KITA chairman forecasts herald interview 7-8 percent growth for Korea’s trade volume
This is the second of a series of interviews of top officials on FTAs in light of the Korea-U.S. FTA taking effect. ― Ed.
Despite persistent signs of fragility clouding the world economy, free trade pacts will lend a fresh impetus to Korea and its counterparts, said Han Duck-soo, chairman of the Korea International Trade Association.
With the Korea-U.S. FTA taking effect Thursday, Han predicts that trade volume for Asia’s fourth-largest economy will expand as much as 8 percent on-year in 2012 with the trade surplus totaling $30 billion.
“We need an engine to power an upswing in the economy,” Han told The Korea Herald on Tuesday.
“For Korea, trade is the answer to kick-start growth momentum, given that domestic demand tends to rise gradually.”
Upon his return to Seoul after three years as ambassador to Washington, Han was astonished by the high prices of food and everyday items.
Statistics Korea said Monday the Engels coefficient, which gauges the proportion of low-income households’ spending on food and non-alcoholic drinks, touched a six-year high of 20.7 percent last year. This reflects a drop in living standards for the poor in the wake of shriveling incomes and high inflation.
This is one of the areas to benefit from the long-awaited deal, he said.
“Regardless of the U.S.’s trade deficit, foodstuffs and other staples are a lot more affordable there,” the former prime minister said.
“Korea has no other recipe but trade in order to help stabilize prices and notch up living conditions for the populace.”
Han, 63, is among the masterminds of Korea’s historic free trade deals.
In 1998, Han kicked off negotiations with Chile as trade minister. When talks with the U.S. were under way in 2006, he served as finance and economy minister, and then chaired a FTA-related presidential commission. He also spent three years talking U.S. senators into the pact in his ambassadorial job before taking the helm at KITA last month.
“The FTA brought relations between the two nations to their best level,” Han said. “The two are now working together not just within the Korean Peninsular but across the region and the world.”
Signed in 2007, the Korea-U.S. FTA had long been pending in legislatures of both countries amid a partisan deadlock and vehement opposition from civic groups and potential victims.
The deal is the biggest for the U.S. since the North American FTA with Canada and Mexico went into effect in 1994. Korea has seven free trade partners with the European Union being the largest.
Under the agreement, the two countries have eliminated tariffs on more than 80 percent of imported items immediately. Duties on the remainder, including American beef, pork and cars, are to be removed over time.
According to the Korea Institute for International Economic Policy, the FTA will boost Korea’s gross domestic product by up to 5.66 percent and create 350,000 new jobs over 10 years. Korea’s trade surplus with the world’s largest economy will also grow by $138 million on annual average for the next 15 years.
The FTAs with Korea, Colombia and Panama will benefit the U.S. economically and strategically, according to the Brookings Institution.
“Carefully developed accords will boost U.S. exports significantly, especially in the key automotive, agricultural and commercial services sectors,” the Washington-based think tank said in a paper, adding to other benefits such as a perk-up in diplomatic ties and investment inflows.
Still, the U.S. recovery remains feeble. Opposition lawmakers claim a dispute settlement mechanism between Seoul and foreign investors undermines Korea’s legal independence. Farmers are calling for more protective measures for the agriculture sector.
“The ongoing claims against the FTA are more of anger than of reason,” Han said. “We must protect investors’ rights if we want to court more investment ― it’s an essential component in any intergovernmental pact.”
As for the agricultural sector, Han said the government will have to prop up farmers with tax revenue surplus resulting from the FTA, which he estimates at 10 trillion won ($8.9 billion) annually.
“We should modernize the area and shift to high value-added products. Safeguarding agriculture for the sake of protection will eventually deal a blow both to farmers and consumers,” he added.
At the state-run trade body, Han said he plans to focus on three goals ― widening Korea’s economic sphere, expanding a labor pool for businesses, and facilitating access for small- and mid-sized firms to the global marketplace.
“My top priority is supplying talented a workforce and tackling job and skill mismatches in the labor market,” Han told reporters prior to the interview. “A multitude of vocational schools and educational institutions have been making efforts but we face a long way to bear fruit.”
By Shin Hyon-hee (firstname.lastname@example.org