Free Trade Fervor - Careful, Comprehensive Strategy Leads to Success
31 March 2005
The government’s plan to conclude 15 free trade agreements by 2007 is the right move _ if somewhat overambitious. Officials at the Ministry of Foreign Affairs and Trade must have been encouraged by the better-than-expected result of Korea’s first FTA with Chile over the past year. This is fortunate for the economy, and justifies the nation’s continuous pursuit of free trade. Becoming an open market is the only survival strategy for Seoul, which depends on foreign trade for 70 percent of GDP.
In many ways, the Korea-Chile FTA has proven to be a win-win deal. Korea’s exports to Chile increased 58.6 percent, while imports grew 54.3 percent. The nation’s market share in the Latin American country has surpassed that of Japan with damage to the domestic agricultural industry remaining minimal, at least so far. There are two reasons for success that should be considered in future negotiations: the selection of a complementary partner in industrial structure and gradual import liberalization in agriculture.
Talks with major trade partners, however, remain in the doldrums. The Korea-Japan FTA negotiation, originally supposed to end this year, has hit a snag mainly because of Tokyo’s recalcitrance to open its farm market and the latest diplomatic dispute. Both governments are urged to separate economics from politics and mend their diplomatic rift with business cooperation. The talks with the U.S., now stalled due to Washington’s precondition that Korea open its film market, should get on the right track soon.
Conclusion of more FTAs is an urgent task with almost half of global trade being made through about 200 bilateral accords. But the nation should not put the cart before the horse by regarding trade liberalization as a goal instead of a means. Maximizing our national interest and improving people’s living standards is at stake. A prerequisite in this regard is a master plan, which carefully weighs future industrial strategy, synergy with potential partners and other factors related with competitiveness.
The government should beef up the manpower of its FTA bureau by recruiting more private experts, and upgrade the status of the Trade Minister if necessary. It should show leadership in coordinating the conflicting concerns of numerous interest groups, while persuading the people about the imperatives of moving toward freer trade. Swift restructuring of weak industrial sectors is a must for minimizing damage. The main impact of the Korea-Chile FTA on domestic farmers has yet to come.
Liberalizing the economy to suit global trends is not just necessary; it is now inevitable. But making it serve national interests depends on our ability to set the right agenda and schedule. We Koreans know all too well what damage an unprepared market opening can have on the country.