The Approaching 'New Middle East Boom'... Korea-UAE Officially Sign Comprehensive Economic Partnership Agreement

Electric Vehicle Tariffs: Immediate Removal for Freight Vehicles, 10-Year Phase-Out for Passenger Cars
Import Tariffs on UAE Crude Oil to be Gradually Eliminated Over 10 Years After Enforcement
First Opening of UAE Online Game Services

The Comprehensive Economic Partnership Agreement (CEPA) between South Korea and the United Arab Emirates (UAE) was signed on the 29th. CEPA is a type of free trade agreement (FTA) similar to a free trade agreement, which includes not only market opening for goods and services between the two countries but also comprehensive cooperation enhancement.

Minister of Trade, Industry and Energy Ahn Duk-geun and UAE Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi officially signed the Korea-UAE CEPA at the Yongsan Presidential Office in the presence of the heads of state of both countries. The signing ceremony was held about seven months after the negotiations were concluded in October last year.

The Korea-UAE CEPA was actively promoted following President Yoon Suk-yeol’s state visit to the UAE in January last year. After intensive negotiations between the two governments, the agreement was abruptly finalized in October last year. Since then, the government has been carrying out domestic procedures necessary for the formal signing, including legal review of the agreement text, preparation of the Korean version, and examination by the Ministry of Government Legislation.

On the 29th, at the Four Seasons Hotel in Jongno-gu, Seoul, Jeong In-gyo, Director General for Trade Negotiations at the Ministry of Trade, Industry and Energy (right), and Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade at the Ministry of Economy, held a joint press conference for the official signing of the Korea-UAE Comprehensive Economic Partnership Agreement (CEPA) and took a commemorative photo.

The government plans to swiftly proceed with follow-up measures for the Korea-UAE CEPA signed on this day and submit the ratification proposal to the National Assembly as soon as possible. After completing the domestic legal procedures for ratification and enforcement of the Korea-UAE CEPA in each country, the two countries will exchange written notifications certifying this. The Korea-UAE CEPA will come into effect on the first day of the second month following the receipt of the written notification.

As of 2023, the UAE is South Korea’s 14th largest trading partner (28th in exports and 9th in imports). South Korea mainly exports manufactured goods such as automobiles and automobile parts, electronic devices, and synthetic resins. From the UAE, South Korea mainly imports essential energy, resources, and raw materials for domestic industries, including crude oil, petroleum products, natural gas, aluminum, and copper products. The government expects the UAE to be a logistics hub connecting not only the Middle East but also Africa and South Asia, greatly aiding the expansion of Korean companies’ presence in the region.

◆High-level Market Opening for Goods → Expected Market Preemption Effect

Through the Korea-UAE CEPA, South Korea will open 92.5% of its product categories, and the UAE will open 91.2% of its product categories. Most of South Korea’s major exports to the Middle East, such as weapons, will have tariffs eliminated immediately upon the agreement’s enforcement, which is expected to increase exports in response to the rapidly growing defense demand in the Middle East. Additionally, many machinery items such as rolling machines and metal casting machines will have tariffs eliminated within five years, and items such as automobiles and parts, as well as home appliances (refrigerators, washing machines, air conditioners), will have tariffs eliminated within a maximum of ten years after enforcement. This significantly improves export conditions for Korean companies compared to major competitors such as the United States, the European Union (EU), Japan, and China, which have not yet signed CEPAs with the UAE. In particular, tariffs on eco-friendly vehicles such as electric and hybrid cars, which have high growth potential, will be eliminated within ten years after enforcement, and many tariffs on dump trucks and cargo vehicles among trucks and special vehicles will be eliminated immediately, enabling export growth fueled by the construction boom in the Middle East.

Tariffs will also be eliminated on various other promising export items, laying the foundation for export market diversification. Not only manufactured goods such as medical devices, pharmaceuticals, cosmetics, and LED lighting equipment but also major agricultural and marine products such as beef, chicken, fresh fruits, ginseng, seasoned laver, anchovies, and abalone will benefit from tariff elimination.

Export containers are loaded onto a ship at Busan North Port. Photo by Jinhyung Kang aymsdream@

◆Elimination of Crude Oil Import Tariffs... Contribution to Price Stability

Import tariffs on UAE crude oil will be gradually eliminated over ten years after enforcement (from 3% to 0%), and import tariffs on naphtha, a key raw material for petrochemical products, will be halved over five years (from 0.5% to 0.25%). The government expects this to enhance the price competitiveness of the domestic petrochemical industry and contribute to domestic price stability.

The UAE has opened online game services for the first time under the Korea-UAE CEPA, which were not opened in FTAs with other countries. This ensures legal stability for Korean companies when supplying game services online to the Middle East or when related companies directly enter the local market. The agreement also allows Korean medical institutions to open local clinics and provide telemedicine, and opens postpartum care and physical therapy services.

The Korea-UAE CEPA specifies 14 cooperation areas, including new trade issues such as energy, supply chains, digital economy, and bioeconomy, establishing a comprehensive economic cooperation system to accelerate future-oriented economic cooperation between the two countries. Notably, unlike CEPAs the UAE has signed with other countries, this agreement includes cooperation on energy and resources, including alternative and renewable energy.

Additionally, the Korea-UAE CEPA improves trade rules applied during trade processes between the two countries, such as customs clearance, government procurement, digital trade, and intellectual property rights. By introducing a pre-assessment system for goods customs clearance, the two countries have increased predictability for exporters and enabled cost reduction. The UAE, which is not a member of the World Trade Organization (WTO) Government Procurement Agreement, has opened the procurement market of major central government agencies, reflecting principles of transparency and non-discrimination. Regarding digital trade, the UAE has allowed cross-border data transfers for the first time in the country. This regulation enables Korean companies operating in the UAE to transfer information collected locally back to Korea. Furthermore, by introducing high-level intellectual property protection standards, effective countermeasures against copyright and trademark infringements of Korean companies have become possible.

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