SOUTH KOREA: AN OVERVIEW OF THE RUSH TO FREE TRADE

José Luis León-Manríquez*

Since the end of the Cold War, the most internationalized sectors of government, business and academia in the ROK have been pushing for a more assertive participation of their country in an increasingly liberal order. Although they reckon that South Korea is a tiny country from a territorial viewpoint, they also argue that the country has become a major player in the international economy. This way of thinking is epitomized in the words of Il Sakong, a well-known scholar and former minister of Finance, who in 1993 stated: “A critical new challenge for Korea is reconciling demands for responsibility-sharing with domestic particular resistance to market opening and sensitivities to necessary but difficult structural adjustments in agriculture and finance.”

The juncture for pursuing this project would come with the onset of Asian economic crisis in 1997. Besides a comprehensive restructuring of the bureaucratic apparatus and the attempt to reduce the power of chaebols in the domestic market, Korea’s response to such a crisis entailed further economic openness, a welcoming attitude towards FDI, and a bet to take advantage of globalization’s opportunities. In the Korean view, free trade agreements became a powerful tool to carry on this endeavor. As the rest of East Asian countries, Seoul had been reluctant to embrace the FTAs fever that had swept over Latin America and many other developing areas in the early 1990s. This defensive position of the ROK would undergo a radical transformation in the current decade, when dozens of  FTAs are under negotiation or have been concluded in Asia Pacific and the Pacific Rim.

Fearing that South Korea could become a sort of “international orphan” if it did not signed FTAs, both businessmen and officers in the Korean bureaucracy began looking for potential trade partners. The “FTA mindset” has been embodied, among others, by Chung Hae-kwan, a top officer of the Ministry of Foreign Affairs and Trade (MOFAT). Chung has pointed out that “the pursuit of FTAs is not a matter of choice for Korea, but rather a necessity for future economic growth”. Accordingly to this view, in April 2004, a FTA Chile-South Korea took into effect, after three delays in its ratification process due to the voiced protests of Korean farmers. This was both the first FTA that the ROK entered into and the first trans-Pacific FTA. After the FTA with Chile, the ROK has signed further treaties with Singapore, the Association of Southeast Asian Nations (ASEAN) excluding Thailand, and the European Free Trade association (EFTA). In June 30, 2007, the Korea-United States FTA (KORUS-FTA) was signed, thus becoming the largest FTA for the U.S. since NAFTA.

In the case of Mexico, Korean interest on a FTA started since the early 1990s, with the negotiation of the North American Free trade Agreement (NAFTA). Pressed by the imperatives of diversifying foreign trade and paying service to their pro-free trade ideology, by April 2005 Mexican policymakers had managed to enforce 12 FTAs with 43 countries. What has stopped, then, the negotiation of an FTA with Korea? The explanation is to be found in Mexico’s internal factors. First of all, the administration of Vicente Fox (2000-2006) was very cautious in signing new FTAs, and decreed a moratorium of FTA negotiations, with the exception of the Free Trade Areas of the Americas and Japan, which took into effect in 2004.

It is very likely that the skepticism of the Mexican government towards new FTAs has a lot to do with increasing doubts of Mexican public opinion about free trade instruments. While Mexican public opinion was pretty confident on the benefits of FTAs in the early 1990s, it has become somehow skeptical on this very subject. Thus, in the specific case of the FTA with Korea, the Mexican private sector has exerted intense pressures on the government for not signing a FTA. Despite these pressures, at mid-2008 there are still possibilities that this over-negotiated agreement may be signed soon. From my viewpoint, a Korea-Mexico FTA would have three main effects: a) It would reinforce the increasing relevance of the ROK in Mexican foreign trade, especially regarding imports; b) It would invigorate the USA-ROK alliance, which has been stressed by a recent wave of Korean nationalism; and 3) Added to KORUS-FTA and to the Japan- Mexico FTA, an agreement between Korea and Mexico would be a catalyst for further Trans-Pacific integration and would mean the affirmation of Northeast Asia as a sort “NAFTA’s fourth partner”.

* Professor-researcher of the Universidad Autónoma Metropolitana-Xochimilco and Professor of Korean Studies in El Colegio de Mexico.