Damage Due to Delay of Korea-Chile FTA Approval Amounts to 3,600 Billion Won

Kim Jin-pyo, the deputy prime minister and the minister of finance and economy, announced, “If the ratification of the National Assembly regarding the Korea-Chile Free Trade Agreement (FTA) is voted against on February 9, Korea might be a ‘solitary trader’ in the international market as a result of a loss of confidence.

“I am confident of Korea-Chile FTA approval, since leaders of each political party and farming organization want Korea-Chile FTA,” Kim said on a TV program about current events on February 8.

He also promised that “we will support fruit growers, expected to be damaged by FTA, with 150,000 billion won for seven years.”

“Korea-Chile FTA is inevitable reality,” said Huh Sang-man, the minister of agriculture and forestry on another TV program. “The government will prepare the basis of the development of the Korean agricultural industry by minimizing damages of farmers and by improving the safety and quality of agricultural products.”

The Ministry of Commerce, Industry and Energy, on the other hand, announced that the damage to Korean businesses caused by delay of Korea-Chile FTA approval, and the implementation of the America-Mexico FTA, amounts to about 3,600 billion won.

According to the Ministry of Commerce, Industry and Energy, the damage from exports of electric home appliances and other goods to Chile last year, such as Korean cars, color TVs and microwave ovens, is estimated to be $2.2 billion (about 2,650 billion won). Last year, the market occupancy rate of Korean cars in Chile was 18.8 percent, which was 1.7 percent lower than 2002 (20.5 percent), and which has continued to decline. Rates of cell phone, color TV (14 inches and up), and microwave oven exports have also declined heavily, by 3-13 percent.

Because Mexico’s government raised its tariff on tires from 23 percent to an average of 48 percent on January 1 in cases of non-FTA countries after implementation of the America-Mexico FTA, the amount of damage is also $8 million (about 960 billion won). The Ministry of Commerce, Industry and Energy is concerned that the amount of export damage will be $5 billion (about 6,000 billion won) if Korea-Chile FTA approval continues to be delayed.

Kwang-Hyun Kim Jin-Hup Song kkh@donga.com jinhup@donga.com