Agriculture stands to lose in possible South Korea-China FTA
Hankyoreh, Seoul
Agriculture stands to lose in possible South Korea-China FTA
Lee’s visit to China lays ground for discussion on trade with Beijing
By Ahn Chang-hyun, Staff Writer and Ryu Yi-geun
10 January 2012
President Lee Myung-bak agreed to begin the necessary "domestic procedures" for opening formal negotiations on a South Korea-China free trade agreement during a summit meeting Monday afternoon with Chinese president Hu Jintao at Beijing’s Great Hall of the People.
Lee and Hu expressed interest in working out a South Korea-China FTA "so that the trend of economic partnership is further strengthened," the Cheong Wa Dae (South Korea’s presidential office or Blue House) reported.
The necessary domestic procedures for an FTA include hearings at home, deliberation by a promotion committee, and voting at a meeting of foreign and economic ministers. In the case of the South Korea-United States FTA (KORUS FTA), the procedures in 2006 took approximately three months.
A senior Cheong Wa Dae official said the agreement was "strongly requested by China" and explained that the chances of formal negotiations starting in the near future were "not high."
Lee was invited by Beijing to spend three days in China in honor of the 20th anniversary of the establishment of diplomatic relations between the two countries.
Analysts said the impact of an FTA between South Korea and China would be far greater for the national economy than the agreements with the US or European Union.
As reasons for pushing for an FTA with China, the South Korean government has emphasized the principles of "making the most of economic territory and preemptively capturing the benefits of openness." According to this reasoning, an FTA can be expected to provide a foothold in the world’s most populous country and a buffer against a slump in the global economy. China is already South Korea’s largest trading partner.
The government is predicting a rise in South Korean gross domestic product if an FTA is reached with China. Last year, the Samsung Economic Research Institute forecast a 2.72% bump in the GDP from an FTA with China, including a 30% rise in exports to China.
But the prospects are not entirely rosy.
Analysts said the agricultural sector will suffer as it did from FTAs with Chile, the EU, and the US. In a recent report, the Korean Institute for International Economic Policy calculated that fruit production would drop by $1.02 billion and vegetable production by $977 million over the next ten years if South Korea signs an FTA with China. In 2010, South Korea imported $2.5 billion in agriculture, livestock, and marine products from China while exporting just $500 million worth. Observers are predicting snowballing damages for the South Korean farming, livestock, and fishing sectors if Chinese products in those areas enter the country without tariffs.
According to a joint research study completed last year on a South Korea-China FTA, domestic agriculture production would drop by as much as 14.7% from such an agreement. Former Minister for Trade Kim Hyun-jong, who spearheaded the KORUS FTA, expressed concerns in 2006, saying that "more than 200 vulnerable farming products could suffer if we push a free trade agreement with China."
Another area of concern mentioned by observers was the increase in South Korea’s trade dependence on China as a result of an FTA. Currently, China accounts for 25% of South Korea’s exports. Some experts are saying the possibility of an FTA with China should be discussed by the next presidential administration, as it would have a far greater impact on the national economy than the KORUS FTA.
Korea Institute for New Society vice director Kim Byoung-kweon said, "While it is true that we should be expanding trade between South Korea and China under the framework of East Asian partnership, we must not go about it like the FTAs with the EU or the US, sending all the benefits to manufacturing and forcing sacrifices on agriculture."
