S. Korea accelerating move to expand FTA territory
For South Korea, an open and small economy, selling goods overseas may be the most viable source of income, and that’s why the country is ratcheting up efforts to expand or upgrade free trade agreements with more and more countries amid growing trade protectionism.
This year alone, Asia’s fourth-largest economy has inked or implemented three new free trade agreements (FTAs), with seven more trade talks currently underway.
Seoul’s move to seal more FTAs has gathered pace since last year as its top two trading partners — the United States and China — have been engaged in an unprecedented trade war. Their protracted trade row has dealt a hard blow to South Korea, leaving it suffering an extended slump in its outbound shipments.
In September, South Korea’s exports sank 11.7 percent from a year earlier, extending their slump to a whopping 10th consecutive month. It marked the longest year-on-year skid of exports since the 19-month consecutive fall from January 2015 to July 2016.
Adding to the woes is the recently flared-up trade tussle between Seoul and Tokyo. The Asian neighbor’s abrupt curbs on exporting key industrial materials, crucial for the production of chips and displays, served as a wake-up call for South Korea to further diversify its exports.
“It is unusual for countries such as South Korea to heavily depend on a few partners in trade,” Kim Bongchul, a professor of commerce at Hankuk University of Foreign Studies, said. “Even without such trade disputes, South Korea always needed to avoid putting all its eggs in one basket.”
Since its debut in 2017, the Moon Jae-in administration has been preaching the expansion of FTA territory and the diversification of overseas markets by forging or strengthening economic and political ties with emerging countries from the Southeast and the Central Asian regions, as well as with Russia and India, under its iconic New Southern and Northern policies.
“An FTA can work as a tool for South Korea in maintaining overall balance in trade. It serves as legal infrastructure that helps the country to ease its dependence on traditional partners,” Kim added, claiming South Korea is on the right path to expand ties with more partners.
Starting this month, South Korea’s FTA with Honduras and Nicaragua went into effect, as the first step of its comprehensive trade pact with five Central American countries. The FTA with the remaining countries — Costa Rica, El Salvador and Panama — will also go into effect after they complete remaining procedures.
In August, South Korea struck a free trade deal with Israel that is expected to take effect in the first half of 2020.