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SEOUL: Asian economic powerhouses South Korea and India Friday signed a pact to scrap or reduce most trade tariffs over the next decade, giving Seoul a head start over its rivals in a market of 1.1 billion people.
Indian Commerce Minister Anand Sharma and his Korean counterpart Kim Jong-Hoon signed the deal at Seoul's Ministry of Foreign Affairs and Trade after three years of negotiations.
It will eliminate or reduce import duties on 85 percent of Korean exports and 90 percent of India's overseas sales by 2019, Seoul officials say.
The pact between India, Asia's third-largest economy, and the fourth largest, South Korea, is expected to come into force early next year after Seoul's parliament ratifies it.
India's legislature does not need to approve the deal, according to Seoul.
South Korea has been actively pushing for such pacts worldwide to bolster its export-dominated economy. Friday's deal is its first with the so-called BRICS group of fast-developing economies -- Brazil, Russia, India and China.
"It is the first free trade agreement with an emerging economy of scale. We've just laid out a long-term (milestone) to activate trade, investment and workforce exchange," the trade ministry said.
Two-way trade was worth just 15.56 billion dollars last year -- compared with more than 90 billion dollars between South Korea and the European Union, which are close to sealing a trade pact.
But officials say Friday's deal known as the Comprehensive Economic Partnership Agreement gives South Korea greater access to a potentially huge market ahead of trade rivals Japan and China.
Tariffs on South Korean auto parts, the country's biggest trade item with India, will fall to as low as one percent over an eight-year period from the current average of 12.5 percent.
Both sides agreed to exclude fisheries and some agricultural products -- including dairy products, beef and pork -- from the concessions.
The pact covers goods and services as well as investments and contains chapters on competition.
In the service sector, India agreed to open its telecom, accounting, medical and advertising markets to South Korean companies. South Korean banks will also be allowed to open branches in India.
South Korea will be able to invest in food processing, textiles, garments, chemicals, metals and machinery, according to the trade ministry.
The two countries agreed to let skilled professionals such as computer programmers and engineers work temporarily in each other's countries, the first such commitment offered by Seoul under its free trade deals.
India has agreed to classify goods made at Kaesong, a South Korean-built industrial zone in North Korea, as made in South Korea -- a sticky issue in other trade pacts.
India will also let South Korean companies invest in the machinery, automaking and electronics sectors, the ministry said.
Seoul already has free trade agreements with Chile, Singapore, the European Free Trade Association and the Association of Southeast Asian Nations.
A free trade pact was signed with the United States in 2007 but needs ratification by the legislatures of both countries.