Korea and a group of six Central American countries last week declared the launch of negotiations on a free trade agreement. The declaration came at the end of a meeting between Korean Trade Minister Yoon Sang-jick and his counterparts from Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.
During the meeting in Houston, Texas, the ministers agreed to pursue a high-level and comprehensive FTA including trade in goods and services, investment, economic cooperation and other areas of mutual interest. The six Central American countries comprise a regional economic bloc known as SIECA, which was formed in 1960.
The first round of FTA negotiations between the two sides may be held as early as next month in El Salvador, where SIECA is headquartered, according to trade officials in Seoul. The proposed FTA with Korea, if signed, will be the regional bloc’s first free trade accord with an Asian country.
Together, the SIECA member states make up the fifth-largest economy in Latin America with their combined gross domestic product reaching $209.8 billion last year. Their combined population of 43.5 million is the third-largest in the region.
Trade volume between Korea and the six Central American states has almost doubled over the past decade, to about $5 billion last year. Some 200 Korean companies currently operate in those countries, employing around 150,000 local workers.
An FTA is expected to bring further benefits to both sides as they have complementary industrial structures. Korea’s key export items include automobiles, electronics and textiles, while Central American countries export mainly coffee, tropical fruits and metals.
A free trade deal with the SIECA members would help Korean products better compete with cheaper goods imported from China and other countries in the region. In particular, it could offer more opportunities for Korea’s small and medium-sized enterprises to make inroads into the fast-growing market.
With Korea’s exports on a downward trend partly due to sluggish demand in major markets, it is necessary for the country to seek to expand trade with other parts of the world.
Trade officials here forecast that an FTA with Central American countries will result in increasing Korea’s exports by up to $710 million in the decade after its conclusion, which is expected to come as early as next year. This may be a small amount compared to Korea’s total exports, which reached $573.1 billion in 2014, but the increase would be a meaningful part of the country’s endeavor toward lessening its reliance on key traditional trading partners.
Korea and the six Central American countries can also benefit from cooperation in making joint advancements into other regional markets. The SIECA members are located on a strip of land linking North and South America and provide access to Cuba and other island states in the Caribbean Sea.
Enhanced cooperation with them will help form a favorable atmosphere for the restoration of diplomatic relations between Korea and Cuba, which were severed in 1959.