Japan-Mexico FTA Settled, Korean Exports Damaged

As the FTA negotiation between Japan and Mexico has virtually come to an amicable settlement, both countries will officially announce the result of FTA negotiation by the end of next week. According to this, exports from Korea to Mexico are expected to face difficulties.

Nakagawa Shoichi, the Japanese economy minister, and Fernando Canales, the Mexican economy minister, discussed about FTA negotiations over the telephone on March 10 and consented to the final measure that Japan should open up its agricultural market and Mexico should repeal the customs imposed on the Japanese industrial products such as steel and car on a long term basis.

As for Japan, this conclusion of FTA between Mexico is its second time in history following the FTA settlement between Singapore in 2002. It is expected that Japan’s FTA negotiations with Asian countries, including Korea, will be accelerated, reported Japanese news agencies.

In relation to the agreement, Japan assented to increase the range of low customs quarter of pork import into 80,000 tons gradually during the upcoming five years, and that of orange import to 6,500 tons.

For the mining and manufacturing industries, Mexico has agreed to allocate five percent of its entire auto sales to Japanese motor companies as a customs-free portion in the first year of FTA settlement and completely abolish the customs related to Japanese cars within the next seven years.

On the other hand, “Due to the Japan-Mexico FTA settlement, Korea’s exports to Mexico will be severely damaged,” remarked Korea Trade Organization on March 11, adding, “Approximately 22 percent of Korean products are placed in a competitive relation with those of relevant Japanese products. With the complete effectuation of Japan-Mexico FTA, the Korean companies, which pay more than 15 percent of customs on average, will suffer a major blow with the high customs products as the major victims.”

In particular, among 124 items which possess more than a million dollar exportation scale to Mexico, 40 items including auto parts, video cameras, wireless transmitters, autos, electronics, and steel are expected to be hit directly by the adverse influence of Japan-Mexico FTA.

As Mexico has announced that it would limit the requirement for application to the countries that have settled FTA with Mexico, there is the prospect of Korean companies to be left out from taking part in the government-led procurement projects.

On the survey carried out last November by the Korea Trade Organization, which was targeted to 122 export companies as to the influences of Japan-Mexico FTA, approximately 53.2 percent of all companies have answered that the exportation to Mexico would decrease by more than 10 percent.

Won-Jae Park parkwj@donga.com jameshuh@donga.com