SHANGHAI — A free trade agreement signed between China and South Korea is expected to be a boon for Korean beauty and fashion brands.
The agreement, signed Monday, will remove tariffs on 90 percent of all products traded between the two countries, including brands such as The Face Shop, as well as AmorePacific’s Laneige, Mamonde and Sulwhasoo, which have parlayed Korea’s K-wave cultural phenomenon into an economic powerhouse, driven largely by big-spending Chinese consumers.
Prior to last week’s announcement by the Chinese government of lowered tariffs on imported skincare, among other products, and the signing of the FTA, Korean cosmetics faced tariffs as high as 130 percent when exported to China. The new trade deal will lower that to virtually zero.
“We can anticipate positive effects from the results of the South Korea-China FTA, but currently we will continue to focus on expanding our business in China by offering optimal products and services to our Chinese customers.” Kim Seung-Hwan, senior vice president of Korean cosmetics giant AmorePacific, said.
Cindy Hahn, the founder of the fashion and retail-focused Hahn Global branding agency and doyenne of Korean fashion, said the agreement will be particularly positive for smaller, independent fashion brands — of which Korea has many — whose barrier to entry in the giant neighboring retail market of China will now be lessened.
“With the China-South Korea FTA, it will be much easier now for many Korean brands to enter the Chinese market. It is apparent that the FTA will open more doors for Korea,” she said.
“Currently, you can see young Chinese women interested in Korean fashion brands and visiting Korea to purchase large amounts of Korean brand clothing. Their spending is increasing by the year. This means there is much demand for Korean fashion brands in the China market.”
According to Chinese Ministry of Commerce data, two-way trade between China and South Korea reached $274.2 billion in 2014, 55 times the growth since the two countries established diplomatic ties in 1992.
Seoul’s trade ministry estimates the new FTA will boost trade between the nations to over $300 billion a year. It’s also projected to lift South Korea’s GDP by roughly 1 percent over the next decade. China, meanwhile, is expected to see its GDP rise by 0.3 percent over the next 10 years due to the agreement.
The FTA is also significant as a stepping stone to a trilateral free trade agreement between China, Japan and South Korea, a seventh round of negotiations for which were undertaken in Seoul last month. If signed, the trilateral agreement would represent one of the most significant trade partnerships in the region.