South Korea`s Approach to FTAs

Abstract

This paper aims at investigating South Korea`s strategy toward FTA. Firstly, it starts with analyzing South Korea`s main motivations and purposes of promoting FTA and its choice of the target countries, then evaluating South Korea`s concluded FTAs and on-going major FTA negotiations, confronting difficulties, and prospects for breakthrough and implications.South Korea`s foreign trade adds up to 70 percent of its GDP. With rapidly changing global economy characterized by the rising trend of forming RTAs and FTAs unfavorable to South Korea`s exports, South Korea decided to promote FTA in 1998 and picked up Chile as the first country to conclude FTA. The Kim Dae-jung Government started negotiations on the trade pact with Chile in 1999 and concluded the FTA in October 2002. However, the agreement was not ratified by the National Assembly until January 2004, almost one year after President Roh Moo-hyun was sworn into the office. It took almost five years to negotiate and implement the agreement largely due to the domestic opposition to opening the agricultural market to Chile. Main reasons include fears of liberalization and the difficulty in coordinating conflicting interests between exporters and domestic farmers.Subsequent to the Chile FTA, South Korea reached a FTA with Singapore in November 2004. Given that it has concluded only two FTAs, lagging far behind the trend of spreading FTAs in East Asia and facing an urgent need to diversify the country`s export markets, South Korean President Roh Moo-hyun indicated in December 2004 that his country has to choose FTA in order to ensure overseas markets and the continuation of economic growth. South Korean major economic think tanks such as KIEP and KIET suggest that for expanding business opportunities and acquiring favorable position in overseas markets, South Korea must actively promote FTA negotiation with those countries with huge markets. As a result, South Korea-EFTA FTA concluded in July 2005. Currently, South Korea is simultaneously pursuing FTA negotiations with more than twenty countries, including ASEAN, the U.S., China and the EU as primary targets to conclude FTA. The South Korea-US FTA is regarded by Seoul as the first priority. There are lots of hurdles to be removed. Even the two countries reach the FTA, the impacts on the South Korean economy, politics and society will be enormous.