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South Korea Concentrates On FTA Network

by Mary Swire,, Hong Kong

13 February 2013

South Korean Minister of Strategy and Finance, Bahk Jaewan, hosted the 3rd Crisis Management Meeting of 2013 on February 7 and led a discussion on the country's challenges and future plans, now it has earned the title of a "free trade agreement hub," having signed treaties with 45 countries across three continents by the end of 2012.

South Korea understands that its economy relies on increasing its trade globally in order to continue growing. As a consequence, it was pointed out that South Korea reached the USD1 trillion mark for total annual trade for the second consecutive year in 2012, and is ranked 8th in the world for global trade. The Government says it will continue its policy of “economic territory expansion.”

Under this policy it will continue negotiating agreements with as many of its trading partners as possible, while also re-examining the content of the FTAs it currently operates in order to consider updating their terms to provide further benefits, such as quickening the rate of tariff reductions.

In that regard, while an FTA between South Korea and The Association of Southeast Asian Nations (ASEAN) came into force in June 2007, and stipulated that the tariffs levied on around 97% of South Korean goods sold in ASEAN countries were phased out by 2010, the Government is now looking to negotiate further higher-level trade treaties with selected ASEAN countries to boost South Korean exports and investment in the region.

That process began with Vietnam and Indonesia. For example, the bilateral Comprehensive Economic Partnership Agreement that is currently being negotiated with Indonesia is expected to extend the products included in the ASEAN FTA. It is also expected to reduce the tariffs more quickly on the sensitive items contained in the FTA. In addition, the new agreements should include improved investment protection and dispute resolution clauses, to further encourage South Korean investment.

Despite the current uncertain global economic situation, it is stressed that existing and future FTAs will play a leading role in South Korea’s future development in all economic sectors, particularly since the conclusion of the agreements with the European Union and the United States, that were both of substantial importance in increasing the percentage of South Korea’s foreign trade covered by FTAs.

In addition to the pressure being put on the signing of an agreement with Canada in North America, South Korea is also looking at additional FTAs in South America. It already has three FTAs with Latin American nations: Chile, Peru and Colombia, and is looking at a further FTA in the region, with Mexico. It would also like a multinational agreement with Mercosur, the South American common market.

During the meeting, Bahk also confirmed that the Government will “closely monitor and carefully respond” to other pending issues, such as the current South Korea-China FTA negotiations, where it is hoped that further progress in talks will be seen this year, as well as the possible tripartite South Korea-China-Japan FTA; both of which could be extremely important in spurring further economic growth.

It is recognized that, particularly if a tripartite deal can be reached, the common benefits could be substantial. While Japan and South Korea are obviously looking for improved access to the huge Chinese market, it has also been recognized that the issue of tariffs on sensitive goods and services could be challenging for all three countries. While Japan and South Korea are competitors in the supply of many manufactured and technological goods to China, tariffs on the import of agricultural products from China would also be a problem for both countries.

TAGS: tax | free trade agreement (FTA) | Chile | tariffs | trade treaty | China | Colombia | Mexico | agreements | Canada | Indonesia | Korea, South | Peru | United States | import duty | trade | European Union (EU) | Japan | Vietnam | Europe

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