South Korea and Mongolia have reached a preliminary agreement on a Comprehensive Economic Partnership Agreement (CEPA). This agreement is expected to facilitate trade liberalization between the two countries, enhance the supply chain for critical minerals, and support industrial and investment cooperation, thereby accelerating the export of K-consumer goods and the entry of South Korean companies into Mongolia.
The Ministry of Trade, Industry and Energy announced that during a summit held on July 9, coinciding with President Lee Jae-myung's state visit to Mongolia, the leaders of both nations declared the principle agreement on the Korea-Mongolia CEPA.
The CEPA aims to eliminate tariffs on major export items between the two countries while encompassing a wide range of economic cooperation, including supply chains, distribution, infrastructure, finance, and healthcare, in the form of a free trade agreement (FTA).
Once the agreement is formally signed and goes through the necessary procedures in both countries, over 90% of items and import values will be mutually opened. South Korea will liberalize 96.3% of items and 94.5% of import values, while Mongolia will liberalize 94.4% and 90.9%, respectively.
A key expectation from this agreement is enhanced cooperation in the supply chain for critical minerals. Under the CEPA, import tariffs of 2-5% on Mongolian copper, molybdenum, and rare earths will be eliminated immediately upon the agreement's enactment.
Additionally, the agreement will formalize the basis for cooperation in energy and minerals, supporting supply chain collaborations in rare metals.
The entry of South Korean consumer goods into the Mongolian market is also expected to expand. Tariffs on cosmetics will be eliminated immediately upon the agreement's enactment, while tariffs on ramen and seasoned seaweed will be removed within five years. South Korean retail companies, including CU, GS25, and E-Mart, have already established a presence in Mongolia, and the reduction in tariffs is anticipated to enhance price competitiveness, further boosting exports of K-beauty and K-food.
Other key South Korean export items, such as cargo trucks, automotive parts, pharmaceuticals, and construction and mining equipment, will also be exempt from tariffs upon the agreement's enactment. Tariffs on used cars aged 4-6 years will be eliminated within five years.
The agreement also includes provisions for industrial cooperation in various sectors, including infrastructure construction, finance, and healthcare, which is expected to further expand the foundation for South Korean companies entering Mongolia.
Negotiations for this agreement began in December 2023 but were stalled for about 1 year and 7 months due to disagreements over the level of market opening and negative perceptions of free trade agreements in Mongolia following the signing of the Japan-Mongolia EPA.
Subsequently, both countries recognized the need to conclude negotiations during the summit, and Yeohan-gu, head of the Ministry of Trade's Trade Negotiation Bureau, and Enkhbayar Zandamba, Mongolia's Minister of Economic Development, reached a final agreement after three rounds of negotiations leading up to the summit.
The Ministry of Trade plans to finalize discussions on remaining technical matters before proceeding with the formal signing and enactment of the agreement.
Yeohan-gu stated, "The Korea-Mongolia CEPA will serve as a foundation for expanding trade in goods between the two countries, as well as for institutional support across economic cooperation in industry, supply chains, and services. We will strive to ensure that this leads to a leap in economic relations and tangible cooperation outcomes."
* This article has been translated by AI.
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