Korea, Ecuador to begin FTA talksKorea will begin negotiating a free trade pact with Ecuador next week, as part of the country’s efforts to reach new export markets.
The negotiations will begin soon after a meeting next Tuesday in Seoul between Korean Trade Minister Yoon Sang-jick and his Ecuadorian counterpart Diego Aulestia, as well as Ecuador’s Production Minister Nathalie Cely, according to the Korean Ministry of Trade, Industry and Energy on Thursday.
The negotiations have been discussed since 2010, when the president of Ecuador visited Korea. Both countries completed their domestic legal preparations earlier this month.
Ecuador was Korea’s 67th largest trade partner as of last year, when Korean exports reached $811.5 million and imports from Ecuador were worth about $342.5 million. Trade volume has steadily grown each year, from $449.7 million in 2009 to last year’s $1.15 billion, according to the Korea International Trade Association.
Korea mainly exported manufactured products like cars, auto parts and synthetic materials, while it mostly imported raw materials and food, such as crude oil, shrimp, copper and aluminum.
Ecuador hasn’t been a very large trade partner thus far, but the Korean government has been pushing for the free trade agreement (FTA) considering Ecuador’s growing domestic consumption and relationship with other South American countries.
The country’s gross domestic product has maintained an average 5 percent in the past four years, which is relatively high considering the slowdown of the global economy in recent years.
Ecuador is also one of the four largest crude oil producers in South America, along with Venezuela, Brazil and Colombia, and a free trade agreement (FTA) would open opportunities for Korean companies working the refining and construction industries.
“The FTA will mostly initiate Korean companies to expand production lines there [in Ecuador], because shipping completed products costs too much,” said Baek Seung-won, a manager at the Euramerican trade assistance department at the Korea Trade-Investment Promotion Agency, by phone.
Korean businesses last year invested about $2.5 million in Ecuador last year via four projects, much smaller than the peak of $28.7 million in 2008. The projects were mostly in mineral extraction and construction.
Nine Korean companies including Hyundai Motor, SK E&C, Posco E&C and Daewoo Shipbuilding and Marine Engineering are operating production lines in Ecuador.
The government is also hoping that the FTA will help Korean companies become more price competitive with Japan and China in both the country, and in Central and South America more broadly.
“China has been an active investor in Ecuador,” Baek said. “If Korean companies expand production lines in Ecuador after sealing the FTA, they will gain price competitiveness by selling their products tariff-free to the Andean Community member countries that still don’t have a free trade relationship with Korea, like Bolivia.”
Korea still does not have a free trade relationship with many Central and South American countries. In June, the government launched FTA negotiations with six Central American countries: Guatemala, Nicaragua, El Salvador, Honduras, Costa Rica and Panama.
The Trade Ministry and other economic research institutes in Korea have been looking into the feasibility of an FTA with Mercosur countries - Argentina, Brazil, Paraguay, Uruguay and Venezuela - since 2004, but has not been able to begin negotiations. Ecuador is not yet a member of Mercosur but is in the process of joining the group. The Korean government hopes a free trade pact with Ecuador will accelerate FTAs with Mercosur countries.
“It is true that South American emerging economies like Ecuador, which mostly have sustained their economy with raw material exports, are having a tough time due to tumbling oil and raw material prices,” Baek said, “but the FTA will help Korea in the long-term, after the global economy revives.”
The government estimates that the FTA with Ecuador will contribute to lifting the Korean GDP by up to 0.04 percent.
BY KIM JI-YOON [firstname.lastname@example.org]