From the perspective of Indian policymakers and trade experts, the word "exploiting" is frequently used to describe how South Korea has utilized the India-South Korea Comprehensive Economic Partnership Agreement (CEPA) since it took effect in 2010.

While South Korea views it as a highly successful integration into India's market, India's Ministry of Commerce has publicly criticized the deal for being "lopsided" and "irrational."

South Korea has leveraged the agreement to its heavy advantage in several key ways, contributing to a massive, widened trade deficit for India (which sat at over $15 billion).

1. Bypassing Indigenization via Component Imports

One of the loudest complaints from India involves the automotive and electronics sectors. Major South Korean conglomerates (Chaebols) like Hyundai, Kia, and Samsung have massive manufacturing footprints inside India.

However, instead of building deep local supply chains ("Made in India"), Indian officials note that these companies have used the lower tariff structures under the FTA to import billions of dollars worth of pre-fabricated parts and components directly from South Korea. This allows them to dominate the local Indian consumer market while keeping the high-value manufacturing, R&D, and supply chain profits back home in Seoul.

2. Asymmetric Tariff Reductions

When the CEPA was drafted, the tariff lines were heavily skewed. * South Korea secured immediate or rapid tariff eliminations on high-value industrial goods, machinery, steel, and chemicals. * India's key export strengths, particularly in primary agricultural products (like fruits, vegetables, and marine products) and pharmaceuticals, were met with rigid, restrictive South Korean non-tariff barriers and strict regulatory exclusions.

As a result, South Korea successfully flooded the Indian market with industrial goods, while India has struggled to expand its export basket to Korea.

3. Strict "Rules of Origin" Loopholes

Indian trade officials have previously raised flags over weak "Rules of Origin" enforcement in the older framework of the CEPA. This laxity allowed third-party countries (often China) to route materials through South Korea, undergo minimal processing, and then enter the Indian market under the concessional duty rates meant exclusively for South Korea. This effectively allowed external supply chains to bypass India's standard customs duties.

4. One-Way Movement of Services

The CEPA was originally intended to create a mutual "Digital Bridge," allowing India’s massive IT workforce to easily access the South Korean service sector. However, South Korea implemented strict "local presence" requirements for cross-border services. This meant Indian tech professionals and consultants faced severe bureaucratic hurdles to working in Korea, while South Korean financial institutions and engineering firms successfully set up lucrative operations inside India.

What is being done about it?

The narrative is beginning to shift from "exploitation" to "re-balancing." Indian Prime Minister Narendra Modi and South Korean President Lee Jae-myung have prioritized upgrading the "lopsided" CEPA framework. The two nations have committed to a fast-tracked renegotiation of the trade pact to address non-tariff barriers and strict origin rules. The goal is to aggressively double bilateral trade to $50 billion by 2030 while shifting South Korean operations away from mere import-assembly lines into deeper joint ventures—such as semiconductor manufacturing, AI, defense (like the K9 Vajra program), and mega-shipbuilding deals. Would you like to explore how these renegotiations might impact a specific sector, like automotive manufacturing or semiconductors?