Korea’s New Trade Agreements

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Recently, the Republic of Korea has entered two new free trade agreements (FTA), one with an existing party to the WTO Government Procurement Agreement (GPA) and the other with a country about to become a GPA member. Both include government procurement provisions that are closely aligned with the GPA and do not appear to break new ground.

Korea-Canada FTA: Korea and Canada have completed an FTA, which includes a Government Procurement Chapter. That Chapter incorporates their commitments from the recently revised GPA, but only applies to central government procurement. However, it expands access by applying lower thresholds than in the GPA. (Thresholds are monetary values at and above which procurement is opened.) Both will apply a lower threshold than the GPA threshold of 130,000 Special Drawing Rights (SDRs) (US$204,000). Under the FTA, Canada will apply a threshold of Can$100,000 and Korea a threshold of 100,000 Korean won. That is the same threshold that Korea applies in its FTA with the United States. Under that 2012 agreement, the U.S. applies a roughly equivalent threshold of $US100,000. (The U.S. applies a procurement of $25,000 to Canadian goods in federal procurement under NAFTA.)

Under its FTA with Canada, Korea also covers build-operate-transfer contracts, as it does  under the revised GPA and its FTA with the U.S. Canada does not specify any such coverage in the FTA.

The Canada-Korea FTA does not cover any sub-central procurement. That procurement was also excluded from the U.S.-Korea FTA. Canada did not extend to Korea the extensive sub-central procurement that it is opening to the European Union under their recently concluded agreement, the Comprehensive Economic and Trade Agreement (CETA).

Korea-New Zealand FTA: In November 2014, Korea and New Zealand completed negotiations of an FTA, which will give New Zealand access to the procurement of Korea’s central government entities. This will place New Zealand firms on an equal footing relative to parties to the GPA, which New Zealand is about to join. It is likely that New Zealand will gain access to Korean’s GPA coverage as a GPA party before the FTA is finalized. The FTA will need to undergo first a legal verification and translation into Korean, and then be approved under the countries’ domestic ratification procedures. Only then will it be able to enter into force. In October 2014 when the GPA parties approved the terms for New Zealand’s accession to the GPA, they gave New Zealand nine months to submit its instrument of accession to the WTO; its accession will become 30 days after that submission.

Jean Heilman Grier

December 15, 2014

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