Free Trade Agreements in the Asia- Pacific: Why Korea Might be Different John Ravenhill Australian National University Presented to conference on New Zealand, Korea and Asia-Pacific: From Distance to Closeness, Auckland 16- 17 November 2012
Korea’s PTAs (share in total exports, start of negotiations date, implementation date) 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)
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 of 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 only 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 office. – 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?
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