[EDITORIALS]The trade treaty with China

South Korea and China are in the process of changing the Investment Protection and Promotion Agreement into a bilateral investment treaty. In 2003, during a summit meeting, both countries basically agreed to have a treaty and the two sides are currently in the process of negotiation. Once a treaty is signed, foreign investment companies will receive the same treatment as domestic companies. A bilateral investment treaty is more than a promotion agreement and is a stepping-stone to a free trade agreement.
What first needs to be said is that the earlier the treaty is signed, the better. The agreement that was signed in 1992, when both countries established diplomatic ties, no longer fits the current economic circumstances. There are more than 30,000 South Korean companies doing business in China, and with $3.64 billion invested in the country, Korea has emerged as the biggest national investor in China, with the exception of Hong Kong and some tax shelters. Korean companies that enter China have to face many obstacles resulting from Chinese laws that have special clauses that make doing business there a hassle. It was due to these laws that rumors began to fly that once a company established itself and was doing good business, the Chinese government would kick it out. Thus, by agreeing to the treaty, all sorts of regulations and permissions that hindered investment, such as the requirement that foreign companies use Chinese raw materials, will be removed, a direction that is good for both sides.
It has been known that China wants a step-by-step approach to signing an investment treaty instead of one that would implement all the measures at the same time. There is also the possibility that China will ask Korea to give it “market economy status,” which is not acknowledged by the United States and the European Union. (Under such status, it is accepted that the market drives prices without interference from the government. A country granted such status is thought to be in a good position in anti-dumping negotiations).
Korea signed a similar treaty with Japan in 2001. The investment treaty with the United States has been held up by Korea’s support of its screen quota system for the film industry and by the import of U.S. beef. Some say that it is too soon to make a treaty with China, but the sufferings of Korean companies are too great to wait for diplomatic timing. It’s time to protect the interests of companies doing business in China.