A strategy for survival

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A strategy for survival

Korea and the European Union have begun the first round of free trade negotiations. Negotiations could be completed within a year if things go smoothly. The focus is on what level an agreement will be reached, not whether an agreement will be signed. The two sides want a more comprehensive deal than the one between Korea and the United States. There is a good chance for that to happen because agricultural products ― which were the trickiest issue in the FTA between Seoul and Washington ― are unlikely to be an issue. Both sides categorize farming as private industry. Negotiating teams from both sides will pour all their energy into opening doors for industrial goods and services. The average EU tariff rate is 4.2 percent, higher than the 3.7 percent of the United States and 3.1 percent of Japan. If the tariffs are lifted, we will export more industrial goods to European countries. The tariff rate on EU vehicles is 10 percent, four times higher than that of the United States. The tariff rate on audio and video equipment, including TV sets, is 14 percent, also higher than the rate of the United States, which imposes a tariff between 0 and 5 percent. Thus, a free trade pact with the EU is expected to bring many benefits, like the one with the United States.
A Korean research institute on foreign economic policies predicted that if a free trade agreement with Washington is approved, Korea’s gross domestic product will increase 2 to 3 percent and create 300,000 to 590,000 more jobs. The EU, the world’s largest market, imposes quite strong disadvantages to countries outside the union. If we sign a free trade accord with the EU, most of those disadvantages will be removed. Because the EU includes 27 countries of varying economic size, from advanced countries to developing ones, a deal with it will probably offer more business opportunities. A free trade accord with the EU will also serve as a stepping stone to Russia and Eastern Europe, which are new markets to us.
The deal surely bears economic benefits, so we want the government to sign a comprehensive free trade agreement in industrial goods and services. The government must be aware that each EU country might have different interests and must be well-prepared. It also must present measures to help domestic industries that might be damaged from the deal. More than half of the world’s trade occurs among countries that have free trade deals with one another. If we do not join this group we will be left behind. A free trade agreement is not a matter of choice, but a strategy for survival.
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