Trade pact can open doorsSouth Korea has reached a de facto free trade agreement with the European Union, the world s largest economic bloc. President Lee Myung-bak, therefore, will bring home a precious gift from his trip to the Group of Eight summit in Europe, a gift that might help to reverse the downturn and revive the sluggish domestic economy.
The FTA with the European Union is Korea s second major trade deal after a similar agreement with the United States.
The EU, a 27-nation economic bloc with a combined gross domestic product of $18.3 trillion, is Korea s second-largest export market after China, accounting for $58 billion in annual revenue. If companies respond to the FTA by boosting productivity, industrial output could increase by 5.5 percent, and 290,000 new jobs could be created.
The new trade pact will help the country move past its mercantilist image and become a leading champion of free trade. Korea has long given the impression that it is primarily concerned with selling its products overseas but that it only halfheartedly accepts imports.
Through its free trade efforts, however, the country has some valuable leverage to speak out against protectionist practices in the global market amid an economic slowdown.
A free trade pact with the EU likely won t upset local industries, and it probably won t face too much opposition. So the legislative process should be a breeze, especially when compared to the still-contentious deal with the United States. Yet there are worries that pressures on the domestic market to open further will increase.
Local companies need to reboot themselves with the idea of global competitiveness in mind, and the government must support them so that the opening of the market will bring more good than harm to Korea.
A partnership with the EU can help accelerate free trade deals with other countries, possibly with the United States and Japan. The FTA with the U.S. is pending in the National Assembly, and negotiations with Japan have been shelved for years. It could also breathe fresh air into the deadlocked talks with China.
Korea should also seek out other markets for potential free trade talks. Such steps will eventually build up the country s potential and capabilities as a free trade hub.