South Korea and China may open trade talks

New York Times | 5 Aug 2010

South Korea and China may open trade talks

By MICHAEL WINES and CHOE SANG-HUN

BEIJING — South Korea’s ambassador to China said in an interview published Thursday that his nation was likely to open free trade talks with Beijing next year. The negotiations could be a first step toward a three-nation trade zone including Japan, which would rival the European Union and the North American Free Trade Agreement in size.

In an interview with China Daily, the state-run English-language newspaper, Yu Woo-ik cautioned that a free trade pact with China would face deep skepticism from South Korea’s farming, fishing and forestry industries, which fear being undercut by cheap Chinese imports.

But the ambassador also was quoted as saying that the agreement would be in South Korea’s long-term interests. The Chinese have been striking similar agreements with some of South Korea’s economic competitors, such as Taiwan and countries in Southeast Asia.

Asked about Mr. Yu’s remarks, the South Korean Ministry of Foreign Affairs and Trade said Thursday that no decision had been made on whether or when to open formal negotiations with China.

Two-way trade between China and South Korea amounted to $141 billion last year; South Korea sends a quarter of its exports to China. The two nations have said they will boost their bilateral trade to a $300 billion a year by 2015.

South Korea and China completed a feasibility study for a possible free trade accord in May, and at the time they agreed to have more consultations on agriculture, fisheries and other sensitive areas before deciding to begin formal negotiations. Such consultations have not begun, though South Korean officials expect them to start soon.

“We don’t know how long those consultations will last and what results they will bring about,” Kim Jin-wook, director of the ministry’s free trade accord policy planning division, said Thursday. “Until those consultations are over, we cannot say whether and when formal negotiations for an FTA will take place.”

China has been more aggressive in pursuing a free trade deal with South Korea than vice versa, South Korean officials said.

When South Korea’s president, Lee Myung-bak, held a summit with China’s premier, Wen Jiabao, in Seoul in May, Mr. Wen told South Korean business leaders that negotiations for a trade agreement would begin “within a year.” South Korea said no such schedule was set.

Still, key members of Mr. Lee’s governing Grand National Party have recently called for negotiations with China for a trade pact to help South Korean firms in the face of a “Chiwan economy.”

The recent trade deal between China and Taiwan “can deliver a serious blow to our companies, which have been engaged in fierce competition with Taiwan for the Chinese market,” Kim Moo-sung, the floor leader of the governing party, said in a speech in July. “The government must prevent us losing all the market by pushing for an FTA with China.”

In the United States, President Barack Obama is struggling to win support from his party’s legislators for a free trade pact with South Korea that has gone unratified by Congress for more than three years.

The accord is strongly opposed by the U.S. beef and auto industries, as well as labor unions, which say it fails to end what they say are unfair restrictions on U.S. auto and beef sales in South Korea.

The White House has pledged to send Congress a revised agreement addressing those concerns after elections in November. But South Korea’s trade minister said in June that talks were complete and the agreement would not change.

Beijing has increasingly made free trade pacts a centerpiece of its commerce strategy, signing or commencing agreements since early 2007 with New Zealand, Taiwan, Singapore, Peru and a 10-nation Southeast Asian alliance.

Talks with other nations, including Australia, are also under way.

Were South Korea and Japan to reach a trade accord, the alliance would remove tariff barriers between three of the four largest Asian economies.

Preliminary discussions on a trade pact have been under way for eight years.

Even if South Korean domestic opposition to a pact with China were overcome, a three-nation alliance including Japan faces daunting obstacles. Relations between Japan and China have long been darkened by mutual suspicion; efforts by South Korea and Japan to lower their trade barriers have stalled.

Choe Sang-hun reported from Seoul.

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source: NYT