Britain and South Korea extend low or zero tariffs on their bilateral trade of products with parts from the European Union avoiding high tariffs on British businesses under so-called rules of origin.

Have a go at this free teaching activity, which includes a downloadable worksheet and suggested answers.

The agreement between Britain and South Korea provides a boost to the UK car industry. Without this extension, British businesses would have faced high tariffs from January on EU component-based exports, potentially affecting industries like food, drinks, and automakers, including electric cars. The extension supports the £18 billion per year trade between the two countries and precedes talks for a new trade deal later this year.

Tariff-free trade brings many benefits, so post-Brexit, the UK made a new free trade agreement with the EU called the Trade and Cooperation Agreement (TCA); the UK has also negotiated new trade deals with Australia, New Zealand and Japan.

In June 2023, the UK signed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The government is also currently attempting to agree terms for a trade agreement with India. All these agreements help keep trade flowing.

Britain, South Korea agree to extend tariff-free trade for two years (Reuters)

Read the article and then answer the following questions.

1. What is ‘tariff-free trade’? Use a tariff model diagram to show the welfare gain from removing the tariff on a good.
2. Explain the difference between a free trade agreement and a single market.
3. Discuss the advantages and disadvantages for a country joining a trade agreement such as the CPTPP.