SK, China to announce free trade plan: sources
The Hankyorek | 17 November 2006
S.K., China to announce free trade plan: sources
FTA between two would carry political, economic weight
South Korea and China will begin joint research into a possible free trade agreement from the beginning of next year, according to Korean government officials. The plan comes after the conclusion in October of preliminary joint research into a trade deal by groups in both countries.
Beijing has urged Seoul to begin plenary negotiations into a free trade agreement (FTA) as soon as possible, but Seoul is maintaining a reserved position, as the agriculture industry, as well as Seoul’s relationship to Washington, remain touchy issues. Those working in agriculture in South Korea fear that a FTA with China would mean cheaper products flowing in, thus threatening their livelihood. In addition, Seoul fears that a deal with China would strain relations with Washington, which not only regards China as a looming economic threat but is currently working out its own FTA with South Korea.
Indeed, the government began FTA negotiations with the United States, refusing China’s offer, because a South Korea-China FTA would bear significant political meaning. In addition, due to the recently escalated North Korean nuclear issue, Seoul must be extremely careful regarding its relations with Washington.
The two countries completed joint civilian research projects in October, underway since last year. The Korea Institute for International Economic Policy (KIE) and China’s Development Research Center (DRC) participated in the project. At the Asia Pacific Economic Cooperation (APEC) trade ministers’ talks to be held in Hanoi, Vietnam, on November 18, Seoul and Beijing are slated to discuss the timeline to begin joint research.
The two nations initially planned to reveal the launching of joint research into the possible FTA at the governmental, industry, and university levels at an official summit meeting to be held on the sidelines of the APEC forum, but instead opted to make the announcement in a more low-key manner at the ministerial-level meetings, perhaps due to the possible reaction to such an announcement in South Korea and the U.S.
The two nations have reached an agreement to begin joint research into the possible trade agreement, but they have yet to decide on timing. China suggested that they should begin plenary negotiations after finishing joint study within a year, while South Korea has taken a more reserved position, insisting on deciding whether or not to begin plenary negotiations according to the results of at least one year of joint research.
China is exerting pressure on South Korea, using the veiled threat that China may change its mind about wanting FTA negotiations in the future. Beijing has actively sought a trade deal with Seoul since 2004; they expect negotiations to begin in 2008 and a deal to be reached by 2010.
Many experts say that China’s attitude stems from its attempts to widen its influence in Asia. Gwak Su-jong, a researcher at South Korea’s Samsung Economic Institute, said that "to China, the FTA is a means to win a competition with the U.S. and Japan, a way to hold supremacy." Moreover, owing to China’s narrowing technological gap with South Korea, China’s economic burden has been reduced.
But the question of the fate of Korea’s agricultural sector still loomed large over the proceedings. Lee Geon-tae, an official of the South Korean Ministry of Foreign Affairs and Trade, said that "the effect of an FTA with China on our agricultural industry is incomparable to that with the United States. If we exclude agricultural products and China excludes its vulnerable items such as high-quality electronic appliances and autos, the FTA between the two countries will become an agreement in name only," saying that it would be merely a political rather than economic move.
