1 / 46

Korea’s FTA Policies

Korea’s FTA Policies. Introduction. Korea has changed from reluctant to enthusiastic FTA player Importance of trade in Korean economy has grown continuously Korea sees FTA as a tool to maintain and expand foreign markets and modernize its economy

joshua
Download Presentation

Korea’s FTA Policies

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Korea’s FTA Policies

  2. Introduction • Korea has changed from reluctant to enthusiastic FTA player • Importance of trade in Korean economy has grown continuously • Korea sees FTA as a tool to maintain and expand foreign markets and modernize its economy • “multiple negotiations” to achieve as many FTAs as possible with strategic partners

  3. Korean Trade (1970-2011)USD billions

  4. Share of Trade in GDP

  5. Regional Exports(USD billions)

  6. Regional Exports(% of total exports)

  7. Regional Imports(USD billions)

  8. Regional Imports(% of total imports)

  9. What Does Korea Export(2007-2011)

  10. What Does Korea Export(2007-2011)

  11. What Does Korea Import? (2007-2011)

  12. What Does Korea Import? (2007-2011)

  13. Korean Imports by Use(2007-2011)

  14. Korean FTAs: Signed and Implemented

  15. Korean FTAs: Signed but Not Yet Implemented

  16. Korean FTAs: Under Negotiation

  17. Korean FTAs: Under Study

  18. Korean FTAs: Studies Quietly Forgotten

  19. Korean FTAs: Global GDP (2009) basis, billion USD; Total 57,876 billion

  20. Korean FTAs: Trade (1999-2003) Basis (five year export and import total) 1575 billion USD

  21. Korean FTAs: Trade (2007-2011) Basis (five year export and import total) 4243 billion USD

  22. Need for FTA • Korea is a trade dependent country • Resource-poor country • Oil and other raw material must be imported • Thus, exports to earn foreign currency is a must • History of “export-led” growth • Exports and Imports each are over 50% of GDP in recent years

  23. GDP Growth(2005 real won, billions)

  24. GDP Growth(Nominal US dollars, billions)

  25. Need for FTA • Low foreign direct investment • Portfolio investment is fickle, and disrupts exchange rates • Conglomerates (“chaebols”) financed new investment and expansion through debt • Implicit government guarantee caused moral hazard (“too big to fail”), inefficient financial sector, and large short term debt (domestic and foreign)

  26. Cumulative FD I for Selected Countries (1980-2005)

  27. Short History of Korea’s FTAs • Before the 1997 financial crisis • No FTAs signed • Worries over FTAs and RTAs as trade barrier • 1997-1998 Financial Crisis • Need to show commitment to free and open markets • Searched potential FTA partners • APEC

  28. Short History of Korea’s FTAs • Why Chile? • Economy small enough so that no major effect on Korea in case of adverse effects • But large enough with enough imports to show positive effects of FTA • Beachhead into underrepresented South American markets • “It takes two sides to tango” – Not many believed in Korea’s commitment to sign FTAs • Note that negotiations took more than three years, and passage another year • Among problems: Rice, Apples (no Chilean exports), Grapes (growing season opposite of Korea) • Chile started and finished negotiations with US during negotiations with Korea

  29. Short History of Korea’s FTAs • 2003 “FTA Roadmap” • Few more FTAs with “small economies” • Singapore (No agriculture) • EFTA (Little agriculture) • Then larger economies • Ultimately largest economies / trading partners • EU, US, China, India • Fast negotiations with multiple partners • Not one negotiation at a time • Comprehensive FTAs with “WTO plus” • Must include services, investment (FDI)

  30. Short History of Korea’s FTAs • Korean strategy – why? • Korea as a “trade hub” to increase FDI and jobs • Catch up with other countries with multiple FTAs • Increase productivity • Services • Lessons from financial services during financial crisis • Reduce trade diversion

  31. Short History of Korea’s FTAs • KORUS FTA • Politically sensitive • Passage and implementation delayed even though content substantially same as KOR-EU FTA

