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Gov’t to Seek FTA With China After Pact With U.S.

Chosunilbo, Korea

Gov’t to Seek FTA With China After Pact With U.S.

10 August 2006

The government hopes to start free trade negotiations with China in the first half of next year after it clinches a free trade agreement with the U.S, a senior government official said Thursday. The official said once the Korea-U.S negotiations are virtually wrapped up either late this year or in March as planned, it will immediately launch talks with China.

Finance and Economy Minister Kwon O-kyu confirmed that the government will push for a Korean-Chinese FTA after signing a free trade deal with the U.S. But the plan is controversial since a free trade pact with China could damage the Korean agricultural industry 10 times more than a pact with the U.S. The Korean Institute for International Economic Policy estimates the damage at about W10 trillion (US$1=W958). The Korean manufacturing industry would benefit from a deal with China thanks to a big increase in exports of cars and steel products to the world’s most populous country. But small and medium-sized companies would to be hit hard due to a rise in imports of cheap Chinese products. Taking such problems into account, the government expects to propose several preconditions for the launch of the trade negotiations, including an agreement on minimum opening of the agricultural market.

China badly wants an FTA with Korea and has offered significant concessions to exclude major agricultural products. Chinese Vice Finance Minister Liao Xiaojun told Korean trade authorities last August that Beijing could recognize some agricultural products Korea considers critical as items protected. Chinese Commerce Minister Bo Xilai told Korean officials in May Seoul should be more serious about an FTA with China, which cannot wait much longer.

The government decided to promote FTAs with the U.S., China and finally Japan at a meeting of an international economic committee under the National Economic Advisory Council, a presidential committee on economic policies, last September. An official on the committee said the sequence was decided in consideration of economic and political relations with the three countries and the potential effects of free trade pacts with them.