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Businesses Lukewarm on Korea-Japan FTA

Korea Times

18 February 2004

Businesses Lukewarm on Korea-Japan FTA

By Seo Jee-yeon

Staff Reporter

In contrast to the recent push for adopting a free trade agreement (FTA)
with Chile, leading business organizations, including the Federation of
Korean Industries (FKI) and Korea Federation of Small Business (KFSB),
take a cautious approach to back ongoing FTA talks with Japan.

``Business associations agree upon forming a trade pact with Japan in
principle for future growth, but they want to be as cautious as possible
in proceeding with the details of the Korea-Japan FTA, including the
timing for reaching the agreement, the selection of exceptional items
from tariff-free and the duration of the exception,’’ said Jeong Jae-hwa,
FTA team leader of the Trade Research Institute (TRI).

The lukewarm stance of the business community toward the FTA with Japan
is driven by the fear over the possible disastrous fallout of the

``In the event that Korea continues to suffer from a trade deficit with
Japan, an FTA with Japan, which would lift tariff and non-tariff
barriers, could possibly worsen the trade imbalance,’’ Jeong said.

``In addition, because Korea and Japan have similar production and
export structures, the nation’s most competitive sectors like
electronics, automobiles, machinery and shipbuilding, which have
comparative advantages but are less competitive than the Japanese, are
raising concerns over losing ground to their counterparts in Japan.’’

Hesitation toward an FTA with Japan is the densest among small
businesses from relatively weak industries, which claim that they would
become the major victims of the pact.

``We’ve heard complaints from member firms that they would leave Korea
when a trade pact with Japan is signed,’’ a KFSB official said. ``What
we can do is to do the best to fully reflect the opinion of our members
in negotiations with Japan.’’

The FKI, an interest group of conglomerates, also proposed the Ministry
of Commerce, Industry and Energy (MOCIE) organize a meeting with
businesses to take measures for weak industries, while pressing ahead
with talks with Japan for an FTA.

The Korea International Trade Association (KITA) will conduct research
on how Korea can minimize damage by the FTA by lifting tariffs and non-tariffs
barriers on specific items.

When it comes to the FTA with Japan, removing non-tariffs barriers, such
as complex administration procedures, inflexible labor measures and
unfair business practices is just as important as lifting tariffs on
commodities and services to facilitate Japanese investment in Korea.

``Proven in the case of the Korea-Chile FTA, it might not be an easy
task to close FTA talks with Japan without a consensus among weak
industries,’’ Jeong noted.