Everything ready for smooth EU FTA operation
Korean customs chief plans to invite ambassadors to see preparedness
By Kim Jae-won
The free trade agreement (FTA) between Korea and the European Union (EU) is an awesome opportunity for both sides ― for export-driven Korea, it means easier access to a market of 500 million with a combined gross domestic product (GDP) amounting to $16 trillion.
Bracing for the brunt of the impact is the Korea Customs Service (KCS), which is certain to handle a ballooning exchange of products as soon as both sides ratify the agreement.
KCS Commissioner Yoon Young-sun sees this trade pact, which will go into effect as early as next July, as very positive and is already preparing to smoothly implement his agency’s role.
``We plan to invite ambassadors from the EU nations, and have them view firsthand our customs procedures at Incheon International Airport and Incheon Port. This is so they can observe our advanced system.’’
The customs agency has developed a system to ensure Korean firms will receive FTA benefits such as the ``FTA-PASS,’’ a certification system for the origin of products, and provide it for free to small and medium enterprises (SMEs).
So far, 300 or more SMEs have applied to take advantage of the system, Yoon said.
``Domestic conglomerates can manage the process on their own. However, SMEs have difficulty applying the system without assistance. So, we think it is our mission to help them,’’ the 54-year-old said.
Also as part of KCS preparations, Yoon said that a clearance process is being revamped to cope with the expected greater flow of goods from the EU.
“We are trying to combine existing manpower and new personnel to bring an organizational change to our current apparatus,” the KCS commissioner said. Three teams have been working on preparatory measures, he said, adding that maximum efforts are being exerted to avoid any glitches.
“Some may think that the role of customs will be reduced because of the elimination of tariffs as the result of the bilateral free trade pact,” he said. “On the contrary, it is only increasing our role in such aspects as letting import/export firms know exactly how the new system operates as well as how they can benefit fully from the FTA.
There is another motive for Yoon to pay extra special attention to the smooth operation of customs services for the EU-Korea FTA.
Korea has signed quite a few free trade pacts with countries from around the world, including Peru and the United States, but the Korea-EU FTA braces for unprecedented multilingual features because the deal is with the 27 member countries of the EU.
In a sense, the former general director of the tax bureau at the Ministry of Strategy and Finance advised Korean companies to take the necessary steps.
``If a Korean company has a trade problem with any EU nation, it can be a similar problem for other members,” he said. “That’s why we are required to pay more attention.’’
Under the agreement, Korea and the 27-member economic bloc will eliminate or phase out tariffs on almost all goods within three years after the agreement comes into force.
It is the EU’s first FTA with an Asian trading partner. The EU is Korea's second-largest trade partner after China with two-way trade totaling $78.8 billion last year.
Once the FTA goes into effect, Korea is expected to see a 20 percent growth in trade with the EU, according to the state-run Korean Institute for International Economic Policy. The deal is also expected to expedite the stalled process to get the Korea-U.S. FTA ratified by their parliaments and to forge similar accords between Seoul and Beijing or Tokyo.
“It is really fortunate that Italy has finally joined the rest of the EU by dropping its opposition,” the customs chief said, referring to the last hurdle Rome posed to the free trade pact.
Regarding the imposition of countervailing duties to discipline a “wanton” trading partner, Yoon said this can be counterproductive.
He said Korea is an export-driven country whose economic size cannot be compared to that of the United States. “I have received requests by some small firms to impose tariffs on some imports,” he said. “But this can do bigger damage to our exports industries by triggering counter-tariffs.”
``Well, it is not normal tariff. The U.S. is trying to impose an anti-dumping tariff on any country the benefits from manipulating its currency policy,” he explained. ``Super power nations like the U.S. may use the measure, but we cannot use it because we can face a counterattack from other countries.
``We consider all of the factors when imposing a tariff. We must think of what the reaction and effect will be if we decide to levy it,’’ he said.
As the top customs officer, Yoon also made an interesting historical analysis about trade pacts in general.
In time with the 100th anniversary of the forced annexation of Korea by Japan, disputes have resurfaced with regard to what caused it to happen. Here is one unique analysis ― the tragedy has something to do with a free trade agreement (FTA) between the two.
``Joseon signed first modern trade agreement with Japan 130 years ago. It was like a free trade agreement without any conditions,’’ Yoon said. ``Japan could import Korean rice and not pay a penny in tariffs. At the time, Joseon also suffered from a lack of rice, but due to the agreement, the problem became even worse.’’ The Joseon Kingdom governed the Korean Peninsula for approximately 500 years before the annexation.
What Yoon referred to is the Korea-Japan Treaty of Amity, also known as the Treaty of Ganghwa, which was negotiated between the two nations in early 1876. Japan employed gunboat diplomacy to press the kingdom to sign the unfair treaty.
He said that once the unequal pact was signed, it was extremely difficult to address it. Korean officials visited Japan twice to overhaul the agreement, but they failed to meet those in charge.
Yoon said that Korea now is different from that of 130 years ago, taking pride in the advance of the nation’s status that puts it on an equal footing with the world’s top trading nations.