Korea and free trade agreements

Park Chul-hwan The Korea Herald Asia News Network Seoul

In the context of globalization, the idea of Free Trade Agreements (FTA) is becoming more important for economic survival. For several decades, developing nations have debated the issue of free-market liberalization to participate in the global economy.

In the course of these debates, it has become apparent for some that market liberalization is vital as nations exchange technological expertise in order to survive cut-throat competition in the global economy.

However, many developing nations oppose radical market liberalization through the conclusion of FTAs as this would lead to serious imbalances in trade and weakening of price competitiveness.

Under these circumstances, what should Korea do to further economic development? As a nation, Korea needs to realize that although there are very strong arguments against FTAs, the positive benefits stemming from them far outweigh the negative aspects and Korea should therefore do its utmost to sign free trade agreements with other nations.

Korea needs to realize that forming economic blocs is an irreversible global trend. The European Union is a single economic unit, Southeast Asian countries have their Association of Southeast Asian Nations and the North American continent has an economic bloc with the North American free trade agreement at the center.

In contrast, Korea does not belong to any economic bloc and has not yet completed any FTA. To make matters worse, the Korea- Chile agreement, signed after many complications, has been pending ratification at the National Assembly for the last four months because of violent reactions by local Korean farmers. As a result, the share of Korean cars in the Chilean market has dropped to fifth place from second. Therefore, Korea should speed up the process of concluding its FTA agreement with Chile.

When dealing with such critical FTA issues, Korea has to take into consideration its economic structure. Currently, the nation has the world's 12th-largest trade volume and exports account for 67 percent of our gross national product (GNP). Without such an export driven economy, Korea could not have achieved such impressive economic development following the disastrous Korean War in 1950s.

In other words, the nation was a beneficiary of the expansion of economic boundaries which brought higher levels of specialization, competition and openness to world markets. Within such an economic context, more goods and services are offered at considerably lower prices and higher quality.

An expanding market also gives Korean consumers more freedom to compete, improve and to choose; this leads to economic and social progress and is more than enough reason for Korea to ratify such FTAs.

Even though FTAs are indispensable for the economic development of Korea, some, especially Korean farmers, strongly oppose them. These critics point to the possible undermining of price competitiveness for local farmers when domestic markets are opened to other nations and blame unfair subsidies doled out by other rich foreign governments.

They also argue that some industries, like automobiles and electronic components, will suffer enormous losses when Korea is opened to more developed countries, and they take the North America Free Trade Agreement (NAFTA) as an example of the negative side-effects of FTAs.

In fact, NAFTA finally turned out to be detrimental to both Mexico and Canada because of unfair U.S. trade policies, such as U.S. subsidies and protection on its wheat and lumber industries.

But Korea has more to gain than lose in signing FTAs, particularly with Chile, largely because items like rice and apples, in which Chile is more competitive than Korea, will be excluded from trade liberalization. In addition, Chilean grapes will be subject to seasonal tariffs and Korea can impose emergency tariffs on them if necessary.

More important, Chile would provide Korea a bridgehead for Korean industrial goods sales in the South American market. This is a concrete example of the far-reaching economic benefits of FTAs.

Another benefit is that an FTA is a significant channel for expanding and deepening friendly and diplomatic relations between nations and the strong diplomatic ties they create help facilitate exchanges in various sectors of each country.

In conclusion, FTA are very important for Korea to survive in the era of economic globalization. Nobody can deny or reverse the global trend of the integration of economic blocs and Korea has to participate actively in these global trends.

If FTAs are secured with other nations, Korea will benefit from increased trade. Despite such economic benefits, critics are right to point out negative aspects, such as the undermining of price competitiveness stemming from unfair subsidies by developed nations.

However, FTAs will also help develop positive relations between countries, deepening friendship and diplomatic ties and, in the end, this improvement will surely lead to economic gains.

In this sense, FTAs are now an indispensable part of global trade. To garner the best results from them, Korea must use them to embrace further economic globalization.

The writer is a student at the Graduate School of Interpretation and Translation, Seoul University of Foreign Studies.