UK, South Korea agree two-year extension on zero-tariff rules

The UK and South Korea agreed to extend a current agreement on low- and zero-tariff trade for two years, in a boost to Britain’s car industry.

The agreement, a legacy of EU membership which was due to expire at the end of the year, allowed British businesses whose products contain materials from the EU to export products to South Korea while avoiding high tariffs under so-called rules of origin.

The two countries are also preparing to enter talks before the end of the year on a new “modernized” trade deal, which will cover new sectors such as digital, the Department for Business and Trade said on Monday in a statement. Annual trade between the two countries is worth about £18 billion ($21.9 billion).

The department said the deal would benefit a “broad range” of British manufacturers, including food and drink. The extension on existing rules is especially significant for automakers: South Korea was the seventh-biggest car export market for the UK in the first half of this year, and the third-biggest supplier of new passenger cars to Britain.

“This is good news for UK exporters — without the extension exporters of cars and whisky would have been hit with tariffs,” said Sam Lowe, a trade partner at consultancy Flint Global.

“It also points to the challenges the UK is facing adjusting to post-Brexit trade realities, and the fact years of EU economic integration means that EU content still features prominently in UK exports. The UK will now need to secure similar extensions with Canada and Mexico.”