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[Letters] Window to the West: Korea and the FTAs

Published: 15 Mar. 2012, 21:53

The signing of free trade agreements (FTA) with both the United States and the European Union represents for Korea (ROK) a winning strategy to enhance future economic growth opportunities as well as deal with the growing influence of China, just when the West is experiencing hard times. The signing of free trade agreements with the EU and the U.S. is also a clear, landmark step towards Korea’s further integration within the global economy and next-level relations with the West. This is mainly for three reasons.

The one first is economic growth. The EU-ROK FTA, which came into force on July 1, 2011, is estimated to bring with it an increase in Korean exports of almost 5 percent and an increase of EU exports of 1.4 percent along with the creation of between 300,000 and 600,000 estimated jobs. According to the European Commission, the EU-ROK bilateral trade is expected to more than double in the next 20 years compared to a scenario without the agreement. On March 15 the agreement reached with the U.S. (Korus FTA) came into force and is expected to increase Korean GDP between 0.38 percent and 2.41 percent - striking when compared to projected U.S. economic growth of 0.02 to 0.2 percent. The IMF predicts that Korea’s GDP is going to post a 4 percent average growth in the next five years.

Secondly, Korea is reaching out to the West to improve its competitiveness, which has become a national trademark. Korea seems to understand well the importance of maximizing its competitiveness as a means to foster economic growth. As professor John West explains in his article “Korea and Japan: a tale of two countries, after the 1997 financial crisis,” Korea has started to undertake a wide array of reforms that have brought about notable achievements such as consistent progress on fighting bribery/corruption and enabling foreign companies to better operate in the country.

The third reason is Korea’s mistrust of China. China’s growing regional influence is not particularly welcomed in Korea, a country extremely proud of its independence and its current economic achievements. Trade relations with China are booming, with Beijing already listing as Seoul’s largest trading partner - in 2011 bilateral trade reached $220 billion, more than Korea’s trade with the United States and Japan combined.

However, Seoul clearly seems afraid of growing too dependent on China in the long run. “The more we lean economically on China, the more Beijing is going to raise its political bargaining power,” Seoul is probably thinking. Just look at the China-North Korea relations and you’ll understand Seoul’s argument. Let’s also remember: Korea and China were enemies during the Korean War and established official diplomatic relations just twenty years ago; Beijing is still Pyongyang’s closest ally.

That is why Korean leaders are cultivating ties with those whom they consider reliable partners - Washington and Brussels. Both the FTAs have been signed after years of harsh and complicated negotiations. Seoul’s determination has eventually paid off. Why not sign an FTA with Japan, too?

At times when multilateralism is experiencing a stalemate - the WTO Doha round of talks going nowhere - Korea’s bilateral free trade strategy is a winner. Free trade agreements not only hold the potential to improve trade flows, they enhance a country’s competitiveness. What is more, increased economic relations with America and the EU serve the purpose of downplaying fears of an ever greater dependency on China.

by Emanuele Schibotto, coordinator of Equilibri.net, an Italian think tank and online magazine on geopolitics and international relations

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