Chilean Senate Ratifies FTA

The Chilean Senate’s ratification of a free trade agreement with Korea on January 22 has put international confidence in Korea to the test.

That is because the FTA doesn’t go into effect until the Korean National Assembly ratifies it.

Chile ratified the agreement under the convocation of a special full-scale meeting because it believed the Korean Assembly would also ratify it on February 9. If the Assembly propones the ratification again, international confidence in Korea will greatly fall, according to trade specialists.

The credit status of Korea is on a testing stand -- The Korean government has given a detailed explanation of its failed attempt to ratify the FTA with Chile after the plenary session on January 8.

The explanation was that Korea would be able to ratify the agreement because the president was persuading lawmakers and farmers and because the Speaker of the National Assembly has promised to deal with the voting on February 9. The government asked Chile not to worry about the conflicts over the FTA in the Korean Assembly. The government also hinted that it would be helpful to Korea if Chile ratified the agreement first.

“Chile ratified the FTA first to show confidence in Korea despite its political burden,” said Kim Byung-sup, the Ministry of Foreign Affairs and Trade (MOFAT) director in charge of the multilateral trade cooperation division.

The Chilean Senate will be on summer vacation from January 24 to the end of February. Chile considered that the implementation of the FTA would be delayed because of the vacation even if the Korean Assembly ratifies the agreement on February 9.

There is no alternative to ratification -- Analysts say there is a higher probability that the Korean Assembly will ratify the FTA because of the Chilean ratification.

According to diplomatic convention, Chilean ratification means pressure on Korea to pass the bill as well.

The degradation of Korea’s credit status and the worsening trade situation also imposes a heavy burden on the Korean National Assembly. The current trade deficit with Chile increased from $290 million in 2002 to $490 million in 2003 because of weakening export competitiveness caused by the delay of ratifying the FTA according to the Ministry of Commerce, Industry and Energy (MOCIE). The situation has become more pronounced following Chile`s FTA with the European Union last year and with the United States this year. It means the business area that Korea can enter and succeed in has become smaller. “We cannot step back any more,” said an MOCIE spokesperson. “Chile has already taken a conciliatory attitude.”

Eun-Woo Lee libra@donga.com