[Viewpoint] Conditions for a Korea-China FTA

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[Viewpoint] Conditions for a Korea-China FTA

The South Korean government has finally embarked on precursory steps to negotiate a free trade agreement with China. We must be thorough in scrutinizing the merits and demerits from not only economic but also geopolitical security perspectives to be ready for the difficult negotiation. The Korea-China free trade deal - which gives a broader meaning to economic security - would have implications in almost every sector of the two countries: politics, defense, foreign affairs, society and culture.

China has been aggressive in pursuing a free trade pact with South Korea from a political standpoint after the ratification of the Korea-U.S. FTA. Its purpose is to draw South Korea into its “greater China” economy and in the long run prepare for the day when it shares a border with one Korea.

In Korea-China trade negotiations, there are far more details to cover than cutting or eliminating tariffs on commodities and agriculture. There are other equally important areas for which we must fight.

Protection of investors is one. South Korean investors in a hotel business near Mount Baekdu, or Mount Changbai in Chinese, were kicked out by Chinese authorities without any compensation. An investor dispute settlement clause is vital for bilateral free trade agreements.

Second, we must demand further liberalization of services in China, especially the financial services sector. The free trade deals China has signed with other countries stopped at tariff benefits in industrial, farm, fisheries and livestock products. It so far refuses to open its domestic service sector beyond the concessions it offered upon joining the World Trade Organization.

Third, South Korea must require stronger environmental and safety standards from China. If any of the reactors on the Chinese coast cause a nuclear disaster, the Korean Peninsula could be directly affected. We should demand mutual safety inspections and advance alert systems to prevent major nuclear disasters like the one in Fukushima in Japan.

Fourth, as a country eyeing reunification, we must agree with the Chinese to build a joint-venture industrial complex in Dandong near the North Korean border and hire North Koreans to work there. Greater exposure to commercial activities will help open the eyes of North Koreans and eventually lead to arms reduction from the Pyongyang regime.

Fifth, we must demand the output produced by factories in the Hwanggumpyong and Rajin-Sonbong special economic zones invested in by South Korean companies be recognized as South Korean made, same as the products from the Kaesong Industrial Complex. Such an agreement could entice investment in North Korea from foreign investors making inroads in China and create jobs for North Koreans. Stronger protection of intellectual property rights, cooperation in food safety control and standardization of food safety procedures must also be included in the pact.

Bargaining with China won’t be easy. In all negotiations, leverage is important. While proceeding with trade talks with China, we may have to raise the issue of striking a similar pact with Taiwan. We need to propose to China that it upgrade its bilateral free trade system to a multilateral regional trade agreement (RTA) encompassing not only Korea and China, but also Hong Kong, Macau, Taiwan, Mongolia and 10 Southeast Asian countries. We could persuade China that such an RTA could counter the 10-member Trans-Pacific Partnership (TPP) led by the U.S. that excluded China.

But as a potential member of both treaties, we must study what would benefit us most between the two - a continental RTA or the TPP. Upon a breakthrough in inter-Korean relations after the potential settlement over North Korean attacks on our Cheonan warship and Yeonpyeong Island, we also should ready an inter-Korean free trade deal to expand economic cooperation with North Korea which depends on China for 83 percent of its external trade.

We must tread carefully to maintain a balance between rising Chinese and waning U.S. power. We have to build domestic, unification and foreign policies based on actual circumstances rather than an ideological yardstick. We must keep in mind that a superpower tends to demand more than it gives from a weaker party and also that circumstances on the Korean Peninsula are in China’s favor more than the two Koreas.

Translation by the Korea JoongAng Daily staff.

* The author is a former trade minister.

by Kim Hyun-chong
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