[Viewpoint] A deal with ChinaKorea and China have accelerated steps to forge a bilateral free trade agreement. Korean Prime Minister Kim Hwang-sik, after a visit to Beijing in mid-April, said his counterpart ,Wen Jiabao, called for the start of negotiations on a free trade area.
Wen suggested that the two countries iron out differences during the negotiation process. Trade ministers Chen Deming and Kim Jong-hoon had discussed an outline of trade negotiation procedures ahead of the prime ministers’ meeting.
China reiterated the proposal on the sidelines of a trilateral meeting among trade ministers of Korea, China and Japan on Sunday in Tokyo.
It has been nearly a year since the two countries signed a memorandum of understanding during Korea-China-Japan summit meetings to study the feasibility of lowering tariffs and allowing greater access to each others’ markets, tariff-free, and to focus on narrowing differences in their positions.
China’s push for a free trade agreement came after it announced a 12th Five-Year Plan at a Communist Party Central Committee plenum that emphasized the need to balance the world’s second largest economy by shifting its emphasis from exports to domestic spending.
The guidelines for economic policies from 2011 to 2015 proposed a new phase of economic growth by boosting domestic demand, with the intention of sharing more equally the fruits of reform and development among the Chinese public. The shift, which is supposed to mitigate some social problems that resulted from fast industrialization and growth, could have huge repercussions on the global economy.
A boost in domestic demand could transform China’s place in the world as the largest producer to the largest consumer. Even as the government plans to relax its reins on the economy, which it has whipped to grow more than 8 percent a year, the pace won’t easily slow. But the decision to increase the service-sector’s share of gross domestic product to 47 percent from the current 43 percent should translate into a much larger consumer market over the next five years.
Governments and companies are eyeing the Chinese market to see if they can compensate for losses and slowdowns in their domestic economies. We have the geographical and industrial advantage to make that work. Japan does too, but it has traditionally tilted towards closer relations with Western societies.
Japan prides itself as being a member of the Western club. It fundamentally believes it is the role model for other Asian countries regardless of China’s ascent to world’s leadership on the diplomatic and economic front.
But Korea is more open-minded than Japan. It has long accommodated itself in the world with a sense of modesty and self-awareness of its weaknesses, especially when pursuing external relations and trade. Korean companies continue to err when trying to localize their products for overseas markets, but are way better at it than the Japanese, who are now best known for making “Galapagos” products - those that have evolved for the Japanese market and which are useless anywhere else. Japan’s cell phones are the prime example. We are best positioned to make it in the world’s fastest growing market.
In last week’s cabinet meeting, Prime Minister Kim said the government needs to come up with creative measures to protect our most vulnerable markets, such as the agricultural sector, in preparing for a free trade deal with China.
That is easier said than done, as we learned from negotiations for other free trade agreements. In negotiations, we can’t always win everything we want. What is more important is the bigger benefit. China is Korea’s biggest trade partner, accounting for 25 percent of our exports.
Some worry about the downside of over-reliance on the Chinese market after a bilateral trade deal is accomplished. But as the saying goes, you must lose a fly to catch a trout. We must arm ourselves with a more creative and broader mindset in order to capitalize on the changes occurring in the Chinese market.
With the impetus of a Korea-China trade agreement, we should pursue a similar pact with Japan and make headway for a trilateral free market environment.
*The writer is a senior columnist of the JoongAngIlbo.
By Park Tae-wook