FTAs cause trade surpluses to spike

Korea saw its trade surplus with five economic entities with which it has free trade agreements (FTAs) more than double last year as bilateral trade volumes surged on the back of the deals, a report showed yesterday.

According to the report compiled by the Ministry of Foreign Affairs and Trade, Korea logged a combined trade surplus of $18.8 billion last year with Chile, Singapore, the European Free Trade Association, India and the Association of Southeast Asian Nations.

The figure compares with a meager surplus of $7 billion posted before the free trade accords with the economic entities, the ministry said.

Trade volume with the five economic entities increased to $154 billion last year from $92.5 billion one year before each FTA with them went into effect, according to the report.

Last year’s trade surplus with the five economic partners accounted for 39 percent of Korea’s trade surplus of $48.4 billion, and trade volume with them made up 17.3 percent of the total. Korea posted a trade surplus of $9.1 billion from trade with the ASEAN last year, compared with just $2.3 billion in 2006, one year before a bilateral free trade deal came into effect.

Trade surplus with Singapore also increased to $7.4 billion last year from $2.1 billion in 2005, according to the ministry.

Korea, whose economy heavily depends on trade, has been aggressive in forging trade pacts with other nations, highlighted by the sealing of a free trade accord with the European Union in October last year.

The FTA with the EU came into effect on July 1 after Korea’s National Assembly ratified the deal in May. The European Parliament passed the accord in February.

In 2007, Korea signed a free trade agreement with the United States that subsequently stalled. Last week, the U.S. Congress ratified the deal, and Seoul is under mounting pressure to follow suit.

Yonhap