FTA fever hits Korea, as negotiations on multiple trade deals underway
The Hankyoreh, Seoul
FTA fever hits Korea, as negotiations on multiple trade deals underway
Some cite need to use current negotiating leverage, while others proffer ’wait-and-see’ approach
6 April 2007
As official talks on a free trade agreement (FTA) between South Korea and the U.S. have been completed, attention is focused on possible trade negotiations between Korea and other nations, such as the European Union and China.
Already since closing the deal, the South Korean government has proposed another 10 potential FTAs with the mood high regarding the signing of such agreements. Indeed, some are saying South Korea must expedite other FTAs using its higher negotiatory leverage following the South Korea-U.S. FTA.
However, just as with the S.K.-U.S. FTA, others expressed concerns over the planned trade talks with other nations.
Bilateral trade talks are mushrooming across the world after the faltering of World Trade Organization talks last July. However, the Korean government’s current ‘bold’ mood is the main focus. Likewise, the government’s trade strategy is to push through with comprehensive FTAs with some of the world’s large economic blocs.
Currently, South Korea has three FTAs already into effect after parliamentary approval: with Chile, the European Free Trade Association (EFTA), and Singapore. The one it has just struck with the U.S. is pending approval at the Assembly. An additional four FTAs - with Canada, Association of Southeast Asian Nations (ASEAN), India, and Mexico - have been in negotiations, and South Korea is preparing to lauch trade talks with four other economies; namely, China, the EU, the Latin American Mercosur bloc, and the Middle East’s Gulf Cooperation Council (GCC). FTA negotiations with Japan, which stopped in 2004 due to disagreement regarding market opening, among other issues, are expected to resume shortly.
South Korea held a feasibility study for an FTA with China last month, and formal talks with China can start as early as next year. Formal negotiations with the EU are set to occur even earlier, in May. FTA talks with Japan have been suspended over items such as differences over market opening, but Japan is now asking South Korea to resume the talks.
Kim Yang-hee, a researcher at the Korea Institute for International Economic Policy, said, "It’s hard to find a country in the world that is currently pushing for FTAs with large economic blocs. It’s an unprecedented open-market strategy," he said, adding the government should push for FTAs with other nations only after monitoring the effects and setbacks from the Korea-U.S. FTA.
Seoul National University professor Ahn Deok-geun agreed. "We need to see how our society can digest the Korea-U.S. FTA. If it has a continuous large impact, damage to the industrial sector will increase," he said.
Some analysts pointed out that multiple FTAs ushered in during a short time period would prompt Korea’s industries to lose ground. Seo Jun-seop, a trade researcher at the Democratic Labor Party, said, "South Korea could be caught between service frontrunner the U.S. in one corner and rising high-value-added manufacturing monolith China in the other. If the process is extended over the next ten to 20 years, we would be able to set up countermeasures to balance out the negative effects. However, if these trade deals are all struck simultaneously, we will not be able to protect our industries," he said.
Some also pointed out a ‘spaghetti bowl’ effect, referring to the theory that a country’s customs administration and other trade procedural spending might shoot up when it signs several FTAs simultaneously, as regulatory complexity will increase amid the tangle of overlapping, contradictory, complicated rules that in effect become intertwined like sticky strands of pasta. Song Yeong-gwan, a senior expert at the Korea-U.S. FTA Settlement Support Committee, said that "Korea could trim administrative costs that might be faced due to multiple FTAs by coming up with unified terms for customs procedures, including the rules to determine the origin of a product."
A lack of professional negotiators in the government is cited as another problem. Currently, government ministries excluding the Ministry of Foreign Affairs and Trade and the Ministry of Finance and Economy have no trade experts among their ranks. However, all government ministries are required to join FTA talks because the deals encompass myriad socioeconomic issues. Some fear this lack of professional negotiators could undermine the nation’s negotiating power.
