1. Korea’s FTA Policy - Review and Prospect - November 17, 2016
DoHoon KIM

2. Contents Ⅰ Ⅱ Ⅲ Ⅳ Ⅴ I I I I I Korea’s FTAs at a glance
Suggested reasons for pursuing FTA negotiations Ⅱ I
In search of regional integration: at the first stage Ⅲ I
In search of securing export markets (and upgrading economic system) Ⅳ I
At a crossroads: TPP vs RCEP (and CJK FTA) Ⅴ

3. Ⅰ.Korea’s FTAs at a glance
Korea joined the global trend toward FTAs rather belatedly by putting an FTA with Chile into effect in April 2004.
But it has since tried to conclude other trade deals within a short period to explore overseas export markets.
Thanks to the agreements that have gone into effect so far, more than 73.6 percent of Korea’s trade are currently benefiting from preferential tariffs.

4. Investment: September 1 2009
Ⅰ.Korea’s FTAs at a glance
Korea’s FTAs in effect
Partners
In effect
Trade weight (2015)
Chile
April
0.6
Singapore
March
2.4
EFTA
September
1.2
ASEAN
Commodity: June
Service: May
Investment: September
12.4
India
January
1.7 EU
July
10.9
Peru
August
0.2
USA
March
11.8
Turkey
May
0.7
Australia
December
2.8
Canada
January
0.9
New Zealand
December
0.3
China
December
23.6
Vietnam
3.9
Colombia
July

5. Ⅰ.Korea’s FTAs at a glance
FTAs in negotiations (negotiations underway or suspended)
Partners
started
meetings
China-Japan-Korea
November
10 times
RCEP
15 times 
CACM
September 2015
7 times
Ecuador
August 2015
5 times
Israel
June 2016
once
Japan
December 2003
6 times (suspended)
Mexico
December 2007
Twice (suspended)
GCC
July 2008
3 times (suspended)
Indonesia
March
7 times (suspended)

6. Ⅰ.Korea’s FTAs at a glance
FTAs with joint study or examination under way
Partners
Remark
MERCOSUR
Joint study finalized in October 2007
Israel
Joint study finalized in August 2010
CAFTA
Joint study finalized in April 2011
Malaysia
Feasibility study finalized in December 2012
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7. Ⅱ. Suggested Reasons for Pursuing FTA Negotiations1
Regional Economic Integration
In the early years of the Roh Moo-hyun administration, Korea focused on regional economic integration, which coincided with the administration’s goal of turning the nation into a financial and logistics hub of Northeast Asia. Korea-Japan FTA, Korea-Singapore FTA and Korea-ASEAN FTA were started in this line.

8. Ⅱ. Suggested Reasons for Pursuing FTA Negotiations2
Securing Foreign Markets
Korea rapidly turned its FTA aim from regional economic integration to securing foreign markets after the suspension of Korea-Japan FTA at the end of 2004 and started FTA negotiations with Canada. However, Seoul has failed to open the markets of FTA partner countries as wide as possible, because of strong protective attitudes of the nation’s weak agricultural industry. (Ex. Chile, ASEAN, India, China etc)

9. Ⅱ. Suggested Reasons for Pursuing FTA Negotiations3
Upgrading the Economic System
Negotiations for a Korea-U.S. FTA, which began in February 2006, elevated the trade initiative to a higher level. It enhanced Korea’s image as an advanced trade power, which in turn gave momentum to pushing for FTAs with other regions of the world. Immediately after the conclusion of the KORUS FTA, the government started Korea-EU FTA process. During these negotiations, the upgrading of national economic system was also put forward as one of top priorities of FTA negotiations.

10. Ⅱ. Suggested Reasons for Pursuing FTA Negotiations4
Securing Natural Resources
Now that FTAs have emerged as efficient ways to promote trade with resource-rich countries, Korea needs to actively push for the conclusion of FTAs with those countries blessed with abundant natural resources. (Ex. Gulf Cooperative Council, Australia and New Zealand) At the same time, the government seems to favorably consider including resource-rich countries in Latin America and Africa in the list of prospective FTA partners.

11. Ⅲ. In search of Regional Integration: at the first stage
As mentioned earlier, Korea at the beginning at least seemed to have a strong intention to pursue this objective. In fact, the Korea-Chile FTA was regarded as an exceptional case from this trend and just a first try with a “no risky”, “very complementary” and “very experienced in terms of FTA negotiations” partner, which was Chile.
However, even though Korea succeeded in finalizing two of three attempted FTA negotiations, with Singapore and ASEAN, one can assess that Korea’s early rush for FTAs were not such successful.

