Korea saw rapid FTA progress in 2005
By Yoo Soh-jung
10 January 2006
Korea made significant achievements in the area of free trade agreements in 2005, demonstrating the government’s stellar management of trade policies, experts say.
"It wouldn’t be an overstatement to say that the country made the most progress ever in the area of free trade agreements last year," said Cheong Inkyo, an economics professor at Inha University. "The achievements have helped lay the foundations for starting negotiations with other countries like Mexico, India and the United States."
Korea, along with Japan, which are considered latecomers, is now actively pursuing bilateral FTA partners. As World Trade Organization members, they were once more committed to multilateral agreements but have come to realize that multilateral commitments provide little help for domestic reforms, according to Cheong. Therefore, adopting bilateral FTAs has become a major tool in adjusting their trade policies.
The economist underlined that the two countries’ bilateral-FTA strategies are aimed at accelerating domestic reform, maintaining competitiveness in the international and regional markets, and responding to the rise in China’s economic power.
In 1998 Korea decided to pursue an FTA with Chile and also began a joint study with Japan. The Korea-Chile FTA talks began in December 1999 and concluded in October 2002, with official endorsement in April 2004.
Since the agreement with Chile, Korea has made commendable progress not only in terms of the number of cases but also the scale, experts stress. One is the conclusion of FTA negotiations with the European Free Trade Association in July, making it Korea’s third FTA partner following Chile and Singapore. Other progress entails beginning negotiations with the Association of South East Asian Nations and Canada, while conducting joint studies for an FTA with Mexico, India and MERCOSUR. Korea is aggressively pursuing an FTA with the United States, and should enter formal negotiations this year, Cheong said.
"At the moment, Korea has a full plate with what it achieved last year. This year it needs to make progress with the United States. The faster the better," said Jeong Jae-hwa, the FTA team leader at the Korea International Trade Association.
Experts say it could take up to five years, including joint studies and negotiations, to conclude a bilateral FTA with Washington.
Kang Ki-chun, a researcher at Samsung Economic Research Institute, urged Korea to embrace as many FTAs as possible because it would expand its export base as an export-dependent economy.
A survey of 66 leading chief executive officers and economists in Korea co-conducted by Maeil Economic Daily found that the respondents gave the government FTA and trade policies the highest mark for the most achievement made in economic policies last year.
Since 1999, East Asia has been seeing one of the most rapidly expanding number of bilateral FTAs in the world. The 1997-98 financial crisis in particular gave the region new motivation for reform and growth, shifting their foreign economic policies to regional and bilateral integration, Cheong said.
In 2004, Korea was busy preparing the environment for establishing FTAs. This included creating a workforce and government divisions specially for FTAs. The Ministry of Foreign Affairs and Trade, the Ministry of Commerce, Industry and Energy, as well as the Ministry of Agriculture and Forestry saw the changes.
"The year 2005 was a year that allowed full-fledged entry into the world of FTAs," said Cheong.
Experts say the focus for 2006 will be whether Korea and the United States enter formal negotiations.