A growing number of Asian economies are looking to each other for trade and investment. This note takes a look at such a strategic trade partnership pact – the Comprehensive Economic Cooperation Agreement (the "CEPA") entered into between India and South Korea. Signed in August 2009, the CEPA came into force officially on 1 January 2010.
The CEPA is an agreement adopted to facilitate comprehensive economic relations including merchandise and service trade, investment and economic cooperation. It is a de facto free trade agreement. The pact is expected to increase existing trade between India and Korea (USD 15.6 billion as of 2008) by as much as USD 3.3 billion annually. It aims to grow bilateral trade primarily by decreasing tariffs, encouraging investment and promoting the exchange of skills between the two countries. Ultimately the CEPA calls for barriers to fall in the investment field, improving the investment environment between India and South Korea and offering opportunities to expand trade and investment ties.
The CEPA covers six general areas including Trade Facilitation and Customs Cooperation, Trade in Goods and Services, and Competition and Intellectual Property Rights. There are a number of provisions within the CEPA relating to investment protection and investor-State arbitration. Specifically, Chapter Ten of the CEPA contains provisions on National Treatment, Minimum Standard of Treatment, Transparency and Temporary Safeguard Measures.
Chapter Ten also provides for specific areas of investment protection through provisions on expropriation, losses and compensation. Similar agreements among other Asian nations provide for a framework of "safe investment". For instance both the ASEAN-India and the ASEAN-China Framework Agreements on Comprehensive Economic Co-operation (both came into force on 1 January 2010) have provisions for the "protection of investment" in order to promote a "liberal, facilitative, transparent and competitive investment regime". Investment protection is further promoted within these agreements through mechanisms for dispute resolution, which allow for choice of forum, consultation, and the appointment of arbitral tribunals.
Both India and Korea are keen to tap new markets as the impact of the global financial crisis is slowly beginning to fade. It will be interesting to watch how these two countries protect their investments at the international level and prove to be credible destinations for capital and skills.
Investment protection provisions contained within the various free trade agreements in Asia will provide an impetus to investment and trade between Asian nations. These should prove to be particularly effective, at a time when Asian destinations are vying for attention for investment.