South Korea reached a direct free trade agreement (FTA) with Britain to maintain tariff-free trade conditions between the two countries even after Britain’s exit from the European Union (EU).

South Korean trade minister Yoo Myung-hee and her British counterpart Elizabeth Truss signed a bilateral FTA deal on Thursday in London. After the two nation’s parliaments complete the ratification process by the end of October as planned, the new FTA between the two nations will immediately replace the current Korea-EU free trade pact if the so-called ‘No Deal Brexit’ happens, meaning that Britain leaves the EU on October 31 as scheduled without any agreements for the future relationship with the economic bloc.

Trade volume between Seoul and London totaled $13.17 billion in 2018. South Korea’s outbound shipments to Britain reached $6.36 billion, accounting for 1.1 percent of its entire exports. The country exported $1.47 billion worth automobiles to the United Kingdom last year, followed by $1.07 billion worth ships, $380 million aircraft components and $261 million auto parts. Imports from Britain amounted $6.8 billion last year, with crude oil topping the list at $2.33 billion, followed by automobiles ($1.07 billion) and pharmaceutical products ($326 million).

The trade pact with the U.K. will allow Korean exports to continue to enjoy the duty-free shipments to the country. Without the agreement, Korean cars would be slapped with a 10 percent tariff and auto parts 3.8 percent to 4.5 percent after the U.K. divorces the E.U.

The two countries agreed to apply milder safeguard measures on agricultural products than the FTA with the EU to protect sensitive domestic agricultural industry. They also agreed to apply tariff rate quota (TRQ) on malt and supplementary feed whose demand outpaces production in Korea. As for rules of origin, the government agreed to regard goods manufactured in the U.K with EU materials as U.K. goods for three years.

By Lim Sung-hyun and Choi Mira

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