South Korea, Southeast Asia sign framework agreement on FTA

South Korea, Southeast Asia sign framework agreement on FTA

Jae Soon-chang Associated Press/Kuala Lumpur

South Korea and Southeast Asia signed an accord on Tuesday that calls for completing negotiations by the end of 2006 on freeing up trade, though a major hurdle remains over a rice import dispute with Thailand.

The framework agreement sets out basic principles and targets with the ultimate goal of creating a market of 548 million people with a combined economy of more than US$1.4 trillion.

South Korean President Roh Moo-hyun and his counterparts from the 10-member Association of Southeast Asian Nations (ASEAN) inked the accord after their annual meeting in Malaysia's main city, Kuala Lumpur.

Roh hailed the agreement as "a step forward" that would further strengthen economic cooperation between the two sides, according to his aides.

"Based on this, I hope remaining liberalization negotiations will wrap up next year," Roh told his ASEAN counterparts, according to Chung Woo-sung, the chief presidential aide for foreign affairs.

An overall free trade deal also involves four other pacts - dealing with goods, services, investment and dispute settlement. While there is little problem with the last three accords, a rice dispute has complicated the pact on trade in goods.

The goods pact was signed last week by Seoul and nine of ASEAN's 10 members after Thailand, the world's top rice exporter, decided to stay out of it, objecting to South Korea's insistence on excluding rice from the accord.

Seoul, which faces an often-militant farm lobby at home, keeps its doors shut to foreign rice through high tariffs and subsidies for small-plot farmers.

"It's an immovable principle that rice cannot be included" in the free trade accord, said Chung, the presidential aide. Both sides, however, expressed optimism about finding a compromise. South Korean officials said the goods accord will be complete by April while Thailand officials forecast "three or six months" before joining that pact.

Despite the rice row, Thailand joined other ASEAN members in signing Tuesday's framework accord as well as the dispute settlement pact with South Korea.

The two sides plan to launch talks to finalize the two other accords - trade in services and investment - next year. South Korean officials said the two pacts would be much easier than the goods accord.

The goods agreement calls for eliminating tariffs on all agreed products by Jan. 1, 2010, although the six developed members of ASEAN will have flexibility to remove tariffs on 5 percent of products by 2012.

The remaining three, poorer ASEAN members were given a later but unspecified deadline.

ASEAN-Korea trade last year amounted to US$40.2 billion, up nearly 25 percent from 2003.

Despite strong pressure from rice farmers, the South Korean government has taken steps to lower import barriers. It concluded an accord with nine rice exporting countries including the United States and China to increase mandatory rice imports from 4 percent of domestic consumption to 8 percent by 2014. The accord calls for fully opening the market thereafter.

Farmers in South Korea claim that they are already heavily indebted and that their plight would worsen if cheaper foreign rice floods into the country.