South Korea and China Begin FTA Negotiations, Netizen Reactions

South Korea and China meet for FTA negotiations

Could this be the end of historical dispute and regional difference that so often threatens peace in East Asia? We hope so. Over the past weekend, the annual China-Japan-South Korea Trilateral Summit meeting took place at the Great Hall of the People in Beijing in which a number of key issues including regional security, economic cooperation, environmental pollution affecting the East Asian block as a whole were discussed between South Korea’s President Lee Myung-bak, China’s Premier Wen Jiabao, and Japan’s Prime Minister Noda Yoshihiko. Pressing issues at hand, such as the North Korean missile threat, global financial instability, persisting territorial and EEZ disputes were on the table, but the most prominent item on the agenda was the initiation of the trilateral free trade talk. The three leaders agreed to launch the trilateral FTA negotiation within this year.

With the bilateral trade agreement sailing ahead between South Korea and China, which is already very close to reaching an agreement over the Sensitive Items being enumerated, it was reported that Japanese Prime Minister Noda called for an ad hoc meeting on Sunday to address the wide array of the North Korean security threats that includes border refugee issues. However, the agreement over the stability of North Korea was not included due to the Chinese opposition. Wen however expressed that “the pressing task is to do our utmost to prevent tensions on the Korean peninsula from escalating.”

The joint declaration issued on the 13th included the effort to build greater political trust, deepen economic and trade cooperation and encourage sustainable development between the three countries. Xinhua reported that the three leaders also agreed to a three-way investment treaty – one stepping stone to the bigger and much more contentious goal of a free trade deal.

An article from Hankook Ilbo reported that South Korea has adopted the track-two approach, with the focus on greater economic cooperation with China on the one hand, and the security cooperation with Japan on the other hand. South Korea has reportedly demanded a level of trade liberalization higher than the normal WTO-level agreement, to a level similar or higher than CEPA (Mainland and Hong Kong Closer Economic Partnership Arrangement) existant between China and Hong Kong. In an interview with CCTV, President Lee Myung-bak expressed that once the selection of the Highly-Sensitive Items are agreed and out of the way, the negotiation should be concluded within 2 years.

China is the biggest trade partner of both Japan and South Korea. A free trade treaty could lift China’s GDP by up to 2.9 percent, Japan’s by 0.5 percent, and South Korea’s by 3.1 percent, Xinhua said, without citing the basis for its estimates. “China is simply a huge market,” said Noda, according to the Wall Street Journal. “That’s all there is to it.”

From Daum:

Becoming the first country to tap into the 1.3 billion market… Chips all-in for South Korea

South Korea has begun the official Free-Trade Agreement (FTA) negotiation with China, 7 year after the initial joint feasibility study with China.

On 2nd of May, South Korea and China have announced the start of negotiation for FTA, 7 year after the Joint Feasibility Study between South Korea and China. South Korean trade minister Park Tae-ho issued a joint-statement with Chen Deming, the head of the Chinese Ministry of Commerce, announcing the ‘historic beginning of the bilateral negotiation between the two.’ However, there was no mention of the set-date by which to finalize the agreement. South Korean government does not plan to hurry the process. Minister Chen, on the other hand, expressed his personal desire to ‘conclude the agreement within 2 years’.

If South Korea signs the FTA with China, it would be the only country in Asia to have signed bilateral agreements with all three major economic zones (USA, China, EU). South Korea’s world-market access would reach 66.7% of the global GDP, becoming the second in the world.

South Korea and China FTA Impact Assessment

‘FTA Hub’ strategy will also receive momentum. The bilateral agreement between South Korea and China is expected to create further synergy effect with the existing FTA with EU and USA. This move is also expected to jump-start the bilateral agreement with Japan. The companies wanting to gain access to the Chinese domestic market or the Chinese firms trying to gain entry into EU or American market will be attracted to open up branches in South Korea. When all factors are considered, the growth of real GDP in 10 years time is 2.28~3.04% according to the projection by Korean Institute of International Economic Policy (KIEP). In terms of labor market effect, it is estimated that 2,400,000~3,300,000 new jobs will be created. The origin of the ‘FTA Hub’ policy was the Roh administration. The director general of the bilateral trade negotiation Mr. Kim Hyun-jong had previously expressed the moment of this agreement as a leverage with which to sign South-North

However, the prospect of bilateral agreement with China is deeply troubling for some. Mr. Oh Dong-yun, a researcher at Medium-sized Firm Research Institute wrote ‘to the national economy as a whole it is a gain but to some segments it will cause quite a havoc.’

