FTA Alienation – Barriers to Export

Failure in signing Free Trade Agreement (FTA) has caused our companies to be discriminated in foreign markets as well as losing Korea’s existing markets abroad. President Roh Moo-hyun has said that he would prompt the FTA with Japan and Singapore but is already losing business with Chile since the FTA with Chile has not been ratified by the National Assembly.

On October 23, KOTRA (Korea Trade-Investment Promotion Agency) reported, “World Main FTA Success Models and Korea’s Disadvantage Cases - Until the year 2005, more than 300 FTAs will take effect. Korea is the only country with no valid FTA among powerful countries in trade, and our country’s products are experiencing many disadvantages in foreign markets because of that.”

According to the report, Mexico will impose a 50 percent import tax on Korean cars while imposing only 10 percent on cars from the U.S. and EU nations since they had signed FTAs with the nation. In addition, companies from the countries without an FTA with Mexico, like Korea, do not even have a right to bid for their massive governmental construction projects.

Korea will also face difficulties in exporting 21 products including machineries, toys, electric and electronic devices, medical appliances, and elevators to EU nations because of their strict rules of Common Compulsory Standard Certification (CE Mark). It is also because Korea did not sign any FTA with EU nations.

Malaysia imposes a five percent import tax to H-shaped steel from ASEAN (Association of South East Asian Nations) members but 20 percent to non-members.

Choi Dong-suk, Trade Strategy Team Director at KOTRA, emphasized, “After signing the FTAs, the import of certain products will increase, such as agricultural products, but it will also stimulate the economy comprehensively. We can benefit much more from an increase in export, foreign direct investment, manpower, technologies, standards, etc.”

EU’s ten-year plan of Single Market Creation from 1993 until 2001 has created 2.5 million jobs and GDP had an increase of 877 billion euros. North America Free Trade Agreement (NAFTA) also helped Mexico in their export, with an increase of 18.3 percent yearly within the Free Trade zone.

FTA nations have less trade conflicts. The U.S. has excluded Mexico and Canada, both NAFTA members, from their steel safeguard nations. Thailand, at the core of ASEAN, has experienced a 49 percent increase of foreign direct investment from January through August this year compared to the same period last year, amounting to 4.8 billion dollars.

Chan-Sun Hong hcs@donga.com