Policy Implication of Products from Gaeseong Industrial Complex to Korea-China FTA

Abstract

In an era of remarkable development in FTAs, products manufactured from Gaeseong Industrial Complex (GIC) on Koreas side, carry positive implications that could lead to deeper progress in economic cooperation and relations between the two Koreas. However, given Koreas arranged FTA status, Gaeseong-products suffer from different arrangements under Koreas FTA schemes with other countries when it becomes a subject of export. At the core of the issue lie rules of origin factor. By analyzing special rules of origin cases of Korea, Israel-Egypt QIZ, and Singapore, this paper observes how the scheme is addressed differently across trade agreements. Through textual analysis, the paper has found that (1) classification of special rules of origin can be made into (1) outward processing (2) qualifying industrial zone and (3) integrated sourcing initiative. The findings lead to implications to upcoming Korea-China FTA in its outward processing scheme coverage on four levels: regulatory, economic, technical, and political.

This paper first provides research on FTA rules of origin. The second section regards worldly cases of special rules of origin, including that of Koreas FTA outward processing schemes on Gaesong-products. Then, the research attempts to explore consistent pattern, if any, across FTA special rules of origin based on its characteristics. Finally, the paper concludes by providing suggestions to upcoming Korea-China FTA on this issue.