The resistance from the agriculture and fisheries is stiffer than ever before. According to the Korean Agricultural Economy Research Institute, once the bilateral agreement with China is in effect, the agricultural import from China will grow by $108 million USD and the agricultural produce is expected to drop by 14.7%. The fisheries is even more resistant. The Fisheries Co-operations senior researcher Mr. Kim Hyun-yong reported ‘[W]e share the common fishing seas and Tongyong and Shandong Province and there is virtually no lag in distribution-time between us and China. With the bilateral agreement, our primary sector will completely collapse.’

The Two-Phase negotiation is reflective of the sensitivities acknowledged by the both governments. Both governments select a list of ‘Sensitive Items (SI)’ and only then could the negotiation move on to the second phase, a procedure previously never tried. Among the SI the High-Sensitive Items (HSI) will be removed from the negotiation. Rice is off the negotiation table. ‘Normal-Sensitive Items’ will enjoy tariff protection of 10 years after which it will be partially or completely lifted. What gets included and by how much will be decided in the first phase of the negotiation which is set to start at the end of this month. The director general Mr. Park said this would include not only the goods from ‘agriculture and fisheries but also some manufacturing and service sectors.’

Both governments also agreed not to apply tariff to the manufactured goods from the offshore processing zone (OPZ). Mr. Choi explained that this means ‘[W]hatever gets produced in Kaesong and other OPZs in North Korea also will be non-tariffed, adding that this move ‘would contribute to the peace and stability in the Korean peninsular and create an environment that encourages North Korea to open for reform.’

The bilateral agreement gained traction when president Lee Myung-bak and Hu Jintao met for a bilateral summit discussion in January 9, 2012. As China oriented its economic policy to more domestic market, South Korea, until then passive, changed to aggressive stance to gain upper-hand in the Chinese domestic market entry.

Comments from Daum:

대피소:

The bilateral agreement was initiated by China, why? Why does China want it first? This shows that China desperately wants to counter the US-led Asian economic sphere with their own economic sphere. So Korea, regardless of it wants or not, will have to side with China and weaken the alliance with the US, thereby increasing the security threat. Also through the FTA, China will flood our country with their migrant farmers and hurt our agricultural industry. This will harm everyone except Chaebol in South Korea.

밤송:

FTA is nice, but the cheating Chinese – that is the problem.

쥐쉐뀌능지처참할:

Is FTA panacea? Tariff reduction through FTA will result in automatic price reduction in consumer goods…? So where will we get the decreased tax revenue from removal of tariff? Will consumers actually benefit from the reduced price of the goods?? Morons… You honestly think that the reduction in the cost of production will leave more money in your pocket? This is the typical chicanery [cho-sam-mo-sa ‘조삼모사’ –– see below]… Lower the tariff and reduce the goods price, but increase the indirect tax to make up for the lost tariff revenue… Not to mention that the goods price do not ACTUALLY decrease in the first place…

Translators note: [cho-sam-mo-sa ‘조삼모사’ – an ancient Chinese proverb from the Song dynasty. A monkey cage keeper was ordered to reduce the amount of feed. He initially gave three acorns for the morning and four in the evening, causing much anger. When he fed them four acorns in the morning and three in evening instead, the monkeys did not realize it was exactly the same amount and were content in their stupidity. It satirizes the inability of the general public to discern what is obvious political trickery. An online parody was a hit in late 2006, the updated proverb highlighted a more spinless survivalist attitude common now, in the face of unavoidable reality.

우루사:

Not sure if it is a good thing or bad thing, but China certainly seems very eager and willing…

mongni:

If this goes through, the agricultural and manufacturing sector are over~~~~~ Korea will be absorbed into China~~~~

린스요정:

Why do you think Japan of all countries are NOT doing FTA with China?