12. Ⅲ. In search of Regional Integration: at the first stage
With ASEAN
Korea set the target level of market opening too low from the beginning in an attempt to ease burdens on the domestic agricultural sector. Thus it allowed the ASEAN members to exclude a considerable number of sensitive goods from the concession list. (Ex: sensitive list 10%, ultra-sensitive list 3%)
Korea tried to improve the quality of FTA with ASEAN by pursuing separate FTAs with individual countries (Singapore, Vietnam and Indonesia)

13. Ⅲ. In search of Regional Integration: at the first stage
With Japan
At the beginning, two business associations representing large firms of Korea and Japan (FKI of Korea and Keidanren of Japan) found reciprocal interest for pursuing the FTA negotiation and urged the two governments to embark on the negotiation.
However, the Korean government encountered a strong opposition from SMEs aligned with labor unions whereas Japan was very reticent in conceding agricultural products.
The two sides had to suspend the negotiation after 6 times of meetings.

14. Ⅳ. In search of securing export markets (and upgrading economic system)
Korea turned its FTA objective away from regional integration toward economic purposes such as securing export markets and/or upgrading economic system since it started the FTA negotiation with USA in June 2006 (still under Roh government).
For securing export markets, FTA negotiations with Canada, US, EU, India, Australia, Mexico and New Zealand were pursued at the same time under the policy slogan of “simultaneously pursuing multi-FTAs”.

15. Ⅳ. In search of upgrading economic system
For upgrading the economic system, the KORUS FTA and the Korea-EU FTA contributed to the general debate for overhauling the whole economic system starting from regulations on FDI through IPR, health insurance, tax system, entering barriers for major professional services such as legal and accounting services and cultural protection up to Gaeseong Industrial Complex.

16. Ⅳ.In search of upgrading economic system
Issues raised by the KORUS FTA
How to prepare the negotiation (need for pre-negotiation procedures such as conducting a joint study?)
How to persuade opposition groups (especially farmers, with complementary subsidies to individuals and industries as a whole)
How to persuade the general public including the parliament (economic effects, plus and minus, both sides; measuring methods, CGE by GTAP vs partial equilibrium model)

17. Ⅳ. In search of upgrading economic system
Issues raised by the KORUS FTA
Other debates (mad cow disease, ISD etc)
Problems related to issues regarded as “pre- conditions for KORUS FTA” such as re- opening beef market (notorious memory of candle demonstrations), screen quota, pharmaceutical price system and car emission regulation (tax system)
Problems related to “re-negotiation” on postponement of US car market opening
Again, re-negotiation?

18. Korea’s Recent Automobile Export to USA

19. V.At a crossroads: TPP vs RCEP (and CJK FTA)
Even though Korea managed to finalize various small bilateral trade deals with Peru, Turkey and Colombia after the two major trade negotiations with US and EU, the period since 2011 up to now can be regarded as a trough period of FTA negotiations for Korea (remark: suspension of FTAs with Canada, Australia and New Zealand, hesitation between Korea-Japan FTA and Korea-China FTA).

20. V.At a crossroads: TPP vs RCEP (and CJK FTA)
Korea is at a crossroads in the sense that it has to decide whether participating or not in TPP (Trans-Pacific Partnership) which is regarded as a serious free trade bloc and being led by US, or to continue to stick to its stance of prioritizing two regional integration-oriented FTAs such as China-Japan-Korea FTA and/or RCEP (Regional Comprehensive Economic Partnership) which are regarded as being led by China (with half-hearted participation of Japan).
Very recently, the Korean government decided to participate in TPP and started so-called “pre-negotiation talk” with current individual members of TPP.

21. V.At a crossroads: TPP vs RCEP (and CJK FTA)
Why Korea-China FTA rather than Korea-Japan FTA?
The two big trade partners for Korea had long been competing (?) for wooing Korea into FTA negotiation at first.
Korea was forced to hesitate between the two options (or starting the two at a similar time)
Near the end of the previous government, Korea decided to go forth for Korea-China FTA, considering the reticent attitude of opening agricultural market by the Japanese government

22. V.At a crossroads: TPP vs RCEP (and CJK FTA)
Why Korea-China FTA rather than Korea-Japan FTA?
Even though Korea and China had 7 times of meetings for negotiation during the previous government, the two countries hardly made progress in deciding the reciprocal level, Korea wanting rather high level market except agricultural sector whereas China wanting slow market opening.
The two countries managed to find out a compromised level taking advantage of President Park’s state visit to China.

23. V.At a crossroads: TPP vs RCEP (and CJK FTA)
Issues related to TPP
Does it have a real market opening effect taking into account the fact that Korea has already finalized or in negotiation with most of TPP participating countries such as US, Chile, Peru, Singapore, Indonesia and Vietnam (finalized, last two countries in the of ASEAN) and Canada, Australia, New Zealand (re-started negotiations), only Japan and Mexico can be regarded as practically new FTA partners? (differences: level of market opening, rules of origin etc.)
Can Korea commit for a quasi-direct FTA negotiation with Japan?

24. V.At a crossroads: TPP vs RCEP (and CJK FTA)
Issues related to TPP
Can Korea be excluded from a regional trade bloc (which can be developed into the FTAAP) led by US?
Will Korea’s participation into TPP give a stronger postponing effect than ever to RCEP and CJK FTA?
How to deal with opposition from the people who start to feel “a FTA fatigue” especially farmers.
Will current TPP participating countries welcome Korea’s participation?

25. Thank You