Transcript **** 1

Korea’s FTA strategies &
Effects of Korea-EU FTA
1
Korea’s FTA strategy began ten years ago
FTA 1.0

Korea chose FTA as major growth engine to overcome the
1997 financial crisis
- Korea needed a further access to global market in order to overcome the crisis
-

in 1997, which hit its economy very hard
Korea’s decision to push forward FTA negotiations was also based on the need
for further reform of its economy
Korea’s first FTA partner was Chile: Negotiation was
completed in 2002 and agreement came into force in 2004
Korean Economy during crisis
FTA negotiation with
Chile began in 1999
(%)
40
15
10
20
5
0
1990
-20
1992
Imports growth(LH)
Exports growth(LH)
-40
(%)
Source: IMF
GDP growth rate(RH)
1994
1996
1998
2000
0
-5
-10
2
Evolution of Korea’s FTA strategy
FTA 2.0

In 2003, Korean government introduced ‘FTA Roadmap’, a
long term plan for future trade & investment negotiations
- Indicated major FTA partners and areas for liberalisation

Completed negotiations with EU and US in the late 2000s:
These were key achievements of ‘FTA Roadmap’
- Korea-EU FTA and Korea-US FTA came into force in ‘11 and ‘12, respectively
FTA 3.0

In 2013, Korean government announced ‘New Trade
Roadmap’, a new plan for the next decade
- Plans to play the role of a linchpin in TPP led by US and RCEP led by China
- Began FTA negotiation with China, participated in RCEP negotiations, and
stated intention to consider joining the TPP in 2013

Plans to expand trade with resource rich countries and
emerging economies
- FTA negotiations were completed with Australia in 2013 and Canada in 2014
- Currently negotiating with Indonesia and Vietnam
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Korea’s FTA network in 2014

As of April, 2014, no. of Korea’s FTA partner countries
stands at 47 through 9 agreements in force
- Chile, Singapore, EFTA, ASEAN, India, E.U., Peru, U.S., Turkey

Compared to Korea’s major competitors…
- With FTAs with the US and the EU, the share of trade with FTA partners almost
-
trebled since 2009 to 35.3% in 2013, surpassing China and Japan
Share of home country & FTA partners’ GDP in the global economy is 56% for
Korea, much higher than that for China(16.2%) or Japan(17.2%)
Share of Home & FTA Partners’ GDP
Share of trade with FTA Partners
(%)
(%, Year 2013)
40
60
Korea
30
FTA partners
50
Home country
40
China
Japan
20
30
20
10
10
0
0
2009
2010
Source: KITA IIT
2011
2012
2013
Korea
Source: KITA IIT
China
Japan
4
Notable trends in Korea-EU trade relations
Korea → EU: Motor vehicles, Cruise ships, Telephone sets, Motor parts
 EU → Korea: Motor vehicles, Petroleum oils, Machines and apparatus, Aircrafts
 With a rapid rise in Korea’s imports from the EU, net trade
balance has turned negative
 Share of EU in Korea’s exports is declining fast

- Rise of Asian trade partners such as Vietnam and Indonesia
- Eurozone fiscal crisis led to a depressed consumption market
Share of Korea’s exports
Korea-EU trade relations
Exports
Imports
Balance
(Million $)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
(%)
30
China
25
20
2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: KITA
15
ASEAN
10
U.S.
E.U.
5
Japan
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: KITA
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There are some positive signs too
Performance of Korea’s exports to the EU has been
disappointing since the FTA came into effect
 Yet it is too early to criticise the agreement and there
have been economic crises in the eurozone
 Korea is doing well in its key export products

- Out of Korea’s 10 top export items to the EU, 5 items recorded an increasing
share in the EU market between 2010 and 2013(Jan.~Oct.)
Share of imports from Korea in EU’s total external imports
(%)
Cruise Ships
(%)
45
8
43
7
41
Motor vehicles
(%)
6
(%)
Plastic
2
Precision
Equipment
5
(%)
Chemical
products
1.2
1.5
6
39
4
5
37
2010
Source: KITA IIT
2013
1
3
4
35
2010
2013
2010
2013
1
2010
2013
2010
2013
6
Products covered by Korea-EU FTA

If we analyse EU’s import of products covered by the
Korea-EU FTA in 2013, Korea performed rather well
- EU’s imports from Korea decreased by 6.6% in total: while imports of products
-
not covered by FTA decreased by 15.4%, those covered increased by 0.1%
EU’s imports of products covered by Korea-EU FTA (a+b) increased by 0.1%
from Korea while total imports of these products decreased by 1.7%
The performance of Korea’s exports was more marked in products with tariff
planned to be phase out (b)
% change in EU’s imports of products covered by Korea-EU FTA
(2012 Jan~Oct → 2013 Jan~Oct)
Products with
tariff…
Immediately
Eliminated (a)
Phased
Out (b)
Total covered
by FTA (a+b)
Korea
-1.8
5.7
0.1
China
-1.9
-7.6
-2.3
Japan
-11.4
-9.5
-11.0
U.S.
-1.8
-16.4
-2.9
Extra-EU total
-1.6
-2.7
-1.7
Source: KITA IIT
(a+b) share of
total imports
60.7
58.6
66.4
56.9
46.8
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Lessons from Korea-EU FTA

Governments and independent bodies should provide a
balanced analysis on the effects of FTAs
- e.g. Trade balance vs. Performance of exports covered by FTA

Governments should continue their efforts to raise the FTA
utilisation rate, with special focus on helping SMEs
No. of requests to check RoO
Korean exporters’ FTA utilization rate
300
(%)
90
Korea-EU FTA
200
80
Rest
US
Korea-US FTA
70
100
EU
0
60
2011
Source: KITA IIT
2012
2013
2011
2012
2013 Jan~Sept
Source: Korea Customs Serivce
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Lessons from Korea-EU FTA (cont’d)

Participating countries’ firms should bare in mind that
FTAs are like a marathon not a sprint

Both governments and firms should be prepared for the
spread of FTAs
- The EU is working hard to push forward its FTA strategies
EU is currently negotiating FTAs with
major advanced economies such as the U.S(TTIP), Japan &
emerging economies such as India, Vietnam, MERCOSUR, and Thailand
EU: Share of Home & FTA Partners’ GDP
Economic growth rate
(%)
United
Kingdom
3
2
Eurozone
1
0
2010
-1
Source: IMF
2011
2012
2013
2014
2015
(%)
Negotiating stage
80
70
60
50
40
30
20
10
0
Negotiations
completed or
near enforcement
2011
Source: KITA IIT
2012
2013
Short term Medium to
long term
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