Toward a better FTA with China

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Toward a better FTA with China

South Korea and China have concluded the first stage of negotiations on a bilateral free trade agreement after 16 months of talks. They agreed on the basic framework and ultimately working toward 90 percent tariff liberalization, while breaking down items for concessions to three categories - general, sensitive, and super-sensitive - for a 20-year grace period in their opening.

The modality, or basic guideline, had been widely expected. The ratio of exclusion or concessions is considerable compared to FTAs with the United States and European Union. Of course, Korea and China have sensitive interests in both the agricultural and industrial sectors. But the 90 percent liberalization rate is the largest among the free trade deals China has signed.

Real negotiations start now. The two countries have to tackle specific and bigger issues in the next stages that will likely start by the end of the year. Of 12,000 trade items, just 1,200 will be excluded from near-full opening. Seoul is expected to first fit agricultural and fisheries products into the excluded category to protect farmers from cheap Chinese imports. China, on the other hand, will demand liberalization of its competitive farm and fisheries products and labor-intensive manufactured goods, while trying to include less-competitive automobiles and mobile phones in the non-liberalization group.

The bigger challenge, however, will be at home. A Korea-China FTA no doubt will face stronger resistance from Korean industries. The government will first try its best to persuade the agriculture and fisheries industry. But it won’t be able to secure the industry’s support simply by promising subsidies in the case that prices plummet in a cascade of cheap Chinese products.

Therefore, the government should be able to present a long-term blueprint to defend, as well as foster our local farming industry. This industry also must change its mindset. Market opening and liberalization is an inevitable global trend. The industry should seek creative ways to survive in a changing environment rather than simply resisting and fighting.

Because Chinese consumers are enraged and nervous about their food standards these days, guaranteed and better quality imported food sells well. If Korean farmers and food producers work together to differentiate their products on the basis of quality, they can make inroads into a colossal market of 1.3 billion consumers. The government and industry needs to take their cue from the Netherlands, which possesses a smaller territory, worse weather conditions and higher labor costs. But the Dutch built their farming industry into a mainstay export. There is no reason why we can’t do the same.
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