FTAs with China, Japan needed
Jung, currently a visiting professor of business administration at the Korea Advanced Institute of Science and Technology, spoke at a forum held by the Yonsei-SERI European Union Centre on Thursday about changes in the trade networks in Northeast Asia as Korea expands its FTAs.
“Korea is placed in an unusual situation [in the Northeast Asian region] as the countries Korea has signed FTAs with [the U.S. and EU] and those that are on its pending list [China and Japan] are not free trade partners with each other,” Jung said.
“This unusualness can be a favor to Korea’s trade, and to maximize the benefits, Korea should accelerate its FTAs with China and Japan,” Jung said.
In his 30-minute speech, Jung noted that Korea entered the so-called “FTA game” relatively late compared to other countries with the agreement it signed with Chile in 2003. Countries all over the world have been signing FTAs since the establishment of the World Trade Organization in 1995. Based on data collected by the WTO, the number of so-called regional trade agreements, or FTAs, as of last October, was 310. Before the establishment of the WTO, there were only 43.
Korea currently has free trade agreements with 45 countries.
Korea finalized a deal with the U.S. last year and is waiting for final documents to be signed by President Lee Myung-bak before it goes into effect.
“Korea has become a partial FTA hub,” Jung said, because it doesn’t have FTAs with Japan and China. “In order to become a full hub, it must speed up negotiations with closer countries like China and Japan.”
According to Jung, an FTA hub refers to a country that has signed FTAs with countries that don’t have FTAs with each other.
“The benefits for an FTA hub country come in various sectors including exports and imports,” Jung said. With more products flowing into the country as tariffs break down, there will be more competition in local industries, making them more competitive.
Korea is expected to beef up efforts this year to expand its trade ties with geographically close countries - China and Japan. Earlier this month, Minister of Foreign Affairs and Trade Kim Sung-hwan said that the government could launch formal talks with China on an agreement in the first half of the year.
Korea has also been nudging Japan for an FTA but progress has been slow due to sensitive areas of trade such as autos.
Jung predicted that Korea will start its official discussions with China and Japan this year, although progress with Japan is likely to be slow. Between the two countries, Jung picked Korea’s FTA with China as more crucial and important to the country’s economy.
“Japan has relatively low import tariffs while China is the opposite,” he said. “The economic impact should Korea not sign an FTA with China will be bigger than Korea not sealing a deal with Japan.”
Professor Park Young-ryeol of Yonsei University’s business administration department, who is also the director of the Yonsei-SERI EU Centre, was also at the forum.
By Lee Eun-joo [firstname.lastname@example.org]
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