Korea s s FTA Policy. - Focusing its FTA with Japan and US - RIETI July 13 th, 2006

Transcription

1 RIETI July 13 th, 2006 Korea s s FTA Policy - Focusing its FTA with Japan and US - 安世英敎授 DEAN, Graduate School of International Studies, Sogang University 1

2 Korea as Japan s Economic Partner Geese flying development pattern 2

3 GDP (unit: bil.u$) Income per Capita (unit: U$) , , Ko re a Japan , , Source: OECD, World bank, Bank of Korea 3

4 Export 594,890 (unit: mil. U$) 600, , , , , , , , ,000 18, ,419 Korea Japan 60,

5 300 Korea s s Trade Balance (unit: (unit: bil.. U$) export import trade balance Source : Korea International Trade Association 5

6 25,000 20,000 15,000 10,000 5, ,742 Korea s s Trade Balance with its Major partners ( ) Japan China US 2,838 3,456 5,460 2,402 4,818 4,552 8,369 5,656 8,835 4,888 9,772 6,354 unit: mil. U$ US / China 13,201 9,405 20,178 14,067 23,267 10,757-5,000-10,000-15,000-20,000-25,000 4,603 6,272 8,497 8,280 11,635 10,128 11,362 13,136 15,557 15,682 14,713 19,037 24, Japan 24,376 Source : Korea International Trade Association 6

7 Export Market (2005, unit: U$ billion) Korea Japan 1. China 2. US 3. Japan 4. Hong Kong 5. Taiwan 6. Germany 7. Singapore 8. United Kingdom US China Korea Hong Kong Thailand Germany Singapore United 12.6 Kingdom Source : Korea International Trade Association 7

8 Japan s s FDI into Korea into Korea( ) mil. U$ 2,500 2,451 in terms of U$, annual flow 2,258 2,000 1,749 1,879 1,500 1,404 1, Source : Ministry of Commerce, Industry and Energy 8

9 FDI into Korea by origin (2005, stock) Others 26,459 mil. U$ 22.5% US 35,127 mil. U$ 29.8% EU 36,595 mil. U$ 31.1% Japan 17,737 mil. U$ 15.1% China 1,768 mil. U$ / 1.5% Source : Ministry of Commerce, Industry and Energy 9

10 Korea s s FTA Policy 10

11 Under Nego. Signed Effecive 1. K-Chile FTA Feb Apr K-Singapore FTA Aug Mar K-EFTA FTA Dec Jul K-ASEAN FTA Dec Jul (Goods) 5. K-Japan FTA Dec K-US FTA Jun K-Canada FTA Jul K-India FTA Mar K-China FTA 10 K-EU FTA Under study(2005) Under study 11

12 Importance of trade with country's FTA partners number of FTA number of FTA countries trade with FTA partners(%) Dec Dec. China % 19.6% Korea % 3.3% Japan % 2.9% U.S % 35.3% Mexico % 88.0% Singapore % 60.1% 12

13 The Japan-Korea FTA why is it at standstill? 13

14 History 1 st st stage Joint-research ( ) 2 nd stage Negotiation (Oct Dec. 2004) APEC Summit (Oct. 2003) Open government to government negotiation Conclude by 2005 Six rounds of negotiation 3 rd stage Standstill since Dec

15 Domestic politics of JK FTA - Putnam s Two-level game - Korean government Japanese government Level I game Level II game domestic groups Level I game is to bargain with foreign trade partners, leading to a tentative agreement. Diplomacy Level II game is to negotiate domestically with various interest groups. To persuade domestic constituencies to ratify the tentative agreement ement Domestic politics 15

16 Two Level Game in JK FTA Congress Interest groups Level II game Japanese gov. Level I game Korean gov. Level II game Congress Interest groups Hard domestic politics Failure of concession making Game (No win-set) Hard domestic politics Political & Historical Issues 16

17 R. Strauss - STR, Tokyo Round - As an US ambassador of STR, I spent as much time in negotiation with domestic constituents(labor Union, Industry etc.) and the US congress as I did negotiating with our trading partners. 17

18 Four determinants of domestic politics Nature of negotiation issues Reaction of domestic interest groups Politicization Political leadership 18

19 1. Nature of negotiation issues Interests of Interest groups Homogeneous * Peace treaty between North South Korea Heterogeneous Level II game (domestic politics) not so difficult difficult Winners - exporting industries Losers - import import-competing industries (declining industries) Clear distinction between winner groups and loser groups in Japan and Korea 19

20 Korea Japan Loser Winner very heterogeneous Employees in parts & components (1.1 mil., 46% of the whole manufacturing employment) SME( 中小企業 ) (33,282firms, 30 % of the whole manufacturing) Farmers heterogeneous Farmers Manufacturing 20

21 2. Reaction of domestic interest groups Symmetry of political reaction not so difficult Losers and winners : same political reaction NAFTA Union NGOs Political reaction US Political support Business -endorse group More political donation to pro NAFTA politicians than con-nafta 21

