Korea has recently concluded a free trade agreement (FTA) with Vietnam. The FTA is expected to ensure the wider access of Korean-made automobile parts, cosmetics, and home appliances to the notably growing market. According to official data released by the Ministry of Trade, Industry and Energy (MOTIE), Korea, thanks to the FTA, will open 94.7 percent of its import market to Vietnam, while the Southeast Asian nation will open 92.2 percent.

The Korean government said it decided to eliminate tariffs on 495 Vietnamese goods within the next 14 years. It will lift tariffs on 76 items when the deal comes into effect, which requires approval from the National Assembly. Vietnam will do away with tariffs on 200 Korean products in phases over the next two ten years.

A spokesperson of the Ministry said “Korea, according to the pact, will open its market first to Vietnam in the short term, but from the long-term perspective, the FTA will eventually help Korean businesses secure the Vietnamese consumption market.”

Vietnam will firmly play a pivotal role in the Korean exporters’ global expansion, as a strong facilitator. Vietnam will abolish tariffs currently set at 20 to 35 percent on home appliances made by Korean companies within 10 years, which will offer the products stronger competitiveness in the market.

Thanks to the popularity of K-pop and drama stars, home appliances such as TVs, refrigerators, air conditioners, and rice cookers are popular among Vietnamese consumers. Vietnamese consumers are also big fans of Korean cosmetics because they want to follow the style of Korean singers and actresses.

Tariffs of 10 to 20 percent on automobile parts will also be removed over a 15 years period, permitting Korean auto part makers to export more to the nation, which is home to production lines of global automakers. Some cargo trucks and cars will also be subject to tariffs cuts. Tariffs on tires, textile and train parts will also be lifted gradually, which will make Korean manufacturers more competitive against their Japanese rivals. The world’s third-largest economy signed an FTA with Vietnam in 2009, but maintains tariffs on these products. Korean consumers are expected to be able to buy clothing from foreign brands and tropical fruits at lower prices.

When the FTA comes into effect, about 20-type of apparels including socks, shirts, blouses, jackets and coats made in Vietnam will be imported to Korea tariff-free. Now, a 13 percent import tax is imposed on those products. Clothes are Vietnam’s second largest selling product in Korea. It is likely that prices of foreign apparel brands with factories in Vietnam, such as North Face and Uniqlo, will fall.

The Korea-Vietnam FTA is broader than the recently concluded FTA with China in terms of opening agricultural and fisheries trade. Korea will remove tariffs on Vietnamese crops and fishery products in three to five years. Import taxes on fruit like pineapples and mangoes will be abolished in 10 years. Rice, squid, cutlassfish and mackerel, which are very popular in Korea, will keep their tariff levels. Korea has been exporting chips, mobile device parts, synthetic resins, plastics and commercial vehicles while importing clothes, shoes and wood from Vietnam.