Amid a long-stagnant relationship between Korea and India, President Lee Jae-myung recently made a state visit to India, the first such visit in eight years. The trip focused on expanding and revitalizing bilateral ties beyond purely transactional exchanges into strategic areas such as clean energy, maritime capabilities, artificial intelligence, and supply chains. In particular, the two sides treated the Comprehensive Economic Partnership Agreement (CEPA) as a key agenda item and agreed to swiftly advance negotiations. As Indian Commerce Minister Piyush Goyal has pointed out, the delay in this agreement stems from the limitations of the existing CEPA, which no longer fits current realities.
The CEPA signed between India and Korea in 2010 embodied efforts to promote the coexistence of two complementary Asian economies. It was regarded as a forward-looking agreement with the potential to generate mutual comparative advantages. One side was a manufacturing powerhouse, while the other was an economy with the dynamism of scale and population. Fifteen years on, the agreement sits in a paradoxical state. Trade has grown, investment has expanded, and yet the CEPA has been only partially fulfilled. Whether to upgrade the agreement is no longer the question. The core issue is how to reconcile conflicting interests within an increasingly complex global economy.
Since the CEPA took effect, bilateral trade has nearly doubled, reaching $26 billion to $27 billion in 2024-2025. Korean multinationals now play an indispensable role in Indian industry. For them, India has become an important market in electronics, automobiles, and digital services. Yet persistent imbalances remain. India's trade deficit with Korea exceeds $10 billion and continues to widen, driven by imports of high value-added items such as semiconductors, machinery, petrochemicals, and auto parts.
India's exports, by contrast, continue to face constraints in Korea's regulated market. This asymmetry shapes both perceptions and policy, making New Delhi cautious about further liberalization. India seeks not merely to upgrade the CEPA but to redefine it, citing procedural and structural problems.
The India-Korea CEPA faces two major issues. The first is tariff asymmetry and sector-specific sensitivity. In general, Korea has sought deeper tariff cuts in competitive areas such as automobiles, steel, and electronics. India, however, views these sectors as critical to its own industrialization strategy. Pursuing policies such as "Make in India" and the Production Linked Incentive (PLI) program, the Indian government has taken a cautious stance on expanded imports that could threaten domestic industries. As a result, the talks have stalled. What Korea perceives as market access, India regards as vulnerability.
Moreover, non-tariff barriers have become a greater obstacle than tariffs themselves. Indian exporters still struggle to meet Korean standards, certification requirements, and language-specific compliance rules. Exports in agriculture and pharmaceuticals, in particular, face stringent regulatory barriers respectively.
Korean companies operating in India, meanwhile, commonly cite bureaucratic delays, excessive paperwork, sluggish land acquisition, policy unpredictability, and localization pressures as major issues. These frictions breed a vicious cycle of mutual distrust, becoming harder to resolve and more deeply embedded in corporate operations over time.
Third, the CEPA once again reveals its limitations in design. Negotiated in the late 2000s, the agreement fails to adequately reflect today's core trade elements, including digital commerce, cross-border data flows, critical supply chains, and green technologies. As trade becomes ever more intertwined with technology and security, these gaps are weakening the CEPA's strategic relevance.
Fourth, the terms of the agreement are closely tied to each country's domestic political and economic circumstances. In India, bilateral and regional trade agreements have been subject to steady scrutiny over concerns that they could trigger import surges. Korea, too, must balance its export expansion goals with domestic industrial protection and global market uncertainties. In either country, trade policy cannot easily escape political pressure. If trade barriers are the problem, then negotiations are needed to dismantle them. To effectively upgrade the CEPA, the two sides should pursue gradual progress through flexible, sector-specific solutions rather than clinging to rigid commitments.
India can pursue incremental tariff cuts in areas where sensitivity is low, and back this up by more actively leveraging its strengths in services, pharmaceuticals, and select agricultural products. Korea, for its part, can manage the impact of expanded imports in sensitive manufacturing sectors while creating new market opportunities in growth industries. Regulatory cooperation grounded in institutionalized trust is also important. The two sides can aim to reduce non-tariff barriers by building joint consultative bodies to establish common standards, speeding up dispute resolution procedures, and expanding mutual recognition. Transparency and predictability, often overlooked ahead of trade itself, can be just as important as tariff cuts. Yet the most meaningful of these solutions will lie beyond the traditional framework of trade.
Supply chain cooperation offers a strategic path forward. Amid the growing diversification of global production networks, India and Korea have strong incentives to jointly build resilient supply chains in electronics, semiconductors, electric vehicles, and critical minerals, to the benefit of both countries. Korean firms can use India as a manufacturing and export hub, while India can broaden its participation in advanced technology and global value chains. Partnerships in the digital and innovation sectors are another key area of cooperation. A natural synergy exists between Korea's strengths in advanced technology and India's experience with digital public infrastructure. Adding digital trade, data governance, and business-to-business cooperation on top of the CEPA could evolve the agreement into one capable of responding to future changes.
Rebalancing trade through investment is also essential. Expanding Korean investment in India, especially in export-oriented industries, would help close the trade deficit while strengthening industrial linkages. While thousands of Korean companies operate in Vietnam, only a few hundred have established a presence in India. The time has come for Korean firms to solidify their footing in India and activate local supply chains. The memorandum of understanding signed during President Lee Jae-myung's India visit to establish a Korea-India Industrial Cooperation Committee, along with the announcement of plans to build a Korea-dedicated industrial complex in India, has the potential to mark an important turning point for investment, manufacturing, and supply chains. This in turn is expected to have a positive effect on expanding trade volume and easing the trade deficit.
Ultimately, the CEPA's challenges illustrate a more fundamental reality about trade, and trade within a multipolar world. A CEPA redesigned to reflect supply chain diplomacy and technological cooperation can play an important role in strengthening joint efforts by the two sides. This would help move toward a more balanced trade structure while mitigating the structural vulnerability of a surging trade deficit.
At the same time, it is important to build economic resilience through strategic partnerships and investment in regional industries. This will require compromise, the search for new directions of development, and the sustained political will to support them. If these obstacles can be overcome and mutually beneficial agreements reached, the CEPA can deliver on its original promise and mark a new turning point.
It can also transform an unexpected partnership into a powerful engine of growth in a multipolar economic landscape. Given the considerable effort already invested in the CEPA negotiations,
