Mongolia has been broadening commercial and economic partnership ties with multiple countries since the country transitioned to democracy in 1990, significantly increasing the quantity and scope of partnership and commercial agreements with other countries.
Companies enjoy tariff incentives to EU
The country is benefiting from tariff discount for exporting 7,200 kinds of goods to EU countries after being involved in the EU’s Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+) in 2005. The EU’s GSP+ has created considerable growth in the production of cashmere and wool goods, two key sectors of Mongolia’s exportations. The EU standard tariff on knitted clothes and their facilities is 12 per cent, while the tariff on processed cow and horse hides is 6.5 per cent. Thanks to the GSP+, Mongolia is now able to export the above kinds of goods to EU countries without tax.
In 2014, the EU amended the GSP+’s regulations in order to fix the customs tariff incentive for small and medium-income nations. Besides Mongolia, the incentive arrangement includes Kyrgyzstan, Armenia, Pakistan, the Philippines, Cape Verde, Bolivia and Paraguay.
Mongolia-Japan trade is growing up through EPA
In 2010, Mongolia and Japan concurred to establish an Economic Partnership Agreement (EPA) to frame their strategic partnership relations. This agreement entered into force in June 2016 with 17 chapters and 10 appendixes following a seven-phase negotiations that started in 2012. The EPA regulates 17 items such as the trade of goods, codes of origin, customs rule, hygiene, technical barriers in trade, service, investment, improving the business environment, intellectual property, E-commerce, competitiveness policy, conflicts resolutions, general and final articles, cooperation and government purchases.
In accordance with the EPA, both countries are exempting 5,700 kinds of products made in Mongolia and about 9,300 kinds of Japan-made goods from custom tax. As a result, the bilateral trade reached USD 336 million in 2016. In first five months of this year, the trade increased by 18.8 per cent, where 96 per cent of the total trade was made from Japan.
Since the EPA establishment, the Mongolian National Chamber of Commerce and Industry (MNCCI) has given to over 20 companies more than 900 certificates of origin, of which some 30 per cent are cashmere and woolen clothes and 10 per cent are frozen horse meat and offal. Carpets and sea buckthorn oil are being exported to Japan as well. However, the kinds of goods supplied from Mongolia are still relatively low due to Mongolia’s lack of a laboratory that ensures international standards are met to facilitate the granting of licenses from relevant authorities.
Mongolia intends to have FTA with South Korea
Mongolia and the Republic of Korea are negotiating for establishment of a Free Trade Agreement (FTA), which resulted from an official visit of Park Geun-hye, President of the Republic of Korea, to Mongolia during the 11th ASEM Summit held last year in Ulaanbaatar.
A working group was formed in December of 2016 in order to evaluate the feasibility of a new FTA and to accelerate the process, with representatives from the Mongolia’s Ministry of Foreign Affairs, Academy of Sciences, MNCCI, Mongolian National University, Customs Agency, Finance Regulatory Committee and Mongolian Agency for Standardization and Metrology.
The working group is divided into four divisions. Economic situation, benefits from the industrial competitiveness and economic influence, trade opportunities and investment cooperation and non-tariff barriers. A final conclusion over the FTA feasibility is expected to be completed by end of 2017. Although an official conclusion from the group has not been presented yet, Mongolian companies already have expressed their interest in exporting cashmere and woolen clothes and wild fruits to South Korea.
Having FTAs with some 30 countries, South Korea wants to buy mining products and raw materials.
Source: Invest Pro Mongolia #4 (2017)