Korea and China on Monday set the terms of negotiations for a bilateral free trade agreement in their first round of bargaining in Beijing, and agreed to hold the next round of talks in Korea in early July.

The two sides set the detailed rules on how to proceed with the negotiations, discussed the scope and coverage of the FTA as well as how to organize the negotiation working groups, Seoul’s Trade Ministry said in a statement.

The terms of reference covered the principles of the negotiation, objects of the agreement, negotiation modalities for the areas of goods, services and investment, and the outward processing zones such as South Korea’s industrial park in North Korea’s Gaeseong.

“The principles of the negotiation include pushing for a comprehensive FTA, substantial liberalization, conformity to WTO standards, consideration of sensitive areas and sustainable development,” Korea’s chief negotiator Choi Seok-young said in a press briefing in Beijing.

“The negotiation will be carried out in two stages, the first of which will be on the modalities of the different bargaining areas. The second stage will be negotiations on the draft of the agreement and concessions based on the agreed modalities.”

The two sides exchanged basic views on the scope of the negotiation on Monday, and will further discuss the issue later, said Choi, who led the Korean delegation consisting of officials from the ministries of finance, agriculture and knowledge economy.

The Chinese negotiating team was headed by Assistance Minister of Commerce Yu Jianhua.

A Trade Negotiating Committee with the chief negotiators of the two sides as joint chairmen was established as a result of the talks on Monday.

The committee will draw the modalities for goods, services, investment and trade standards, and coordinate the entire negotiation, the trade ministry said.

Korea and China also exchanged trade statistics and information related to tariff rates and future negotiation schedules on Monday.

The two sides agreed to hold talks every two months, which means about three or four rounds will be held this year. The second round will take place in Korea, tentatively set for early July.

Seoul is seeking to categorize agricultural and fisheries products as sensitive or ultra-sensitive items, while Beijing is eying autos, machinery and petroleum.

China is Korea’s biggest trading partner and trade between the neighboring countries is forecast to reach $300 billion by 2015.

The first round of working-level talks came as President Lee Myung-bak and Chinese President Hu Jintao on Monday hailed the beginning of the FTA negotiations and vowed to make efforts so that the trade pact can upgrade the two countries’ economic ties during their summit talks in Beijing.

The Korea-China FTA talks are expected to proceed faster than the trilateral FTA talks among Korea, China and Japan, according to trade ministry officials.

The three countries vowed to immediately launch preparations to kick off official negotiations this year on a three-way FTA in a joint declaration on Monday, a day after an annual summit meeting of Lee, Japanese Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao.

By Kim So-hyun (sophie@heraldcorp.com)