Research On FTA Strategy In South Korea

The major frame of the trade policies of Korea has been made having the market-opening in mindsince the growth strategy of the export-oriented was stabilized as policy stance in1960s. But it is not amarket-opening in the true sense of the word that emphasized only the importance of entering externalworld. A bond of sympathy that it is the most important strategy to pioneer the world market as asmall-scale economy was developed throughout each government, but it was not in case of import. It istrue to have made an effort in liberalization of imports, but the policy to relax regulations of importrestrictions was in partial retreat or modified whenever it faced special situations like the changes in worldeconomic conditions or trade balance. However, it can be said that the evolution axis of the Korean tradepolicies, throughout the history after the Korea’s independence, has been put on the efforts for exportpromotion and progressive import liberalization such as a promotion and retreat in relaxation of importrestrictions in the mid-1960s, a promotion of import liberalization in the mid-1990s, a continuouspromotion of economic liberalization and accession to WTO and OECD in1990s, and a completepromotion of the negotiation of FTA in the beginning of2000s. The Korean strategy of Free Tradeagreement can be seen to be located on the solid line of progressive efforts for such an opening.Considering that the meaning of the opening is not only to enter foreign countries but also to opendoors to them and accept their goods, services and factors of production, the growth of Korea economy hasnot always had the same way of the complete opening. The trade policy for its economic growth was basedon the import promotion while the import, another axis of the opening, was controlled frequently. In1960s,after complete implementation of export-oriented growth policies, the opening strategy of Korea, in fact,featured the strategic measures to promote export and to control import in numerous cases.It is true that the trade policies until1960s were based on the philosophy of import and domesticoriented development. But since the export-oriented growth strategies were settled as the strategic keynotein the beginning of1960s, the trade strategy of Korea can be seen to have the opening in mind. A bond ofsympathy that it is the most important strategy to pioneer the world market as a small-scale economy wasdeveloped throughout each government, but the policy to relax regulations of import restrictions was in partial retreat or modified whenever it faced special situations like the changes in world economicconditions or trade balance. However, it can be said that the evolution axis of the Korean trade policies,throughout the history after the Korea’s independence, has been put on the efforts for export promotion andprogressive import liberalization such as a promotion and retreat in relaxation of import restrictions in themid-1960s, a promotion of import liberalization in the mid-1990s, a continuous promotion of economicliberalization and accession to WTO and OECD in1990s, and a complete promotion of the negotiation ofFTA in the beginning of2000s.Due to the export-oriented growth strategies dominating the trade and growth strategy for about40years after1960s and the relatively slow-moving import liberalization, the study on import affecting theKorean economy was insufficient and the opposite opinions of import liberalization were sporadic anddiscontinuous. Though it is the privilege only for a few member nations, along with the implementation ofFTA between a foreign country with abolition of tariff and non-tariff on items the pros and cons began tobe revitalized. Considering such timeliness,the thesis deals with impacts of market opening throughabolition of import barrier whose significance has recently been emphasized on Korean economy and waysto reorganize institutions of Korean economy. The recent efforts for the opening include not only smoothtrade of goods but also various strategic efforts to improve the mobility of production factors like capitaland labor regardless of service. Reduction of various customary and institutional barriers hindering thetrade of goods, service and production factors among nations, and improvement of custom and institutionabout guarantee of domestic mobility and discriminative treatment versus domestic goods, service andproduction factors, are on the rise as recent key issues of FTA.Since1960s when the growth started and import and export was the main issues, import has beenregulated in respect of tariff and quantity limit. Even now, import is regarded as buying intermediary goodsand capital goods only for export, or as a source of profits for exporters.Encouragement of export and limited acceptance of import might be unavoidable options in1960sand70s when we had undeveloped economic structure and chronic trade deficit. Actually, in the mid1980s, improvement of international trade balance made it possible to introduce actions for free import.However, even before1980s, there were efforts to open import. In the1990s, general reduction oftariff and steady free import of some agricultural produce took place. Especially, free trade movement suchas Urguay Round negotiation made market opening settled. This change persisted even in times of trade deficits, and government expanded the area of free trade into service industry and direct investments.During this period, the range of trade countries was expanded into Russia, Eastern Europe, and China, andKorea experienced unprecedented economic crisis. Even though the cause of economic crisis in1997wassaid to be early opening of market with unmatured economy, arguments that economic flexibility throughmarket opening and improvement of economic constitution made recovery of economy possible gainedmore power, and thus government continued to open markets.In the2000s, FTA agreements are representative of government efforts to make import free. FTAwith Chille in April,2004was a real starting point for true free trade, and Korea-U.S. FTA of April,2007outweighed all the previous FTAs. The biggest economy in the world made agreements different andspecial, and the range was far beyond abolition of tariff. It is generally agreed that evaluations ofKorea-U.S. FTA are in average grade, but many scholars differ from each other in detailed assessment.FTA is an agreement between the parties which imposes trade benefits such as reduction or abolitionof tariff on each other. Examples of regional economic integration which is a further step than free tradeagreement focusing on abolition of tariff within the zone, are (1)Customs Union in which commonreduced tariff is applied to countries without zone as well,(2)Common Market in which productionelements are freely transferred among member countries and (3) Single Market in which politics andeconomy are unified within zone such as the use of single monetary unit. Free Trade Agreement is knownas one the most typical agreements of Regional Trade Agreements. The spread of Regional TradeAgreement including Free Trade Agreement is on the rapid rise as seen5before1970s,12in the70s,10inthe80s,64in the90s, and106since2000. Regional Trade Agreement has steadily been on the rise sincethe foundation of WTO in1995, and is known to account for50%of all trade in the world in2005. Inkeeping abreast of this trend, Korean government has also tried to sign agreements with many countries.Free trade agreements with45countries has completed, and thus Korean economy territory expands into61%of world GDP. Especially, FTA with EU(effective in2011) and U.S.A(effective in2012) areexpected to be the ground for Korean economy to leap into high. Korea has become a leading FTA country.In addition, Korean government is trying to sign an agreement with Chinese government which is thebiggest trade country of Korea. On May2,2012, Korea and China officially announced commencement ofnegotiation. After announcements, actual negotiation on detailed sectors is anticipated to start soon.