In-depth look at economic effects of Korea-China FTA
Arirang TV | February 1, 2012
In-depth Look at Economic Effects of Korea-China FTA
Thanks for staying with us.
This year marks the 20th anniversary of diplomatic ties between Korea and China and the two countries are working towards further strengthening their relations.
That includes bolstering economic cooperation by implementing a free trade agreement deal and now we are joined by Arirang’s Hwang Sung-hee in the studio to tell us more about the economic benefits of a possible Korea-China FTA.
Hello, Sung-hee.
Where does the economic relationship between the two countries stand now
[Reporter : ] China is Korea’s largest trade partner, with Korea’s exports to China accounting for a quarter of the country’s total outbound shipment.
The amount is so large that it even exceeds Korea’s exports to the United States and the European Union COMBINED.
And their two-way trade volume, which stood at a little over six billion dollars 20 years ago, topped 200 billion dollars last year.
It’s been eight years since Korea and China began discussions on the feasibility of a free trade agreement.
China is one of the fastest, if not THE fastest, growing countries in the world, and it is never bad to strengthen ties with an economic powerhouse.
However, there are voices of concern, since the trade deal is expected to negatively affect some sectors.
China is Korea’s LARGEST trade partner, with the trade volume between the two countries being TWICE that of Korea’s exchanges with the United States and the European Union.
And a free trade agreement with China would boost Korea’s economy by nearly three percent, which is much greater than the effects of its current trade deals with other countries.
A recent report released by the finance ministry shows a possible Korea-China FTA will boosting China’s demand for Korea-manufactured goods, like mobile phones, machineries and chemical products.
This, because the products will gain a competitive edge in the Chinese market since a removal of tariffs, that currently reach as high as ten percent, will lower their prices.
The report also suggests the pact will give a boost to Korea’s labor market, since eased regulations will open up the Chinese market to Korean exporters and thus encourage Korean manufacturers based in China to return home.
This would mean MORE jobs in the domestic manufacturing sector.
However, a Korea-China FTA wouldn’t be good news for everyone.
[Interview : Zheng Hwan-woo, Research fellow Korea Int’l Trade Association:]
"If the FTA opens up Korea’s agriculture market, the ripple effect is beyond imagination. Therefore, we need to take the matter more seriously during and after negotiations."
Korea’s agriculture market is expected to be flooded with fresh farm products from China, that are much cheaper than domestically-produced fruits and vegetables.
In fact, a trade pact with China could boost Korea’s imports of fresh goods from China by over 200 percent.
This, experts say, may drop demand for domestically-produced fruits and vegetables by around one billion US dollars EACH.
However, the government said that FTA negotiations with China will not begin, until proper countermeasures are put in place for industries that may be negatively affected by the trade deal.
[Interview : Choi Seok-young, Deputy Minister for FTA] "We will first need to reach an agreement on a model that proposes solutions to the concerns. Once agreed upon, the model will become a base for another round of domestic negotiations, which will be followed by an official discussion with China."
It will take a cautious approach, by collecting ideas and opinions from various experts related to the Korea-China FTA.
[Interview : Choi Seok-young, Deputy Minister for FTA] "The government will hold various seminars, forums and conferences between January and February to collect experts’ views on the Korea-China FTA."
Experts, so far, have agreed that a trade deal with China is critcal if Korea wants to advance in the Chinese market, but they emphasized the importance of protections for industries sensitive to the pact, before making the next move.
The government had said the two countries came up with a list of such industries during working-level talks.
And while Beijing has expressed a willingness to begin negotiations in May, Seoul says talks will be launched at an appropriate time.
If and when the Korea-China FTA comes into effect, it would make Korea the first East Asian country to have trade deals with three of the world’s largest markets.
So China is hoping to launch FTA negotiations in May. But there are some procedures that the government has to go through prior to such negotiations
[Reporter : ] Yes, there are a set of local procedures.
This includes putting on public notice its announcement for public hearings on a FTA and holding them about two weeks after the notification.
Related ministers then have to make a final decision on that after a working-level review of all related issues.
And after talks between the trade ministers of the two countries, they are to announce the official start of FTA negotiations.
You mentioned that a trade deal with China help Korea to sign more FTAs with other countries. How would this be possible[Reporter : ] Experts say that could be one of the effects of the Korea-China FTA because a trade deal with China will make Korea the only country to have FTAs with three of the world’s largest economic powerhouses.
This will apply even more to the Korea-Japan FTA, which has currently been halted, and the trilateral trade deal between Korea, China and Japan.
Experts say that if Korea-China FTA negotiations pick up speed and bear some fruitful results, it will prompt the remaining deals to show some progress.
Well, that’s all the time we have for now.
Thank you for joining us today.
[Reporter : ] My pleasure.
FEB 01, 2012
Reporter : ssung86@arirang.co.kr
