Korea-China FTA negotiations hit snag
By Park Si-soo
Free trade agreement (FTA) talks between Korea and China are facing difficulties in progressing as hoped. The former wants the negotiations to bring about “comprehensive” market openness on both sides while the latter wants it to be “limited and small-scale.”
“I don’t think the government’s FTA talks with China will move forward smoothly,” Choi Seok-young, chief FTA negotiator at the Ministry of Foreign Affairs and Trade, said in a press briefing Friday.
“There are still wide gaps on some key issues, particularly the degree of openness. What we want is a comprehensive scope for the FTA that includes everything from services and products industries to investment, while China only wants to open non-sensitive sectors.”
These remarks were based on the three-day second round of Seoul-Beijing talks that ended Thursday on Jeju Island. The two countries announced the launch of formal FTA negotiations in early May, expecting the talks to be concluded in two years.
To ensure quick progress, according to the chief negotiator, the two nations will classify sensitive items and handle them separately from a third round of talks that will take place in August in China.
“The two sides discussed the scope of the deal and how to set up working groups on each segment. Based on the results, the two countries will work to agree on definitions of sensitive items,” he said.
The sides earlier agreed that the talks on a free trade deal will proceed in two phases, with the handling of sensitive items and the scope of the trade agreement to be mainly discussed first.
Agriculture and fisheries are considered to be the most sensitive sectors for Korea, while China categorizes its manufacturing industries, which include the automobile and machinery sectors, and oil refining, as sensitive.
China is Korea’s largest trading partner, with bilateral trade expected to reach $300 billion by 2015. Since 2008, the nations have held a series of joint feasibility studies on a possible free trade deal and exchanged views on sensitive issues.
Many experts here worry that a Korea-China FTA could deal a fatal blow to Korean farmers.
The Korea Institute for International Economic Policy (KIEP) said in a recent report that an FTA with China will hit the local farming industry in a way the Korea-U.S. FTA never could.
Under a trade deal with China, the state-run think tank predicts the country could see production in its agriculture and fisheries sectors drop around 14.26 percent from 2005 levels due to an influx of cheaper Chinese products. Under an extreme scenario that both countries decide to remove import tariffs on all agricultural goods, the margin of decline could reach 20 percent, it added.
“The damage to the local farming industry from a Korea-China FTA will be at least twice as big as the damage from the Korea-U.S. FTA,” the KIEP report said.
Another report from the Korea Rural Economic Institute (KREI) projects that the loss in agricultural production due to a Korea-China FTA would be around 2.7 trillion won on the premise of a 50 percent cut in import tariffs on all agricultural products. Chinese agricultural imports will likely surge by more than 200 percent if an FTA goes into effect, the KREI said.