Amid Iran Conflict, Korea-UAE CEPA Takes Effect: "UAE Export Expansion Expected"

UAE Emerges as Largest Export Market Among 21 Middle Eastern Countries
First CEPA Signed Between South Korea and an Arab Nation
Automobiles Lead Promising Export Sectors, Cosmetics Also Expected to Grow

On May 1, the Comprehensive Economic Partnership Agreement (CEPA) between South Korea and the United Arab Emirates (UAE) came into effect. With the elimination of tariffs on major items such as automobiles and parts, K-beauty, and K-food, exports to the UAE are expected to increase. In addition, economic cooperation between the two countries is projected to become more active in emerging sectors such as artificial intelligence (AI) data, renewable energy, and the cultural industry.

The Ministry of Trade, Industry and Energy and the Korea Trade-Investment Promotion Agency (KOTRA) published a report on May 4 titled "Promising Export Sectors and Cooperation Opportunities Following the Entry into Force of the Korea-UAE CEPA," and proposed ways for domestic companies to leverage the agreement.

According to the report, South Korea's exports to the UAE are expected to reach USD 5.7 billion in 2025, making the UAE South Korea's largest export market among 21 Middle Eastern countries. Given that the UAE functions as a trade and investment hub for the Middle East and Africa, there are also expectations for expansion into neighboring countries. Notably, this agreement is South Korea's first CEPA with an Arab nation, and since the UAE has not signed CEPAs with the United States, China, or the European Union (EU), the trade expansion effect between the two countries is expected to be significant.

KOTRA identified promising export sectors by focusing on items for which tariffs will be eliminated under CEPA, that have high import demand in the UAE and strong South Korean market share. Representative beneficiaries include automobiles such as passenger cars, electric vehicles, and hybrid vehicles, as well as auto parts. In addition, cosmetics, food products, synthetic resins, engines and parts, refrigerators and freezers, and medical devices were presented as promising items. For these items, the existing 5% tariff will be abolished either immediately or phased out over five to ten years.

Exterior view of the Korea Trade-Investment Promotion Agency (KOTRA). KOTRA.

In particular, South Korean cosmetics exports to the UAE are expected to grow by 65% year-on-year to approximately USD 260 million in 2025, showing strong growth momentum. Since all of the UAE's top five cosmetics import source countries have not signed a CEPA with the UAE, analysts see significant potential for Korean products to expand their market share. With this agreement, South Korea will eliminate tariffs on 92.8% of all items, while the UAE will abolish tariffs on 91.2% of items.

Expansion of industrial cooperation between the two countries is also anticipated. The UAE's "Stargate Project" is expected to create more entry opportunities for AI startups and companies related to data centers. In addition, following the signing of the "Korea-UAE Nuclear Power Export Cooperation Memorandum of Understanding (MOU)" in November 2025, cooperation on new nuclear technology and benefits across related upstream and downstream industries are anticipated. As the UAE pursues net zero through its "Energy Strategy 2050," cooperation in eco-friendly sectors such as electricity and solar power is also considered promising.

In the cultural industry, the creation of "UAE K-CITY" as a comprehensive Korean Wave hub is being promoted. This urban cooperation model combines Korean Wave content, information and communications technology (ICT), AI-based innovation industries, and medical and bio capabilities, with the potential to boost exports across related industries.

Kwanmook Kim, Executive Vice President and Head of the Economic Security and Trade Cooperation Division at KOTRA, stated, "The two countries, which are in a special strategic partnership, have further expanded cooperation through the summit held in November last year," and added, "As the UAE serves as a hub for the Middle East and Africa, we will do our utmost to support Korean companies in utilizing CEPA."

Meanwhile, KOTRA has also published a report titled "2026 UAE Market Entry Strategy," which offers market analysis and entry strategies. The related report can be found on KOTRA's Overseas Market News platform.

This content was produced with the assistance of AI translation services.