South Korea is a latecomer on freer trade
South Korea is a latecomer on freer trade
Rambabu Garikipati
The Korea Herald, SEOUL
Published on December 11, 2004
In cooperation with other members of the Asia News Network (ANN), The Nation continues its series on free-trade agreements. Today’s article, the eighth in the series, looks at South Korea.
Until April, South Korea was the only member of the World Trade Organisation other than Mongolia without a free-trade agreement (FTA). Now it is trying to catch up in a hurry.
After signing its first ever FTA with Chile earlier this year, the world’s 12th-largest economy is now finalising an FTA with Singapore, is negotiating another with Japan and wants to begin talks next year for pacts with Asean and the European Free Trade Association (EFTA).
“The pursuit of such FTAs is founded on Korea’s firm belief in the primacy of the multilateral trading system, and therefore is pursued in a manner that can complement the liberalisation efforts on the multilateral level,” said officials at the Ministry of Foreign Affairs and Trade.
South Korea is also exploring bilateral agreements with the United States, China, the European Union, Mexico, Canada and India. However, the formal process for these deals has to start.
The Korea-Chile FTA, the first trans-Pacific FTA ever, came into effect on April 1 this year. The agreement liberalised trade in goods and services and included provisions on technical regulations, investment, government procurement, intellectual property rights and dispute settlement.
For the liberalisation in trade in goods, Korea granted immediate tariff elimination to 87 per cent of the total tariff line on imports from Chile, while the same treatment granted by Chile to exports from Korea amounted to 42 per cent. Tariff elimination on untouched products will be phased in over the next 16 years.
In the next 10 years, Korea’s current trade deficit with Chile is expected to turn into a surplus of nearly US$3 million (Bt119 million).
Korean farmers vehemently opposed the trade pact and the national assembly vote on the FTA was postponed three times after the senate had approved it. To appease the farm sector, the government promised to dole out $102 billion to farmers over the next 10 years.
Negotiations between Korea and Japan began in December last year with the aim of concluding an agreement by next year. This followed the first official government proposal for a joint study on a Korea-Japan FTA during former president Kim Dae-jung’s state visit to Japan in October 1998.
Korea and Japan have held negotiations every two months, focusing on nine key areas of mutual interest : trade in goods, non-tariff measures, investment and trade in services, government procurement, competition policy, intellectual property rights, mutual recognition, dispute settlement and general cooperation.
The Korea-Japan FTA is expected to serve as a catalyst in strengthening regional cooperation in East Asia and a stepping-stone towards creating an East Asia Free Trade Area. However, protests by various Korean business sectors are likely.
Negotiations on the Korea-Singapore FTA are expected to reach conclusion by the end of this year after the two sides began talks in January. Nine working groups have been created to facilitate the work on key issues.
No major opposition is expected, since no agricultural products from Singapore are involved. In fact, the Korean financial sector may welcome know-how from Singapore to compete against an increasing presence of foreign financial institutions.
Talks between Korea and Asean, meanwhile, will start next year and are targeted for completion in 2006.
The Korea-Asean FTA initiative began during the 5th ROK-Asean Experts Group Meeting in Jakarta last August. The purpose of the meeting was to examine the feasibility of an FTA with Asean. The decision was announced at the end of last month after a South Korea-Asean leaders’ summit.
Korea and the EFTA (European Free Trade Association) have tentatively agreed to begin free-trade talks early next year.
An agreement to establish a joint study group to evaluate the feasibility of an FTA with the European group was reached last May on the sidelines of a ministerial meeting of the Organisation for Economic Cooperation and Development.
A ministry report forecast that a possible FTA with the European free-trade bloc would increase Korean exports by 26 per cent annually and imports by 27 per cent. The report said the FTA was also expected to strengthen bilateral cooperation and exchanges in high-tech industries.
The foreign ministry forecast that the FTA would also boost South Korea’s exports of automobiles, ships, electronic and fibre goods.