2GB:

Suuuuuuch a brazen BS….. Take the SOFA…? Get the fuck out of here… We must not do FTA, and above all not under this administration….

불고기:

I want to love China. But there is nothing on the Korean media that makes me want to love China. What do I need to do to love China……? This news does not make things any easier for me to love.

joylife2:

As soon as we sign this, there will be a liberalization of labor market, and the Korean folks will be swept away by the sea of 짱께. That will be world-apart from the number tolerated by the current multicultural policy. I hear rumors about 10 million Chinks flooding in. This FTA is not exactly for commoners for sure.

염장지르기:

Whatever happened to all those protesters against the FTA with America!

작은거인

Those who cannot compete with the Chinese must not be bailed out but leave them to their own device. Why must we protect the weak industry preying on us consumers behind our protective barrier? Do not ever bail them out with tax money, let them fall and collapse if they cannot survive on their own. No market intervention, we taxpayers are not last resort for your incompetency.

seal

Sigh~ There is no answer. Immigration is the only answer?

K2저격수

Whatever you do, don’t open up the labor market.

MB는개말종

MB seems sorry that he was able to sell us out to only America and Japan and now he does this to make up to China… He is so eager to sell us out…

derouasjk

If we sign this deal, we may as well sign our sovereignty away huh huh huh Especially, labor market-illegal aliens-no visa entry issues cannot be ignored in this tiny little country… The illegal alien issue is already bad enough as it is, so what do you think will happen when we sign on to the FTA with China? ke ke ke In 10 years time we will lose control of our own land ke ke ke Think carefully about the outcome… huh huh huh

따스한햇살

Hey Rat [referring to the president], have you thought about 1.3 billion pushing INTO our market???

그때가좋았지

Why do we always assume that we will end up top?? Could the opposite not happen? In 5 years… I would think that Haier electronics may catch us up in 10 years other than the key competitive goods…. We have near monopoly over automobile market in domestic, but China will be able to erode our market lead with their low-price strategy. Of course their goods are inferior to ours but they are catching up to us in incredible speed…. very alarming.

민들레18번가

I am against this. We did fine without it until now~ If one gets too greedy, one is bound to choke~ And especially under this administration~

못난거들

Whatever you say about everything else, the Chinese agricultural goods will wipe out the Korean agricultural industry.. This is for certain.

 

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  • Interested

    Orientals do hate each other.

    • Wang that!

      True and so do whites, browns and blacks.

      Its just a hate-feast out there…

  • Wang that!

    trading freely from my sofa

    • Seoul less

      u wish puto jajajajaja

  • Bam Wam

    Argh, theres something about asians calling other asians chinks that rub me the wrong way. Maybe it has to do with the old joke of how all asians look the same. Aside from all this East Asian hate (I wonder how it would have been if some South East Asians had gotten into these meetings), the new FTA agreements will surely benefit all parties involved.

  • Brett Sanbon

    From observing reactions to the FTA with America and now China, I think Korean schools need to require students to take more economics classes.

  • An anonymous boy…

    I wonder how this will affect jobs in South Korea/Japan?

    I mean after China joined the WTO, the US lost 2.3 billion jobs between 2001 and 2007 due to the flood of investment into China which subsequently increased China’s exports around the world (and thus increased the US trade deficits).

    • Justin_C

      China has recently announced the plan to stimulate domestic growth precisely on account of that – the reduced access to the US domestic market. So their export-powered growth is slowing down. The Chinese political leadership has decided to spur the domestic consumer market growth. South Korea thinks it is a prime time to enter, given the enormous potential there. It also beat Japan to it, since Japan is always bogged down by the protectionist policy vis-a-vis agricultural sector (rice) on which the ruling party heavily rely on for votes. So Japan is slow to sign up to any FTA agreement – South Korea has thrown down virtually all tariff barriers with China already and has been extremely aggressive (which even shocked their Chinese negotiation team), and Samsung and co. will enjoy greater market access to China over their Japanese competitor and Apple.

      For China, they see it as a win-win game (not sure why… exactly… maybe agricultural export, and just greater regional integration and other intangible benefits, etc?)

