1 Korea’s FTA strategies & Effects of Korea-EU FTA

Korea’s FTA strategy began ten years ago 2 Korea chose FTA as major growth engine to overcome the 1997 financial crisis ­ Korea needed a further access to global market in order to overcome the crisis in 1997, which hit its economy very hard ­ Korea’s decision to push forward FTA negotiations was also based on the need for further reform of its economy Korea’s first FTA partner was Chile: Negotiation was completed in 2002 and agreement came into force in 2004 Korean Economy during crisis FTA 1.0 Source: IMF

Evolution of Korea’s FTA strategy 3 In 2003, Korean government introduced ‘FTA Roadmap’, a long term plan for future trade & investment negotiations ­ Indicated major FTA partners and areas for liberalisation Completed negotiations with EU and US in the late 2000s: These were key achievements of ‘FTA Roadmap’ ­ Korea-EU FTA and Korea-US FTA came into force in ‘11 and ‘12, respectively FTA 2.0 In 2013, Korean government announced ‘New Trade Roadmap’, a new plan for the next decade ­ Plans to play the role of a linchpin in TPP led by US and RCEP led by China ­ Began FTA negotiation with China, participated in RCEP negotiations, and stated intention to consider joining the TPP in 2013 Plans to expand trade with resource rich countries and emerging economies ­ FTA negotiations were completed with Australia in 2013 and Canada in 2014 ­ Currently negotiating with Indonesia and Vietnam FTA 3.0

Korea’s FTA network in As of April, 2014, no. of Korea’s FTA partner countries stands at 47 through 9 agreements in force ­ Chile, Singapore, EFTA, ASEAN, India, E.U., Peru, U.S., Turkey Compared to Korea’s major competitors… ­ With FTAs with the US and the EU, the share of trade with FTA partners almost trebled since 2009 to 35.3% in 2013, surpassing China and Japan ­ Share of home country & FTA partners’ GDP in the global economy is 56% for Korea, much higher than that for China(16.2%) or Japan(17.2%) Share of Home & FTA Partners’ GDP Share of trade with FTA Partners Source: KITA IIT

Notable trends in Korea-EU trade relations 5 Korea → EU: Motor vehicles, Cruise ships, Telephone sets, Motor parts EU → Korea: Motor vehicles, Petroleum oils, Machines and apparatus, Aircrafts With a rapid rise in Korea’s imports from the EU, net trade balance has turned negative Share of EU in Korea’s exports is declining fast ­ Rise of Asian trade partners such as Vietnam and Indonesia ­ Eurozone fiscal crisis led to a depressed consumption market Share of Korea’s exports Korea-EU trade relations Source: KITA

There are some positive signs too 6 Performance of Korea’s exports to the EU has been disappointing since the FTA came into effect Yet it is too early to criticise the agreement and there have been economic crises in the eurozone Korea is doing well in its key export products - Out of Korea’s 10 top export items to the EU, 5 items recorded an increasing share in the EU market between 2010 and 2013(Jan.~Oct.) Share of imports from Korea in EU’s total external imports Source: KITA IIT

Products covered by Korea-EU FTA 7 If we analyse EU’s import of products covered by the Korea-EU FTA in 2013, Korea performed rather well ­ EU’s imports from Korea decreased by 6.6% in total: while imports of products not covered by FTA decreased by 15.4%, those covered increased by 0.1% ­ EU’s imports of products covered by Korea-EU FTA (a+b) increased by 0.1% from Korea while total imports of these products decreased by 1.7% ­ The performance of Korea’s exports was more marked in products with tariff planned to be phase out (b) Source: KITA IIT Products with tariff… Immediately Eliminated (a) Phased Out (b) Total covered by FTA (a+b) (a+b) share of total imports Korea China Japan U.S Extra-EU total % change in EU’s imports of products covered by Korea-EU FTA (2012 Jan~Oct → 2013 Jan~Oct)

Lessons from Korea-EU FTA 8 Governments and independent bodies should provide a balanced analysis on the effects of FTAs ­ e.g. Trade balance vs. Performance of exports covered by FTA Governments should continue their efforts to raise the FTA utilisation rate, with special focus on helping SMEs Korean exporters’ FTA utilization rate Source: KITA IITSource: Korea Customs Serivce No. of requests to check RoO

Lessons from Korea-EU FTA (cont’d) 9 Participating countries’ firms should bare in mind that FTAs are like a marathon not a sprint Both governments and firms should be prepared for the spread of FTAs ­ The EU is working hard to push forward its FTA strategies  EU is currently negotiating FTAs with major advanced economies such as the U.S(TTIP), Japan & emerging economies such as India, Vietnam, MERCOSUR, and Thailand EU: Share of Home & FTA Partners’ GDP Economic growth rate Source: IMFSource: KITA IIT