Guatemala Joins Korea-Central America FTA... Expected Price Reduction for Coffee and Bananas

Korean Consumers Gain $187 Million in Welfare Over 5 Years of Fermentation
Guatemala Immediately Abolishes Tariffs on Over 4,000 Items Including Knitted Fabrics and Tires

Guatemala has officially joined the Korea-Central America Free Trade Agreement (FTA). Following this agreement, consumer welfare is expected to increase by approximately $187 million over five years after its enforcement.

On the 9th, the Ministry of Trade, Industry and Energy announced that it had formally signed the "Protocol of Guatemala's Accession to the Korea-Central America FTA" in Guatemala.

Under the presence of Alejandro Giammattei, President of Guatemala, Noh Geon-gi, Director General of Trade Negotiations at the Ministry of Trade, Industry and Energy, signed on behalf of the Korean government, while the Central American side was represented by Mario Bucaro, Guatemala's Foreign Minister, along with representatives from the six Central American countries.

Prior to the signing ceremony, Korea and five Central American countries (Costa Rica, El Salvador, Honduras, Nicaragua, Panama), all parties to the Korea-Central America FTA, held a joint committee meeting to adopt a decision approving Guatemala's accession to the FTA. Guatemala was a participant during the initial negotiations of the Korea-Central America FTA (2015?2016) but withdrew due to disagreements over tariff concessions. Subsequently, from September 2021, additional accession negotiations were conducted, culminating in a negotiation agreement announced last September after about two years.

This formal signing took place after Korea, Guatemala, and the other five Central American countries completed their respective domestic procedures for signing following the negotiation agreement. The agreement will be finally enforced after each country completes ratification procedures, including parliamentary approval. With Guatemala, the largest economy among the six Central American countries, joining the Korea-Central America FTA, the FTA is effectively finalized. Approximately 6,000 Korean expatriates and over 150 companies (in textiles, apparel, etc.) operate local branches in Guatemala. The government expects trade, investment, and human exchanges between the two countries to be further strengthened.

According to reports from specialized institutions such as the Korea Institute for International Economic Policy, within five years of the Korea-Guatemala FTA coming into effect, Korea’s real Gross Domestic Product (GDP) is expected to increase by 0.02%, and domestic consumer welfare is projected to rise by about $187 million.

Korea mainly imports agricultural products and minerals such as coffee, bananas, nickel, copper, aluminum, and apparel from Guatemala, while exporting automobiles, yarn and knitted fabrics for apparel, and petrochemical products. Since both countries have agreed to eliminate most tariffs immediately or gradually, the trade environment between the two countries is expected to improve significantly.

Guatemala has eliminated import tariffs on 6,677 items (95.7% of total). Among these, 3,927 items (56.3% of total), including knitted fabrics (current tariffs 0?10%), tires (5?15%), and automotive parts such as air filters, braking systems, and suspensions (10%), have had tariffs removed immediately. Tariffs on 770 items, including tire tubes (5%), textile yarn (5%), and audio equipment (15%), will be eliminated within five years. The Ministry of Trade, Industry and Energy expects the elimination of tariffs on yarn (5%) and knitted fabrics (0?10%) to strengthen the textile and apparel supply chain between the two countries, where fabric is exported and apparel is imported.

Korea plans to eliminate import tariffs on 11,673 items (95.3% of total). Tariffs on 9,791 items (80% of total), including sugarcane sugar (current tariff 3%), coffee (8% for roasted, 2% for unroasted), molasses (3%), and woven fabrics (10%), will be removed immediately upon enforcement. Tariffs on some fruits, such as bananas (30%), will be eliminated within five years.

Furthermore, with Guatemala joining the Korea-Central America FTA, the investment protection agreement signed between the two countries in 2002 will be terminated, and the investor protection provisions of the Korea-Central America FTA will apply. Enhanced investor protection norms, including most-favored-nation treatment and national treatment for pre-establishment investment protection and expansion of existing investments, will contribute to the stable local advancement of Korean companies.

Director General Noh stated, "Guatemala is not only a hub country in Central America in terms of population and economic size but also holds a favorable position for entry into North America and the EU regions, having FTAs with the United States, Mexico, and the European Union (EU)." He added, "This year, we will continue to pursue FTA negotiations with major countries such as the United Kingdom and India, while also steadily advancing Economic Partnership Agreements (EPAs), which are flexible trade agreements aimed at strengthening supply chains, with emerging countries in Africa and Asia that have strategic value in key minerals and resources. We will continue to expand the playing field for Korean companies worldwide."

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