      But again, I am not an international trades expert…. HELP! :D

      • Brett Sanbon

        Well, I am not an expert either, but I do enjoy reading the WSJ and other business journals. Here are some things I read and some opinions.

        I’m also not sure why China sees it as win-win. The trade balance will be largely in Korea’s favor. You are right though, this will create many new jobs in China, boosting the steadily growing middle class.

        SK’s economic competitiveness has increased tremendously in recent years, even nudging in front of Japan. In China, Korea hopes to take market share in the automobile and electronics sectors from Japan. China will boost agricultural exports. Japan, I think they want China and Korea to both stop restricting Japanese food imports, the Fukushima accident really hurt them.

        Politically the FTA makes stability sense. 1.5 billion person market, 20% of the world’s aggregate GDP (focustaiwan.tw)… SK and Japan can encourage China to take stronger actions against NK provocations. Not only that, but there will be better protection of SK businesses in China (as well as Chinese businesses in SK).

        Regardless of everything positive, expect protests and candlelight vigils in SK. The common people always talk about “protect the farmers, we need to protect the farmers”, all the while complaining about soaring food prices and cost of living. I, personally, just hope that the SK government doesn’t introduce high levies against its own people, or subsidize more agricultural areas, just to protect the FTA with China. Just as China shouldn’t bow down and let Korea and Japan completely take over the electronics market.

        • Justin_C

          good point – i broadly agree with what you say.

          about the protest movement, was a strange phenomenon in retrospect for 2 reasons

          1) it was a strange urban phenomenon driven by urban consumers, who later punished Saenuri heavily in the greater Seoul area. Yet they had the most to benefit in the sense that FTA would have driven the consumer/durable goods cost down due to no-tariff. I think they realised that, because of the cartels (chaebol) the SK govt pretty much HAS TO manipulate Won, thereby keeping export competitive which keeps the import price high (tariff then works as indirect tax – SK govt actually had budget surplus as a result, lol). I think the urban consumers now know not to expect any benefit because of the market structure, in which SSung/LG controls over 30% of the GDP, FTA will just cause more pain, not to mention compromising on safety.

          2) rural farmers are screwed raw by the FTAs and yet they continue to support Saenuri… the party of FTA; and yet they did not join hand with urban consumer and just caved in to the cheaper Chinese substitutes. So I thought they would punish Saenuri, but knowing that urban folks are already going to punish Saenuri, they decided to ‘help them out’ and ‘restore the balance’.

          or so i think…….. korean politics is so little studied in general :p

          http://www.youtube.com/watch?v=OWv87YEJNCM&feature=BFa&list=PLF589B24A0D620DEF

    • Zhegezhege

      2.3 billion?

      Someone has been reading a little bit too much simplified and one sided politico-economic propaganda and getting carried away with himself. (Clue: that’s what it’s supposed to do to you)

      Don’t hold your breath for the collapse of the West.

  • Jang

    Where are the Anti-FTA protests? Twisted! The U.S. really really should leave S. Korea ASAP. OBAMA!

  • glenn

    china gets high quality goods… while SK…. well… any product coming from CHINA has a high possibility of containing a lot of unwanted surprises :))

  • Living in China’s world

    This is not a good idea. Smells fishy. Seems like there is political motivation to overpower Korea economically in the long term. I think the best strategy here is to stay put. We must not forget that South Korea defends the free world, not some old asian allegiance that failed over 100 years ago. The Chinese want nothing more than to advance their own agenda. The eagerness to push this forward from their side plays into the CCP’s nostalgia for restoring some form of Sino-centric old world order in the 21st century. Freedom and democracy has to persevere. Not oppression and totalitarianism.

    • Chucky3176

      Agreed.

      FTA with US, OK.
      FTA with EU, OK.
      FTA with Chile, South America, OK.
      FTA with Singapore, OK
      FTA with ASEAN, OK.

      They’re all OK because they will respect international rules and regulations. China on the other hand, is more interested in advancing their sinocentric world view and to counter the US in Asia. They have absolutely zero interest in seeing different Asian countries to prosper at the same time as China. Their goal is to rule Asia according to their own views.

