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Korea’s FTA Policy and its Perspectives
27 September 2006
Heungchong Kim
Head, European Studies
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Korea Institute for International
Economic Policy
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Table of Contents
I.
Why does Korea pursue FTAs now?
II. How does Korea pursue FTAs?
III. Current Status of Korea’s FTAs
IV. Korea-US FTA: where are we now?
V.
Korea-EU FTA: prospects
VI. Korea’s FTA Networks1in the Future
I. Why does Korea pursue FTAs now?
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Why does Korea pursue FTAs?
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Korea: heavily dependent upon foreign markets in its development
process
trade openness in 2005: Korea(65.7%) vs. NAFTA(25.8%), Japan
(24.3%), EU(32.2%), China(59.3%), ASEAN-7(154%)
strongly supported multilateral trade negotiations as Korea has been
one of the greatest beneficiaries of the GATT/WTO, but just ignored
FTAs
Regionalism revived and making fortress in foreign markets, so urgent
need to change its trade policy to2 take new markets and not to lose
existing ones.
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I. Why does Korea pursue FTAs now?
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Why now?
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No regionalism in East Asia – “Empty box or White spot”
Emerging FTAs…..
China-ASEAN, Japan-ASEAN, Japan-Mexico…..
………and Korea’s Choice
A Sense of Urgency = “Already late, but not too late”
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II. How does Korea pursue FTAs?
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The Roadmap of Korea’s FTA
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A need for setting priorities among potential FTA partners
Pronounced in August 2003, after completion of negotiations with
Chile, and revised in 2004
Factors of consideration in choosing the partners – maximizing
economic benefits, sensitivity of domestic industries, intention of
the FTA partners,
Basic Strategy of Korea’s FTAs
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Forming FTA networks with giant economies and emerging markets
Should take a multi-track pursuit with a high-level and comprehensive
FTAs supporting MTN
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III. Current Status of Korea’s FTAs
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The Early Era of Korea’s FTAs (before 2004)
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mid and late 1980s : a move of Korea-US FTA, mainly from USTR
(1984) and USITC(1989) – “Korea is not ready for FTA”
After financial crisis, the Ministry of Trade established, and its main
objectives were to establish Korea’s FTA policy – government-led
FTA policy proceeded
mid-1998, informal contact with several countries including Thailand,
South Africa, Turkey, Chile, New Zealand and Israel,..
…and Chile was chosen as a first partner for Korea’s FTA(1998. 11)
FTA negotiations with Chile started(1999.
12.) and finished(2002. 10.)
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Singapore: suggested(1999. 9.), pronounced of the start of negotiation
(2003. 10) and finished(2004. 11)
Japan: 1999~2000 research started to published, Joint research group
(2003. 3.), start of negotiation(2003. 12) and stalled.
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III. Current Status of Korea’s FTAs
Entry into force
Under
Negotiation
Chile
Entered into force since March 2005 and proved
successful through mutual benefits
Singapore
Entered into force on 2nd March 2006
EFTA
Entered into force 1st September 2006
ASEAN
Finished commodities area, and on-going
negotiations on services
Canada
Negotiations since July 2005
Mexico
Negotiations since February 2006
India
Negotiations since March 2006
U.S.
Negotiations since June 2006
Japan
Stalled (differences over agricultural products)
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Joint Study
Making good basis
MERCOSUR
Under way (until mid-2006)
China
Joint studies at the academic level
(until 2006)
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IV. Korea-US FTA: where are we now?
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Why pursue the KORUS FTA?
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KORUS FTA will lead to…
Expanding trade and create additional wealth
Accelerating the ongoing economic reform, upgrading the Economic
and social systems,
Strengthening the Korea-US Alliance
The current status of KORUS FTA negotiation
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Announcing start of negotiation in February 2006
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Informal preparatory talks in March and April 2006
1st, 2nd round of negotiations in June and July
3rd round of negotiations held in Seattle in early September 2006
4th round will be held in late October in Korea
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IV. Korea-US FTA: where are we now?
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The Outcomes of 3rd round of negotiation
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Two sides focused on tariff offers and services/investment reservation
lists that had been exchanged
Korea requested the US’s improved tariff offer for and textile, while
US requested Korea’s improved tariff offer for agricultural products.
A basic foundation built in the services/investment reservations by
assessing the requested reservations and mutual interests of both
parties
Progress in certain chapters such as the financial sector, but not much
substantial advancement was made
8 regarding the key issues
Inter-sessional talks will continue before the 4th round
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IV. Korea-US FTA: where are we now?
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Main controversies in the Korean Society on the Issue
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No preparation on the KORUS FTA negotiation?
Harmonization with (North)east Asian Economic Community?
Four contending issues, preconditions for the start of the negotiation?
screen quota, beef, exhaust control, pricing in pharmaceuticals
Growing concerns on the impacts of KORUS FTA on the Korean
Industries
Agriculture, Services including financial, education, medical services,
Investment issues, IPR, etc…
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V. Korea-EU FTA: prospects
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Achievements in Trade and Investment
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As of 2005, the EU was Korea’s second biggest exporting
partner next to China and ahead of the U.S. It is also the fourth
biggest importing partner next to Japan, China, and the U.S.
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Korea is the 8th trading country for the EU.
U.S., China, Switzerland, Russia, Japan, Norway, and Turkey
stood ahead of Korea
Korea is the biggest country of MFN status except giant
economies of the US, China and Japan
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As of 2005, the EU stood as the largest investor in Korea with a
registered investment stock of US$33bn in 2005; more than
30% of foreign capital in Korea
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V. Korea-EU FTA: prospects
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Strategic Complementarities
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Placed multilateralism first on the table but changing the mood
from both sides
EU: a) growing concern about trade diversion in the Korean
market caused by its active engagement in RTA (e.g. KORUS
FTA) b) searching for momentum to improve market access and
to solve problems arising from trade deficit c) active
engagement of the EU in dynamic East Asia
Korea: a) why not the EU? from its FTA policy b) good chance
to expand trade with a giant11 economy and create additional
wealth c) good chance to make a stepping stone in accelerating
the ongoing economic reform and upgrading the economic and
social systems once again
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V. Korea-EU FTA: prospects
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Preliminary Talks began
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Feasibility studies of a Korea-EU FTA almost finished by both sides
The Joint Committee meeting in June 2006 finished
1st preliminary talk on a Korea-EU FTA finished in July and 2nd
round is being held in September
Factors to be Considered
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Existence of strong will to evolve preliminary talks to a higher level
Development of negotiations in12DDA and the KORUS FTA
Political sensitivity in the Korean society
Interest groups on both sides
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VI. Korea’s FTA Networks in the Future
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Korea’s FTA Networks in the Future
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FTA Networks with more than 50 countries in the World
including…..
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Small but strong countries such as Chile, Singapore, EFTA and
Canada
Giant economies of ASEAN, US, EU, Japan and China
Emerging Markets of India, Mexico, MERCOSUR and Russia
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Thank you
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