New chance for China FTAAt the Korea-China summit at the Shanghai Expo last weekend, Chinese President Hu Jintao said, “I hope the China-Korea Free Trade Agreement procedure will be accelerated.” President Lee Myung-bak agreed, saying, “Let’s speed up the FTA.” During the meeting, both leaders agreed to wrap up a joint study on the FTA soon and continue the negotiation step by step. It may be too early to predict when the negotiations will start, but it is sure to be soon.
China is our largest trading partner. Last year, bilateral trade hit $141 billion, capturing 20.5 percent of Korea’s total trade volume. That is even more than our trade with Japan (10.4 percent) and the U.S. (9.7 percent) combined. The Korea Institute for International Economic Policy predicts that Korea’s GDP will increase by 2.44 to 3.17 percent if the FTA is signed.
Meanwhile, China is accelerating its FTA deals with other countries, as the current slump in developed countries pushes China to value the Asian market more than the United States or European markets. With its FTA with the Association of Southeast Asian Nations already taking effect, China is now attempting to execute an ambitious economic integration with Hong Kong, Macao and Taiwan. In this vein, China’s increasing concern about the FTA with Korea seems natural.
Befitting the potential repercussions, the Korea-China FTA is a very sensitive issue. First of all, the industrial structure of the two nations is quite different. That’s why the joint study conducted by the governments, related industries and academia of both countries has failed to produce a conclusion after almost three years.
In fact, there are keen conflicts of interest in key industries in both countries. For example, Korea’s agriculture and labor-intensive industries are fiercely against the FTA. While the Korea-U.S. FTA is hampered by politics, the biggest impediment to the Korea-China FTA seems to be internal dissent.
Therefore, the Korea-China FTA should be pursued carefully. To eliminate our internal conflicts, we need an approach that protects the vulnerable civilian sector. In this regard, a step-by-step negotiation is much more desirable than a package settlement. Even better would be to reduce the potential damage to the related industries first and then gradually expand the scope of negotiations. No one would deny that the Korea-China FTA presents us with a golden opportunity. As of 2007, more than 80 percent of our exports to China fell victim to its nontariff barriers. As China emerges as the biggest market in the world, no one would dispute the rationale for signing an FTA. The only thing left to do is ensure our preparations are much more detailed than they have been for FTAs in the past.