Ratify the China FTA dealKorea’s exports have been declining for five consecutive months since January. Last month’s figures show a whopping 10.9 percent decrease over the previous month. The two-digit reduction is the first time since 2009 when our economy was hit by the global financial meltdown. The abnormal trade surplus caused by two-digit import contractions for five months in a row only deepens our worries. The government has promised to concoct a comprehensive set of prescriptions to tackle the crisis through eased regulations, tax cuts and the diversification of portfolios of export items. Yet industry insiders’ expectations are quickly ebbing.
The drastic reduction of our exports primarily stems from the clouds over the external front: a noticeable slowdown in global trade, a sluggish recovery of the U.S. and Chinese economies and stagnant domestic demand in Japan and European Union nations. On top of that, the Korean economy must wrestle with the triple whammy of the ultra-low yen, the weak euro and Chinese companies quickly catching up with their Korean rivals.
The Korea-China Free Trade Agreement, signed by both governments yesterday, provides an opportunity to put our diminishing exports back on track. China accounts for more than a fourth of our total exports, which consist of intermediary or capital goods like LCD panels for display devices or petrochemical products. But Chinese companies’ expansion of supplies for its own market has made our export strategy nearly ineffective. Such a structural shift played a big part in the rapid decrease of our exports to China. The free trade deal between Seoul and Beijing must serve as a turning point for changing the existing trade paradigm focused on intermediary goods or processing trade.
Though the free trade pact is a low-level FTA, China is opening nearly all of its manufactured product markets and those for content, services, finance, communication and e-commerce - except for cars and LCDs. In particular, the establishment of a systemic apparatus to remove non-tariff barriers such as customs clearance and intellectual property carries great significance.
Korean companies must draw up a new business strategy to aim at China’s 1.5 billion-strong domestic market. Korean products and services should be able to penetrate the daily lives of Chinese consumers. We also hope our government does its part by devising ways to compensate for the damage the FTA will have on our industries. The National Assembly must quickly ratify the trade deal. This is no time for it to drag its feet on the ratification. JoongAng Ilbo, June 2, Page 30