  32. Short History of Korea’s FTAs • “Unusual” Issues • Kaesong Industrial Complex • Located in North Korea, using NK labor with South Korean investors and firms • Rules of origin for most FTAs allow “Kaesong” products to be classified as Korean • But for KORUS FTA, to be further negotiated • KORUS FTA allows special “outward processing zones” but has not agreed whether Kaesong will be OPZ • Clothing • Under current US rules of origin, Korean clothing made with Chinese textiles can be classified as non-Korean • FTA Provisions in place to classify most clothing made in Korea with Chinese textiles as “Korean”

  33. Short History of Korea’s FTAs • Future • China • Korea-China-Japan FTA • Adjusting existing (early) FTAs • Regional Integration • ASEAN+3 or ASEAN+6 (Australia, New Zealand, India) • TPP • FTAAP: Asian-Pacific FTA (APEC)

  34. Korea Trade Policy Considerations(FTA and WTO) • Open foreign manufactured goods markets • Automobiles, IT and office equipment, steel, clothing • Avoid opening sensitive sectors • Agriculture (rice, beef, dairy, fresh foods) • Education, medical services • Reluctant to further open financial markets and capital accounts • Maintain subsidies for certain sectors • Agriculture, fishery and other “backward” industries • Weaken foreign anti-dumping policies

  35. Why Colombia? • One of largest Latin American economy • Geographical hub – North and South America and Asia • Already signed FTAs with 18 countries, but not yet with any Asian countries • Rich in energy and other natural resources • Relatively high tariffs on Korea’s strategic goods (e.g. automobiles : 35%) • Does not export much agricultural goods (except coffee)

  36. Degree of Openness (Goods): Korean Side

  37. Degree of OpennessKorea-Colombia FTA

  38. Sensitive GoodsKorea-Colombia FTA • Manufactured Goods • Tariff elimination: 12 years • Korea: Nickel, Nickel plates, Wooden construction products • Colombia: Refrigerators, Air-conditions, Washers • Agricultural Goods • Tariff elimination 19-20 years • Korea and Colombia: Boneless Beef • Colombia: Uncut chicken and 1 more product • Excluded from Tariff Elimination • Korea: beef, milk, cream, potatoes, garlic, onion, pepper, orange, apple, pear, ginseng, rice • Colombia: rice, beef, milk, powdered milk, pepper, garlic, onion, green soybeans, red beans. Orange, sugar cane and sugar beet, etc.

  39. Degree of Openness(Services and Investment) • Korea’s liberalization measures are mostly the same as GATS offer • Trade in financial services limited (mostly) to mode 3 (direct investment) • Most services (including financial services) are open to foreign investment • Notable Exceptions: • A/V services – especially TV and radio • Accounting and Law – open in stages, up to joint ventures only

  40. Degree of Openness (Services & Investment) Korea-Colombia • Usual liberalization measures • NT, MFN • forbid or restrict local presence requirements, investment requirements (e.g. export requirements) • List all non-conforming measures • In principle, allow capital flows, repatriation • Investment protection measures • ISD in case NT and MFN not followed • Public Debt excluded from “investment”

  41. Other Notable Measures: Korea-Colombia FTA • Government Procurement • Beyond current WTO GPA measures • Kaesong Industrial Complex • Origin is Korean for 100 goods (HS 6 digit level)

  42. Korean Trade with Colombia(USD millions, 1969-2011)

  43. Korean Exports to Colombia(2008-2011), 4890 million USD

  44. Korean Imports from Colombia(2008-2011, 1081 million USD)

  45. Conclusion • Korea is a trade-dependent country • FTA is seen as measure to insure and guarantee future trade • Korea is pursuing “multiple negotiations” with major and significant trade partners • Laid out in 2003 “FTA Roadmap” • US and EU were “big hurdles” • China: the most sensitive • Japan: reluctant to negotiate • Possible stepping stone to regional FTAs (ASEAN+10, FTAAP, TPP)

  46. Conclusion • Characteristics of Korean FTAs • Significant liberalization of goods trade and direct investment

More Related