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ASEAN, Korea move on
FTA
SEOUL - Korean
corporations will have tariff-free access to the
530 million-strong Association of Southeast Asian
Nations (ASEAN) market from 2009. During the first
round of free trade agreement (FTA) talks between
the Korean government and ASEAN in the Indonesian
capital of Jakarta, the two sides agreed to
conclude an agreement on goods transfers by the
end of this year. Four additional rounds of
negotiations are to lead to a full-fledged, formal
FTA agreement during a Korea-ASEAN summit in
December.
The FTA will take effect from
2009, scrapping or significantly reducing duties
on most goods traded between the two sides.
Officials said talks on investment and the service
area would begin early next year so that
negotiations on these can be concluded by the end
of 2006. ASEAN comprises Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam. The
bloc was Korea's fifth-largest trading partner
last year with trade reaching US$46.4 billion.
The issue of waiving or lowering tariffs
for products made in the Kaesong Industrial
Complex in North Korea, to put them on the same
level as South Korean products in the ASEAN
market, was also discussed at the three-day
meeting that concluded on Friday. The Trade
Ministry reported that ASEAN officials promised to
look into the request. After an FTA pact was
signed with Singapore last year, the city state
said it would give preferential duties to
Kaesong-made goods.
South Korea has
entered into talks with the 10-nation economic
bloc as part of efforts to expand trade. Seoul is
under pressure to move quickly on an FTA with
ASEAN, as the group is currently engaged in
similar negotiations with South Korea's trade
competitors China and Japan. ASEAN countries
absorb 10% of South Korean exports.
Two
years after President Roh Moo-hyun took office,
South Korea has edged closer toward open
international commerce and trade relations while
gradually shaking off its image as a laggard in
the rapidly changing global trade environment.
Last April, the nation's first FTA, with Chile,
came into force and South Korea signed a second
deal with Singapore in November, which is expected
to be ratified within this year.
In 2005,
the South Korean government is scheduled to
negotiate or review deals with 21 economies around
the world apart from ASEAN, which include Japan,
Canada, Mexico and India. Four European countries
- Iceland, Liechtenstein, Norway and Switzerland -
are also currently engaged in negotiations.
Opinion is growing that South Korea, which has
long been growth-dependent on exports that make up
nearly two-fifths of its economy, has no choice
but to open up its market if it wants to maintain
future growth.
"The Roh Moo-hyun
administration has been spearheading an aggressive
and open trade policy to make South Korea the
regional economic hub of Northeast Asia," said Han
Young-soo, a senior vice president of the Korea
International Trade Association. "Free-trade
agreements are the front-line weapon in the Roh
administration's trade policy arsenal."
Engaging in bilateral trade negotiations
with other economies is becoming more important as
demand for South Korean goods shows signs of
crumbling in key export markets such as the United
States and China. Apart from worries about higher
crude oil prices, policymakers have expressed
concern that rising US interest rates and China's
efforts to "soft-land" its overheated economy
could force demand for South Korean products to
drop further in coming years.
South
Korea's Ministry of Commerce expects exports to
grow 12% this year, compared with a 31% increase
in 2004. Lower export growth could deal a severe
blow to the economy, which has been suffering from
a decline in domestic consumption. South Korea's
economy, the 11th largest in the world, is still
struggling to emerge from stubbornly weak consumer
spending, which makes up about half of the
nation's gross domestic product, since the
credit-card bubble burst in mid-2002.
Exports have been the main driver of
economic growth throughout the downturn. For the
first half of 2004, government data showed private
consumption fell 1% and facility investment rose
3%, while exports jumped 38%. Together with the
push for signing two-way trade accords, the
government has played an active role in the Doha
Development Agenda process, a round of
negotiations for a rules-based global trading
system that was launched in Doha, Qatar, in
November 2001.
South Korea negotiated
deals with the US, China, Thailand and six other
World Trade Organization (WTO) members to delay
opening the rice market until 2014, while doubling
its rice imports to 8% of consumption. Moves to
open the domestic agricultural market have seen
strong opposition from domestic farmers.
One recent reward for the nation's
aggressive engagement policy was when an
arbitration panel of the WTO recently reaffirmed
an interim ruling in favor of South Korea in a
computer memory chip dispute with the US. In its
final report, the WTO panel ruled that steep
countervailing duties imposed by the US government
on memory chips produced by South Korea's Hynix
Semiconductor Inc were in violation of
regulations. The panel also dismissed the US
government's claim that a bailout decision by
South Korean creditors to keep Hynix afloat was a
violation of WTO guidelines regarding subsidies.
In June 2003, the US International Trade
Commission imposed a 44% duty on imported dynamic
random access memory (DRAM) chips made by Hynix,
the world's second-largest manufacturer of DRAM
chips. "Pushing for free-trade accords and the
Doha Development Agenda process side by side was a
blueprint laid out by the former administration,"
said Kim Han-soo, director-general of the FTA
bureau of the Trade Ministry. "By putting its
weight behind an existing policy, the incumbent
administration has contributed greatly to
furthering the two trade frameworks," he said.
But despite progress made in Seoul's trade
policy over the past two years, experts recommend
that President Roh's government should do more to
raise public support for greater market-opening.
South Korea's trade surplus is estimated to have
fallen sharply to around $1.9 billion in February
from a record $3.23 billion the previous month.
Financial and economic institutions polled
recently by Yonhap Infomax said the median
forecast for February's trade surplus stood at
$1.95 billion, with the high and low end estimates
at $2.5 billion and $1.4 billion won respectively.
(Asia Pulse/Yonhap) |
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