Korea now finds itself in an awkward position in discussing free trade schemes with the world’s two largest economies ― the U.S. and China.
During his talks with Chinese officials in Beijing last week, Finance Minister Choi Kyung-hwan urged them to take swift actions toward implementing a bilateral free trade agreement. Choi said in a separate meeting with Korean correspondents that it was difficult to specify how long it would take for the two sides to resolve remaining differences to work out a final deal.
His remarks came as something untoward for economic commentators and businesspeople here.
Negotiators from the two countries concluded the deal in principle two hours before President Park Geun-hye and her Chinese counterpart Xi Jinping held bilateral talks on the sidelines of the Asia-Pacific Economic Cooperation summit in Beijing last November. At the time, they said a final agreement would be initialed probably in January after some technicalities were ironed out.
It now seems that the initialing of the accord will not come in the foreseeable future. Officials here say China needs more time to fix its stance. But they do not appear to know the exact reason for the delay.
This situation contrasts with Beijing’s aggressiveness, as seen in its negotiations with Seoul, which was more cautious on striking a deal. Now that Korea has been set in the FTA framework with China, some critics here note, China has no reason to hasten to implement the accord, under which the two sides are required to remove tariffs on more than 90 percent of goods over the next two decades, at the risk of damaging its industries.
Korea had dragged its feet on deciding whether to join the U.S.-led Trans-Pacific Partnership while engaging in trade talks with China. Seoul officials seemed particularly worried about disrupting China’s push for its own version of a regional bloc named the Free Trade Area of the Asia-Pacific.
After last November’s announcement of the conclusion of bilateral trade talks with China, voices were raised here for Korea’s participation in the TPP negotiations, which are expected to reach a tentative deal in March. The head of the country’s traders association warned that failure to become part of the trading bloc that would account for nearly 40 percent of the world’s gross domestic product could result in serious losses for local companies. But the U.S. brushed away Seoul’s request to join the TPP talks involving 12 countries, dashing the possibility of Korea becoming a starting member of the group.
Seoul officials need to pay heed to criticism that their sitting on the fence between the two largest economies without a sound strategy has put them in an embarrassing situation. This is yet another reminder of the difficulties or risks Korea faces in trying to strike a delicate balance between China and the U.S.
What is now perceived here as an about-face by China on the bilateral FTA may be strengthening calls from the Korean public for being more careful not to undermine the alliance with the U.S. with too much consideration of this balance. China should accelerate the work to implement the trade pact with Korea unless it wants this sentiment to spread further here.