Free Trade Agreements in the Asia- Pacific: Why Korea Might be - - PowerPoint PPT Presentation

John Ravenhill Australian National University

Presented to conference on New Zealand, Korea and Asia-Pacific: From Distance to Closeness, Auckland 16- 17 November 2012

Free Trade Agreements in the Asia- Pacific: Why Korea Might be Different

Bilateral Minilateral Chile (0.88%, 2003, 2004)) European Free Trade Association (0.64%, 2005, 2006) Singapore (3.51%, 2005, 2006) ASEAN (10.93%, 2005-2009) United States (9.81%, 2007, 2011) Gulf Cooperation Council (9.60%, negotiations since 2008) EU (11.06%, 2010, 2011) Mercosur (1.40%, under study) Peru (0.20%, 2010, 2011) Japan and China (35.66%, under study) India (1.50%, 2009, 2010) China (24.85%, negotiations since 2012) Japan (10.81%, negotiations since 2003) Australia (2.61%, negotiations since 2009) Canada (1.13%, negotiations since 2005) Mexico (1.14%, negotiations since 2006) Turkey (0.47%, negotiations since 2010) New Zealand (0.23%, negotiations since 2009) Colombia (0.17%, negotiations since 2009) Russia (2.28%, under study) Vietnam (0.96%, under study) South Africa (0.47%, under study) Israel (0.22%, under study)

Korea’s PTAs (share in total exports, start of negotiations date, implementation date)

Understanding the Proliferation of PTAs

• Conventional Wisdom: Driven by Firms

Seeking Advantage or to Level the Playing Field

• Two problems: (1) States reduced to role
• f agents, no autonomy to pursue own

vision of what is good for economy. (2) PTAs were driven as much by political/strategic concerns as economic

The Consequences of Politically-Driven PTAs

• Superficial Agreements

– Particularly true of China, ASEAN – China-ASEAN Agreement on Trade in Goods

• nly 23 articles
• Not just carve-outs but protracted periods for

implementation

• Few WTO Plus provisions in Asian

agreements

• Often signed with inconsequential partners

Early Korean Experience

• State driven response to Financial Crisis
• Chose Chile because relatively unimportant

partner, agriculture different season

• Business consulted after the fact. Little support to

government publicly because feared backlash

• Despite carve-outs (only 25% of tariffs on

agriculture immediately eliminated), Huge domestic resistance with Chile treaty rejected 3 times

• Still some shallow agreements (India)

Invitation to US

• Security Linkage: Sold domestically and internationally

as response to rise of China

• China Economic Challenge >> Interest in Improving

Access to Large Markets. Also out-manoeuvre Japan

• Domestic Economic Restructuring:

Desire to change economic structure away from developmental state. Ambivalence towards chaebol on left side of politics.

• Once KORUS under negotiation, desire to diversify >>

positive response to EU’s Global Europe Strategy of

• 2006. Again Seoul takes initiative

Why Politically Possible?

• Reorganization of Korea’s Trade Policy

Bureaucracy

– Ministry of Foreign Affairs and Trade created 1998. – Creation of Office of the Minister for Trade in 1998, unifying trade negotiation authority in one

• ffice.

– Strengthened after 2004.

• Introduction of Generous Compensation

Scheme

WTO Plus Elements in KOR-EU and KORUS

Source: Ahn (2010)

Agricultural Market Liberalization in KOR-EU and KORUS

Source: Ahn (2010)

Consequences

• Domino Effect: Tokyo particularly worried

>> requests to EU, interest in TPP

• Quality Effects: Serious Agreements
• Balancing Effects: Agreement to begin

negotiations for a Trilateral NE Asian PTA

• But Korea no interest in TPP

Implications for Australia and New Zealand

• NZ first country with which Korea

undertook study for FTA in 1999;

• negotiations with NZ & Aus since 2009;

essentially on hold since mid-2010

• Domestic Political Constraints
• Nothing Much to Gain

– Aus car market? – Minerals Chapter?