Comprehensive Economic Partnership Agreement between Korea and UAE Reached... First FTA with a Middle Eastern Country

Removal of Crude Oil Tariffs... Expecting Boost in Automobile Exports
92.8% Removed for Iran, 91.2% for UAE

South Korea and the United Arab Emirates (UAE) have finalized the Comprehensive Economic Partnership Agreement (CEPA), a type of Free Trade Agreement (FTA). This marks the first free trade agreement with a Middle Eastern country.

President Yoon Suk-yeol, on a state visit to the United Arab Emirates (UAE), is meeting with Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the UAE and Ruler of Dubai, at Zabeel Palace in Dubai on the 17th (local time).
[Photo by the Office of the President]

On the 14th, the Ministry of Trade, Industry and Energy announced that at the Korea-UAE trade ministerial meeting held in Seoul, Ahn Duk-geun, Director-General for Trade Negotiations, and Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade, signed a joint declaration confirming the final conclusion of CEPA negotiations between the two countries.

CEPA is a free trade agreement that includes not only tariff reductions to expand market access for goods and services but also measures to strengthen cooperation and exchanges in various fields. The Korea-UAE CEPA is the 24th free trade agreement concluded by South Korea.

This agreement was reached following accelerated negotiations after President Yoon Suk-yeol’s visit to the UAE in January. The two countries plan to strengthen future-oriented economic cooperation in areas such as energy and resources, bioeconomy, and advanced industries through the establishment of stable supply chains.

The UAE is a key partner country for South Korea among Middle Eastern nations. This is supported by projects such as the UAE Barakah nuclear power plant and large-scale defense exports.

In particular, the UAE is South Korea’s third-largest crude oil supplier, and in a context where energy security is increasingly important, the free trade agreement between the two countries holds strategic significance for the stable supply of major energy resources.

Over the next 10 years, the two countries will mutually open markets covering 92.8% and 91.2% of tariff lines, respectively. The UAE will eliminate tariffs on major South Korean exports such as automobiles, auto parts, home appliances, weapons, and agricultural, livestock, and fishery products including beef, chicken, fruits, and ramen. South Korea’s pursuit of a free trade agreement with the UAE ahead of major automobile export countries like Japan, the United States, and the European Union (EU) is expected to provide a competitive advantage in automobile exports.

The UAE currently imposes a uniform 5% tariff on major products including automobiles. Once CEPA is implemented, tariffs will be eliminated over 10 years, enhancing the local price competitiveness of South Korean automobile companies. Automobiles are the largest export item from South Korea to the UAE and have shown a clear upward trend. Last year, exports reached $338 million, an 81.5% increase compared to the previous year.

South Korea will gradually eliminate tariffs on crude oil, petrochemical products, and dates.

South Korea imports about 10% of its total crude oil volume from the UAE. Last year, it imported $9.2 billion worth of goods from the UAE. Approximately 60% of the UAE’s exports to South Korea consist of crude oil alone. Upon CEPA’s enforcement, the current 3% tariff on crude oil and other items will be phased out over 10 years.

The government expects that, given the increased importance of energy security following the Russia-Ukraine war and the unstable situation in the Middle East due to conflicts such as the war between Israel and the Palestinian armed group Hamas, the elimination of tariffs on UAE crude oil will secure a stable oil supply source and improve the cost competitiveness of the domestic refining industry.

Anduk Geun, Chief Negotiator of Trade at the Ministry of Trade, Industry and Energy, held a signing ceremony for the Korea-UAE Comprehensive Economic Partnership Agreement (CEPA) on the afternoon of the 14th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, with Thani bin Ahmed Al Zeyoudi, Minister of State for Foreign Trade of the United Arab Emirates (UAE), and took a commemorative photo.
[Image source=Yonhap News]

Additionally, the UAE will open markets in Korea’s top priority sectors such as online gaming, medical services (clinics, large hospitals, postpartum care, etc.), audiovisual content (films, music, etc.), and construction.

The online gaming market is the first to be opened by the UAE under any CEPA with other countries. The UAE is one of the Middle Eastern countries where online gaming is most popular. The government expects this opening to expand the entry of K-games and increase consumption of K-content such as films and music.

Medical service liberalization will also proceed. Local establishment of medical institutions and telemedicine will become possible, and entry into various medical services such as postpartum care and physical therapy will be enabled, laying the foundation for exporting the Korean medical system and strengthening global competitiveness.

This CEPA includes annexes on five core cooperation areas: energy and resources, bioeconomy, smart farms, healthcare, and advanced industries, drawing attention.

In the energy sector, cooperation is stipulated across upstream, midstream, and downstream sectors, renewable energy, hydrogen, and carbon capture, utilization, and storage (CCUS). It details not only facilitation of cooperation between companies of both countries but also emergency government cooperation in case of supply chain disruptions. This is regarded as a systematic institutionalization of sectoral economic cooperation between Korea and the UAE.

An official from the Ministry of Trade, Industry and Energy explained, "Although entry into service sectors such as gaming and medical services is currently possible under local laws, the concessions made through CEPA provide legal stability. Even if the partner country decides to close the market for policy reasons, as long as CEPA remains in effect, our companies face no investment risk."

The ministry aims to proceed with formal signing in the first half of next year after legal review and Korean translation of the agreement text. Subsequently, it plans to push for early enforcement of the agreement through procedures such as ratification by the National Assembly.

The Ministry of Trade, Industry and Energy stated, "As the first free trade agreement with an Arab country, this will serve as an opportunity to expand trade and investment with the UAE and establish a stable foothold for entry into the Middle East, spreading the new Middle East boom. It is also expected to enhance the stability of Korean companies’ entry into the UAE and contribute to supporting their activities in the Middle East and North Africa region."

This content was produced with the assistance of AI translation services.