The year 2014 has been quite productive for Korea in terms of free trade agreements. Australia, then Canada and China, and now New Zealand have agreed to free trade deals with Korea. While all these FTAs are important for Korea, the one with China, Seoul’s largest trading partner, marks a watershed moment for Korea’s FTA policy started in the early 2000s. Many things are still on the drawing board and both countries will now conduct “legal scrubbing” to polish the text to reflect what has been agreed upon.

The balance sheet for the Korea-China FTA has been analyzed by different entities from many different angles. This exercise will continue and perhaps intensify once the whole ratification procedure starts at the National Assembly early next year.

The usual assessment ― whether for the agreement or against it ― is based on the direct economic impact as a result of tariff elimination “at the border.” This is of course important, but the real impact of an FTA can only be assessed ― and felt ― by, evaluating how the consumers access to goods in the partner country is guaranteed. This assessment is called calibrating “behind-the-border” issues and is getting more attention in the global trade regime.

The elimination of tariffs at the border is just one aspect of the market opening commitment. How the imported products are treated inside the market ― behind the borders ― is becoming more important in the commitment. The pendulum of international trade has shifted from the at-the-border issues to behind-the-border issues. The balance sheet for the Korea-China FTA also hinges upon how these behind-the-border issues will be dealt with. With respect to this particular FTA, here are some of the important issues to look for.

First and foremost is the local government. China is known for the broad autonomy and wide discretion accorded to its local governments of all levels across the vast territory. In many instances, trade frictions with China concern what has taken place at the local government level. So, it is critical to ensure that the FTA is implemented at the level of local governments as promptly as possible. It usually takes time for many countries and it may take longer, even with good faith, for a country with a population of 1.4 billion. Just look around us ― after all, it is the local governments (city governments and district offices) that stand to affect our daily business operations and sales of goods.

Let’s, then, consider the non-tariff barrier issue. Navigating the web of laws and regulations, both written and unwritten, in some countries is like walking down the labyrinthine streets of an old city. Unpredictable exercise of discretion and invisible regulatory restriction couched in vague terms may well neutralize the benefits from tariff elimination. NTB detection and elimination is therefore critical. As with any other FTA, a mechanism to detect, monitor and address NTBs is all the more necessary in this FTA as well.

Finally, the irony of an FTA. The conclusion of an FTA eliminates the tariffs but tends to induce robust trade remedy investigations. The trilogy of trade remedy investigations ― antidumping, countervailing duty and safeguards investigations ― have become a more popular tool for domestic industries to cope with the increased penetration of products from FTA partners. Over the past several years, China has become one of the active users of these trade remedies, and it may be forced to target Korean products when the increased market shares threaten its domestic competitors.

The final balance sheet of the Korea-China FTA will be drawn up only when it is clear how these behind-the-border issues are shaping up through the implementation of the FTA. Of course, China will have its own checklist for Korea. The conclusion of an FTA is just the beginning of a long process and it is its (faithful) implementation that matters most.

By Lee Jae-min

Lee Jae-min is an associate professor of law at Seoul National University. ― Ed.