By Yoon Ja-young
Staff Reporter
Since the signing of a free trade agreement (FTA) with Chile in 2003, Korea has been pushing for FTAs with diverse economic entities around the world. It is certain that being left behind in the global competition to sign bilateral trade deals will deprive Korea of an opportunity to make a leap forward.
Currently, Korea has four FTAs in effect ― with Chile since April 2004, with Singapore since March 2006, with the European Free Trade Association (EFTA) since September the same year, and with the Association of Southeast Asian Nations (ASEAN) countries since May this year. EFTA comprises Switzerland, Norway, Iceland and Liechtenstein, and ASEAN includes Singapore, Malaysia, Indonesia, the Philippines, Brunei, Laos, Myanmar, Thailand, Vietnam and Cambodia.
The preferential trade under the agreements took 12.1 percent of Korea's total trade in 2008. The ratio of trade under FTAs is still low in Korea, compared with Chile's 83.2 percent, Singapore's 67.7 percent, New Zealand's 37 percent and the United States' 34 percent. It is even lower than China's 19.7 percent and Japan's 14.7 percent.
Korea signed pacts with the United States and India and recently completed negotiations with the European Union. Negotiations are still ongoing with six economic entities ― Canada, Mexico, Peru, Australia, New Zealand, and the Gulf Cooperation Council (GCC) comprising Saudi Arabia, United Arab Emirates, Oman, Qatar, Kuwait and Bahrain.
When the accords with the United States, India and the EU coming into effect, trade under FTAs is expected to make up 35.3 percent of the total.
Statistics show that exports to FTA partners increased sharply after the agreements came into effect. The Ministry of Strategy and Finance said it opened up diverse markets and investment opportunities to small- and medium-sized companies as well. The negative effect was limited, according to the ministry.
Korea's exports to Chile, for example, grew by an annual 42.4 percent during the five years since the pact came into effect. Hyundai Motor enjoyed price competitiveness thanks to the cuts in tariffs. Its sales in Chile grew 2.5 times between 2003 and 2007. Exports to ASEAN also grew by over 20 percent.
Importers are also benefiting. A flower importer in Korea, for example, is saving 5 million won on every 18 tons of imports it brings in the flowers from Chile where no tariff is levied instead of the Netherlands.
Agriculture was the most concerned sector in the country over the opening of the trade barrier, but the effect seems to have been fairly positive so far. Grape farmers are sustaining better than expected, as most Chilean grapes are imported when Korean grapes are not in season.
"The FTAs with big economies like the EU and the United States, meanwhile, will enable our businesses to get a head start compared with their competitors like Japan and China," the ministry said.
Hence, the country pushed for an FTA with the United States, its fourth largest trade partner, and the EU, the second largest trade partner.
Korea is either preparing negotiations or engaged in joint research about free trade with eight entities - Turkey, Colombia, Japan, China, Russia, Israel, MERCOSUR (comprising Brazil, Argentina, Uruguay and Paraguay) and the Southern African Customs Union (SACU) (consisting of South Africa, Botswana, Lesotho, Namibia and Swaziland).
chizpizza@koreatimes.co.kr
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