Conclusion and Policy Recommendations

Most of the FTAs that Korea is currently implementing have been concluded with small and medium-sized developing countries. Moreover, in these FTAs, the range of preferential tariffs is not big; as such, only one out of five enterprises was found to be utilizing them. On the other hand, half of the enterprises that had been surveyed responded that they intend to utilize the existing FTAs. These enterprises are thought to have responded so with the implementation of the Korea-US FTA in mind, and most of the enterprises are expecting an early implementation of the Korea-US FTA.

Accordingly, the Korean government should complete the internal ratification of the Korea-US FTA so that it could be implemented early. Owing to the US presidential election, it was difficult for the FTA to be ratified by the US Congress, but Korea should closely consult with the new US administration so that the ratification procedures can be completed in 2009. Moreover, the Korean government should implement the agreement that it concluded with India this year and should also conclude its FTA negotiations with the EU. Further, the Korean government should promote FTAs with the East Asian countries, such as Japan and the PRC.

Lee Myung-bak's government is now promoting strategic FTAs aiming at forming a “global FTA network,” but the government should improve its mechanism of coordinating the internal interests. The government intends to secure the world's largest advanced markets through the promotion of FTAs with the big economic blocs (the US and EU), to adopt the economic system of the advanced economies, to establish a national opening-up mindset, and to pave the way for the revamping of less competitive enterprises. The government is also constructing Korea's strongholds by continent by concluding FTAs with Central America (Chile, Mercosur), Southeast Asia (ASEAN), Europe (EFTA, EU), and North America (US, Mexico and Canada). It aims at securing the prior occupation of the emerging big markets through bilateral FTAs with India, PRC, Russia, and GCC.

The promotion of FTAs with Korea's major trading countries is necessary, and the schemes for raising the degree of FTA utilization should also be actively examined. The organization and channel through which FTA-related information that is useful to enterprises can be provided, rather than the unilateral promotion of FTAs, stressing its advantages to the people, should be reinforced. In particular, SMEs cannot grasp not only the contents of the existing FTAs but also the rules of origin for their own products due to their manpower limitations. The system of supporting FTAs for SMEs should be reinforced. Some SMEs utilize FTAs widely, but the rest are virtually indifferent to them. While the current structure used by many SMEs for supplying goods to the big domestic corporations should be taken into account, the FTAs are useful not only for their exports but also for procuring the parts that are necessary for production. In the FTAs that had been concluded by Korea, the rules of origin are strict and complicated. In future FTAs, a more neutral and lenient form of the rules of origin should be adopted.

In addition, future FTAs should be approached more elaborately and strategically. The government's procedures for promoting FTAs have been systematized, but the procedures for collecting opinions within the country leave much to be desired. As a result of the top-down approach to the promotion of FTAs that has been employed so far, the matters in which the enterprises are interested have not been properly reflected in the agreements. In advanced countries, bottom-up trade policies are generalized, so the matters that the enterprises are interested in are first put in order, and then the FTAs are promoted to realize these interests. Now, Korea, having concluded FTAs with many countries, should establish the advanced-country-type trade policy structure.

Since the conclusion of the Korea-US FTA, the Korean people have become highly interested in the economic effects of FTAs, but basically, it became difficult to form internal consensus among people on the promotion of FTAs with other countries, even with clear validation of economic feasibility. Moreover, in the course of FTA negotiations, there are limitations to the government's role in maintaining its position in order to reflect opinions of its people. As such, the interested groups, including the industrial circles, should be widely utilized in the course of establishing strategies and collecting relevant data. FTA negotiations that are undertaken without collecting public opinion are much likely to cause conflicts due to the lack of internal understanding of such FTAs and may lead to enormous social costs, as was seen in the candlelight street demonstrations related to American beef imports.

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