Will Korea Be East Asia’s Trade Center?

Will the Busan Asia-Pacific Economic Cooperation Summit (APEC) achieve a major breakthrough in creating a massive economic bloc of three billion people?

The three billion-strong bloc will embrace the nations of Korea, the Association of Southeast Asian Nations (ASEAN), India, and China. The ASEAN has already signed a Free Trade Agreement with China, and is in FTA talks with Korea and India. India feels intimidated by Japan and China, while China is wary of Japan.

That’s where the economic bloc encompassing Korea, ASEAN, China and India comes in. The upcoming APEC meeting will decide whether the Korea-ASEAN FTA, the center pillar of the potential economic bloc, will be reached. The FTA agreement, if signed, could reshape the economic landscape in East Asia.

Is a New Economic Bloc of 3 Billion People a Dream Soon to Be Realized?-

The ASEAN is expected to take center stage in the new economic bloc. The ASEAN is aiming to be reborn as the economic hub of East Asia by taking advantage of its central geological position, surrounded by Korea to the east, India to the west, and China to the north, in reaching the FTAs with the three countries.

As part of its effort to realize its goal, it is in negotiations with India to sign an FTA. It is also fine-tuning details with Korea to finalize its FTA negotiations. The ASEAN-China FTA has already come into effect this July.

It is determined to make great economic strides by playing a central role as a 569-million-strong consumer market in the new economic bloc. Three major ASEAN countries, Malaysia, Indonesia and Thailand, have posted a remarkable annual average growth of 9.8% (in terms of GDP) over the past four years since 2000.

China is enthusiastic about integrating the markets of Korea, India, and the ASEAN to achieve its dual goals of taking control in East Asia and holding Japan in check. In the meantime, India prefers Korea as a trading partner to other economic giants such as Japan and China.

A Golden Opportunity for Korea-

India, a huge potential market of one billion population, is being courted by many countries. Japan and China are keen on signing an FTA with India.

But India has not warmed up to the idea yet.

In the meantime, it is engaged in a joint study to pursue an FTA with Korea, suggesting that the country regards Korea as an attractive FTA partner in terms of the size and economic strength.

The same goes for China and the ASEAN, as well. China originally proposed a Korea-China-Japan FTA. But at the same time, it is wary of Japan, viewing it as a competitor in gaining the hegemony in the region.

A government official revealed, “A senior Chinese official once said unofficially that China can fully accept the Korea’s opinion on the range of products to be excluded from the market opening, if the agriculture market opening remains an obstacle to reaching a Korea-China FTA.”

Kim Young-moo, the manager of the regional negotiations department of the Ministry of Foreign Affairs and Trade, said, “Each of the east Asian countries wants Korea to be their free trade partner. This presents Korea with a great opportunity to establish itself as the center of trade in the region.”

Korea-ASEAN FTA Is Key-

Korea and the ASEAN are in last-minute negotiations to decide the items to be excluded from the market opening and the scope of product liberalization. The ASEAN wants to reduce the scope of the market opening, while Korea wants to pursue full-blown liberalization in a bid to boost its exports of industrial goods.

Within the Korean government, the Ministry of Industry, Commerce and Energy, the advocate of the full market opening, doesn’t see eye to eye with the Ministry of Agriculture and Forestry, which prefers a more limited market opening.

The Korea-ASEAN trade ministers’ meeting is scheduled to be held on the sidelines of APEC summit. Working-level officials will also discuss the issue of place of origin in Jakarta, Indonesia.

Jung Young-jin, a trade lawyer at Woo Yun Kang Jeong & Han, a law firm, said, “Korea’s FTA with the ASEAN is now the core of the nation’s trade strategy, as the nation can use it as leverage in negotiating FTAs with other countries. We need to finalize the FTA negotiations during the Busan APEC meeting.”

Eun-Woo Lee libra@donga.com