Reaping the fruit of FTA with ASEAN
By Jeong Jae-hwa
FTA Team leader Korea International Trade Association
15 December 2005
The impending free trade agreement with the 10 members of the Association of Southeast Asian Nations is expected to mark yet another leap for Korea in its pursuit of extensive trade ties in strategic markets.
On Tuesday, the government signed a framework agreement with ASEAN agreeing to conclude a deal in April next year to implement gradual tariff cuts on a list of agreed products beginning July next year. Negotiations remain concerning services and investment, which the government hopes to end by 2006 to finalize the FTA with ASEAN before the year is out.
For Korea, the significance of an FTA with ASEAN reaches far beyond a technical accord as it provides a chance for the country to make a major contribution to forming an Asian economic community. Furthermore, over the long term, the bilateral accord may contribute to expanding the East Asia network to include non-Asian nations such as India and Australia as well.
The material benefits from an FTA with ASEAN also should be substantial as the 10-member group accounts for about one-tenth of the country’s exports. ASEAN is consequently Korea’s fourth-largest export partner. The entry to ASEAN would hugely enhance the competitiveness of Korean products going into their markets.
Nevertheless, for maximum effect, Korea should aim to achieve lowered tariffs on key export goods such as electronics products, transportation machinery, wireless communication equipment, steel products and textiles.
The accord with ASEAN is also Korea’s first free trade accord.
The FTAs with Chile, EFTA and Singapore also were noteworthy achievements for Korea, but mostly as symbolic ones that were aimed more as an opportunity for learning from the expertise of countries that have already signed multiple FTAs.
Given the stakes involving the FTA with the Southeast Asian countries, the Korean government faces the huge task of coordinating the upcoming negotiations to finalize the deal. In order to reap the complete package of benefits from the free trade accord, Korea must be successful in compiling a list of sensitive goods that works to its advantage. The exclusion of key export items in ASEAN’s list could easily erode the profit that Korea expects to reap from the FTA with the group.
The country must also remind itself that it has no more time to lose. The FTA between China and ASEAN has already gone into effect as of July this year. Japan is seeking an accord with ASEAN, after signing an agreement with Singapore, Thailand, Malaysia and the Philippines bilaterally. Japan is also negotiating with Indonesia. With most of its Asian neighbors already on the bandwagon for FTAs, Korea is pressed to complete the bilateral accord with ASEAN.