22 22

23 Asymmetry Losers Korea Losers strong political reaction labor unions SME Winners free-riding riding difficult Japan strong political reaction farmers free-riding riding Korea-Chile FTA Farmers association Political reaction Korean government Free- riding Big business 23

24 3. Political issues Not political issues Korea Singapore Korea - EFTA Political issues Indifferent NGOs easy Korea AEAN difficult Politicians * The JK FTA will become excessively delicate political issues because it is expected to injure the interest of socially weak group like - Japan : farmers - Korea : small business, labor unions 24

25 4. Political leadership It seems that politicians, who have to also count the votes of farmers and labor unions, will not exercise strong political leadership Japan : Prime Minister Korea : President - Clinton s s political leadership in the ratification of NAFTA 25

26 New Agenda - Mid-level FTA as an Ice-breaker - 1. Mid FTA as Second Best 2. New Geo-political landscape in East Asia 3. US-Korea FTA 26

27 1. Mid-level FTA as Second-Best 27

28 Economic effect, feasibility and WTO-consistency Type of integration Deep integration consistency Quality of FTA High- level FTA Mid-level FTA Effect Feasibility High Low WTO- Consistent Average Average Consistent Shallow integration Low-level FTA Low High Non- consistent 28

29 WTO s substantially all the trade (GATT XXIV-8) Low level FTA : not accepted by WTO Two Two FTA policy options Option I - High level FTA in long perspectives aiming at its maximum effect Option II - Mid-level FTA in near future with its low effect 29

30 Mid-level FTA as Second-Best Significantly exclude the sensitive items from the JK FTA as long as this significant exception is not against the WTO 30

31 Mid-level FTAs US-Australia FTA Exception : Sugar, dairy products (partly) EU-Mexico (Chile) FTA Tariff elimination of 58% Agricultural products Singapore-India FTA 51% of two Countries bilateral trade China-ASEAN ASEAN FTA Exception (Agricultural products) : Cambodia 30 items, Vietnam items 31

32 2. New Geopolitical landscape in East Asia - Emergence of the Greater Chinese Economic Zone- 中華經濟圈 32

33 China s s FTA Policy 南方政策 中華經濟圈 FTA(2010) Greater Chinese Economic Zone ASEAN 400 mil. Oversea Chinese 10% population 60% economic power 33

34 3. The US-Korea FTA 34

35 7 th trading partner US Korea 2 nd trading partner 1 st round of Negotiation : 5 th June (US) 2 nd round of Negotiation : 10 th July (Seoul) 5 rounds of Negotiation by March, 2007 US Trade Promotion Authority : July,

36 Why US chose Korea? 25 Counties on the waiting list US FTAs with 29 Countries Effective Under negotiation Peru, Singapore, Oman, NAFTA, Morocco, Jordan, Israel, the Dominican Republic, Chile, Bahrain, Australia, Central and South America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua,) Korea, UAE, Thailand, Panama, Malaysia, Columbia, Ecuador, Republic of South Africa, FTAA 36

37 US FTA Policy 1. Economic Cooperation NAFTA US-Australia FTA 2. Alliance (Security) US-Israel FTA (1984) US-Jordan FTA (2002) 3. Economic Cooperation + Alliance US-Korea FTA 37

38 US Encirclement Policy East Asian Summit (EAS) ASEAN + JKC + Australia + New Zealand + India Korea Singapore Malaysia Thailand Australia FTA(2003) FTA(2006) FTA(2006) US 38

39 Hot issues Service Korea Finance, Law, Education, Health Agriculture rice & beef Manufacturing automotive tax system US Gaesung complex Trade Remedy Measure AD Visa, migration Mutual recognition of license (nurse, teachers) 39

40 Anti-KORUS FTA in US 40

41 Cautious Forecast Domestic Politics In Korea Political issues Political leadership in Korea and US Korea : Very fierce political reaction US : US congress Very hard and thrilling concession-making game. 41

42 Win-set game for Mid-level JK FTA More realistic negotiation strategy based on hard domestic politics in both Countries Win-set game for Mid-level FTA 42

43 Basic Role of win-set Size of Japanese(Korean) ) government s s win- set is decided by level Ⅱgame (political reaction of interest groups) When Japanese and Korean government s win-sets overlap FTA agreement 43

44 Win-set Game 日本 win-set(50% 農産品 ) 韓國 win-set(50% 工産品 ) 日本 win-set(100% 農産品 ) 韓國 win-set(100% 工産品 ) Japan max 100% 工産品 0% 農産品 日本 win-set(70% 農産品 ) 韓國 win-set(70% 工産品 ) Korea max 0% 工産品 100% 農産品 Agree 日本利益極大化協商案 韓國利益極大化協商案 44

45 Thank you Good luck! 45