The signing of the free trade agreement between Korea and the EU has many symbolisms than economic impacts. The eurozone has become closer to Koreans, psychologically. Korea becomes one of the most proactive countries in free trade accords.
Korea is the first Asian country to sign an FTA with the EU. The Asian-middle power is linked to the world’s largest single market with a GDP of $16 trillion and a population of 500 million. The EU is the nation’s second trading partner and the biggest investor in Korea. Half of inbound investment came from the eurozone.
Once the treaty gets ratification from the National Assembly and the EU Parliament, it will go into effect from next July. Since Korea put into effect the FTA with Chile in 2004, the country has signed the same deals with 45 countries. Chile proves how the pact expanded trade. Korea became the Latin American’s fifth largest importing country in five years. Trade with India has been growing following the same deal in January.
It is no coincidence for Korea to become the world’s seventh largest trade partner. The world’s 15th largest economy recovered quickly from the global downturn.
No explanation is necessary on the economic impact of free trade. Once the Korea-US deal goes into effect, the two allies will see more economic vitality.
The nation needs to conclude pacts with Turkey, Canada and other countries, including China and Japan.
Currently, Korea is too dependent on trade with China. China accounted for 25.8 percent of Korea’s trade, followed by the EU (18.3 percent), Japan (13 percent) and the United States (12.2 percent).
It may be a surprise for foreigners to note that Korea, one of the most xenophobic countries with strong nationalism, is so proactive and aggressive in free trade. Seoul seems to be more aggressive than Washington in free trade.
Korea can demonstrate that free trade, not protectionism, is the solution for a prosperous global economy.
As President Lee Myung-bak said, FTAs also deepen such universal values as democracy, human rights, rule of law and market economy. An expansion of trade also increases exchanges of people. The EU is quite influential in setting global industrial standards.
The two sides will discuss later whether to include products made in the Gaeseong Industrial Complex for free trade. Pyongyang will also benefit from the deal once it scraps nuclear weapons.
The dark side is the deepening polarization. It will help exporters, but handicap domestic-oriented companies and farmers, fishermen and cattle breeders.
The booming economy has less of a trickling effect now than in the past due to the widening of the polarization. The more the economy grows, the more people feel a sense of alienation. This is the dilemma for neoliberal economic and free trade paradigm. The government needs to be active in free trade but also take care of the losers in the competition.
The National Assembly should demonstrate a bipartisan approach to FTAs.