South Korea has become the first APAC country to reach a trade deal with six Latin American countries, indicating the global potential for South Korean innovations and trends in the region.
The country is known globally for its cosmetics success. Colour cosmetics and the K-beauty boom have gathered pace internationally, with western markets now looking to emulate the appeal of the Korean beauty and cosmetics sector.
The Korea-Central America free trade agreement (FTA) is the first trade agreement in the region and enables the growing marketplace to enter into the American cosmetics sector.
Under the deal, the six Central American countries agreed to eliminate tariffs on approximately 95% of goods made from each country immediately or gradually after the agreement is in effect.
Before implementation, the FTA will need to be approved by the countries’ individual legislatures.
Korea’s FTA relationships cover a significant part of the western region, including the US, Canada, the EU and three South American countries: Chile, Colombia and Peru.
With the additional FTA made with six countries within Central America, this places South Korea ahead of APAC economic heavyweights Japan and China, giving them an advantage with both investors and consumers.
Nicole Fall, Co-Founder, Asian Consumer Intelligence, said: “the impact is still largely Asian-focused…[with] a proliferation of both new brands and new products, launching in answer to this new demand.”
The agreement has been reached 18 months after initial negotiations launched. All countries that form the FTA will complete the official agreement in the first half of 2017 following final conversations regarding its terms.
"The FTA will help South Korean companies have a competitive edge in the Central American region," said Kim Hak-do, Deputy Trade Minister.
"And we can establish a bridgehead to go over to the North and South American countries through their FTA networks."
In addition, the newly-formed Korea-Central America FTA will enable South Korean companies to engage in government procurement projects throughout the area.
In 2015, the total trade volume between South Korea and the six countries amounted to $4.05 bn (€3.8 bn). Of this amount, South Korea’s exports equalled $3.23 bn (€3.04bn), while imports reached $784 mn (€739 mn).
Currently, although exports to these six countries make up around 0.5% of South Korea’s total exports, it signifies a crucial network-opening opportunity between the APAC country, the US and Central America.
The South Korean government anticipates that once the FTA comes into effect, the country’s GDP will see a rise of 0.0257 percentage points and an export increase by approximately $1 bn (€942 mn).