Plan mitigates FTA fallout
The aid will go mostly to help small and midsize manufacturers, farmers and fishermen upgrade current low value-added products through long-term, low-interest loans.
The plans were unveiled Friday by the Ministry of Trade, Industry and Energy; the Ministry of Agriculture, Food and Rural Affairs; and the Ministry of Oceans and Fisheries.
On Thursday, the ministries submitted a motion to the National Assembly for ratification of three recently signed FTAs, along with a detailed economic impact analysis of Korean industries and plans to protect vulnerable sectors.
“The industry support package worth 1.7 trillion won was set at a level equivalent to the total estimated damages to those key manufacturing, agricultural and fisheries industries,” said Woo Tae-hee, deputy trade minister, at a press briefing Friday at the Sejong Government Complex. He added that the Finance Ministry already has approved the amount.
The government developed an industry protection package worth 25 trillion won for the Korea-U.S. FTA, which resulted in damages of about 10 trillion won, said Woo.
Of the 1.7 trillion won package announced Friday, 803.5 billion won will go to manufacturing industries expected to be hit by the FTAs with China and Vietnam, while 225.9 billion won will go to help farmers, 318.8 billion won to fishermen, and 352.3 billion won to the livestock industry.
As for manufacturers, the government will spend 310 billion won to invest in small and midsize manufacturers who want to upgrade to high value-added activities and in emergency subsidies.
Another 300 billion won will fund a low-interest, five-year loan program for technology R&D projects. The remaining 193.5 billion won will be spent on supporting their export networks in China and Vietnam.
The economic impact assessment report written by six state-run research institutes rolled out a bright forecast, saying Korea’s manufacturing industry will see 2.1 trillion won in increased production over the next 20 years.
However, the government allocated such a large support package for manufacturers because it will take at least 15 years before they start to benefiting from reduced tariffs in China.
According to the report, production by Korean manufacturers will shrink an 702 billion won annually for the first five years of China FTA alone.
The deal will mostly hurt the Korean steel, chemical and machinery sectors during the first 10 years, the report said. The textile, dairy supply, electronic device, mineral and pharmaceutical industries are expected to see declining production for 20 years.
The assessment report also said the FTAs with Vietnam and New Zealand will not be of much benefit to the Korean economy.
Korea is expected to see only a 0.01 percent boost in gross domestic product over 10 years of the Vietnam FTA. When it comes to cheaper import products, the FTAs with Vietnam and New Zealand will mean $146 million and $296 million, respectively, over 10 years.
Meanwhile, farmers will receive 225.9 billion won over the next decade, mainly to increase production efficiency through automation and establish an income insurance program.
Korean fishermen will receive 318.8 billion won over the next decade to strengthen oversight of illegal fishing activities by nearby countries, establish additional storage facilities and implement new insurance and low-interest loan programs.
The local livestock and dairy industry will get 352.3 billion won, which may find it tough to compete with the powerhouse livestock and dairy production of New Zealand. The support package will be in the form of loans and investment in modernizing production facilities and helping to open Halal-certified slaughterhouses, which would allow them to export products to Muslim countries.
BY KIM JI-YOON [email@example.com]