South Korea launched free trade with Chile 10 years ago this week. The free trade pact signed between the two countries was Korea’s first. Since then, Korea’s free trade has grown so much that it may well be considered a major player in open trade.
A few figures will suffice to back the argument: Korea now has nine free trade pacts, including those with the United States, ASEAN, India and the EU. They cover 46 countries, which account for a combined 62 percent of the world’s GDP. Korea is the only one of the world’s 10 largest trading companies that has free trade agreements with the United States, EU and ASEAN.
This is a sea change, considering the difficulties the nation had in the initial stages of every major free trade negotiation, including fierce protests from farmers. Sometimes there were missteps on the part of the government, regarding both negotiations and domestic policy, but overall, it deserves praise for its unflagging commitment to free trade.
It is impossible to measure the exact effects of free trade on the economy. But no one can deny that free trade fueled growth of the Korean economy, especially trade.
Take the Korea-Chile FTA as an example. During the past 10 years, two-way trade has grown an average of 16.3 percent annually, with the total volume reaching $7.12 billion last year from 1.58 billion in 2003. Exports to Chile have grown an average of 16.9 percent in the past 10 years, with imports expanding 16 percent.
Of course free trade may not be the only reason for such a remarkable expansion of trade and commerce between the two countries. There are downsides as well, such as the widening trade deficit Korea suffers.
Despite this and other shortfalls, it goes without saying that free trade benefits the Korean economy. As a country without much land or natural resources, the future of the Korean economy lies overseas.
Korea should continue actively promote free trade, and it needs a comprehensive national strategy to get the most out of free trade negotiations.
This is increasingly important, partly because multilateral free trade talks have taken center stage in such cases as the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership. Also not to be ignored is the need to work out measures to assist domestic industries that could face difficulties if they are more exposed to global competition.