Trade deficit surges 4-fold after FTA with EFTA nations
Korea Times | 09-01-2009
Trade Deficit Surges 4-Fold After FTA with EFTA Nations
By Lee Hyo-sik
Staff Reporter
Korea’s trade deficit with a four-European nation economic block has surged by four-fold since the signing of a free trade agreement (FTA) three years ago, with its imports growing at a much faster pace than exports.
The Ministry of Strategy and Finance said Tuesday that Asia’s fourth largest economy posted a $1.49-billion trade shortfall with the European Free Trade Association (EFTA), comprising Switzerland, Iceland, Norway and Lichtenstein, from September 2008 through August 2009, sharply up from a $385-million deficit from September 2005 through August 2006.
It means Korea’s trade deficit has increased by 3.86 times over the past three years since the two parties signed the free trade accord in July 2005 in a bid to expand the bilateral trades through the removal of tariffs on various industrial and agricultural goods. The past went in to operation in September 2006.
The Asian nation exported cars, ships and other industrial products to the four European economies worth $2.37 billion from September 2008 to August 2009, up from $1.59 billion between September 2005 and August 2006. Its imports of ship parts, pharmaceuticals, machinery and other goods soared to $3.86 billion from $1.97 billion over the cited period.
Even before the FTA, the EFTA member nations had already imposed relatively low tariff rates of 0.6 to 2.3 percent on imported goods. Compared to other free trade agreements we signed, our exports did not increase by a substantial margin. But the country's imports of ship parts, machinery and health-related goods jumped sharply, with the FTA lowering our tariff rates on imported products,'' a ministry official said.
He said surging imports and slowly growing exports worsened Korea's trade balance with the EFTA, adding the upcoming Korea-EU FTA will further boost the nation's appetite for various European goods.
Meanwhile, bilateral investments have increased sharply since the pact took effect. Korea's investments in the four European markets surged to $1.36 billion during the 2006-2008 period from $125 million recorded for the 2003-2005 period, while inbound investments stood at $670 million from $290 million.STX Group’s acquisition of a shipyard in Norway in October 2007, worth $800 million, boosted the nation’s investments in the EFTA. Many other local businesses invested mainly in the shipbuilding and shipping industries. Investors from the EFTA usually acquired stakes in the financial services sector here,’’ the official said.