      FTA with China, no way, terrible ideal.
      FTA with Japan, useless, Japanese don’t buy Korean products, other then kimchi. It’s going to be one way trade – from Japan to Korea.

      • vetomon

        If it weren’t for China all of South Asia will still be in the bottom 3rd world countries in the world.

        Indonesia with China, money.
        Taiwan with China, money.
        Aussie land under with China, money.
        Thailand with China, money.
        Vietnam with China, money.
        Philippines with China, money.
        Burma with China.
        All these countries with the US, welfare.

        All good until the US got so pee off at these whore Asian countries for doing business with the enemy that they send in the 7th fleet to stop this BS with China.

        It will happen to Korea and Japan too.

        What you think the war games are all about?

        Know the enemy and find out their weaknesses.

      • vetomon

        And let me add, now they all are kissing Obama’s ass because the US has the big balls and the biggest navy in the Pacific rim.

        They bully their way into ASEAN and made all of Asia their bitch.

    • takasar1

      yes, because south koreans are ‘free’ and the country is a ‘democracy’, right?

  • Chucky3176

    I know I’m not welcome here, but I’ll weigh in anyway, because I care about this topic very much.

    Why this FTA with China won’t work:

    1) China’s record of keeping rule of law and fairness is atrocious. For one example, look at the fishing treaty of 2001 that was signed with South Korea. China totally disregarded the treaty and thousands of their fishing boats are invading South Korean waters on a daily basis. The illegal fishermen are armed to the teeth, and so far they have killed two South Korean coast guards who are trying to arrest them.
    What makes anyone think China will stick to their end of their bargain if things don’t turn out to the way they like? I have exactly zero trust in China.

    2) FTA’s are made between friends who trust enough in each other. China is not South Korea’s friend. China is North Korea’s friend. China has never abide by international rules and laws. They make up the rules themselves. Good luck on South Korea taking China to the courts if there’s a dispute with trade. Yeap, good luck on that.

    3) China lures foreign countries with promises of a huge Chinese market. And on the surface, that looks to be the case when you look at the numbers for Korean exports to China which exceeds the Korean exports to the US by three times. But look at the figures more closely in detail, and things are not what it seems like. Eighty five percent of South Korea’s exports to China are middle capital goods that are imported into China, then assembled into finished goods, and re-exported to the US and EU and elsewhere. Only fifteen percent of Korean exports to China gets consumed by Chinese consumers. And that share is shrinking everyday, as Chinese are not going to let foreign companies continue to profit in China. It doesn’t take long for Chinese companies to absorb the know how and will soon undercut the foreign companies in price to drive them out of the market. The Chinese government at first will do anything to attract foreign investment. But once they are not needed any longer, they are driven out. Ask all the foreign companies from US, Japan, Germany, Korea, etc. There are lot of foreign companies that made money by using cheap Chinese labor to use China as an export station to sell to the world. But very few foreign companies have actually made any money in China, selling to the Chinese consumers. Let’s not fool ourselves, this is by design.

    • dim mak

      Yes, it probably is. But that level of protectionism is normal for an Asian country, Japan and Korea did their share too. There’s a reason the world’s largest economies outside the West are in East Asia, and it’s not by letting foreigners make money of us.

    • Justin_C

      of course you are welcome here chucky san.

      1) well, good point. the whole point of FTA is so that you can sue should this breach of contract were to occur again. The Korean fishermen now have the legal recourse to sue the s$^$ out of the Chinese fishermen or failing that, the relevant Chinese authority through the WTO dispute settlement procedure.

      http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm

      this is exactly why the legal service sector is off the enumerated list, so that South Korean firms could sue the Chinese authority should they find them to be in bad faith.

      2) close to 50% of the Korean exports end up in China – China is now the biggest trading partner, closely edging out the US. China having the power to levy tariff against the Korean goods is hugely imbalanced and asymmetrical as it stands. Having the FTA safety mechanism is in fact a plus rather than a minus.

      3) Well, you argue for protectionism and I can respect that. I am not particularly crazy about the FTAs in general, but I am not sure about the performance track-record of the foreign firms in the Chinese domestic market though. Any substantial evidence that you want to share?

      cheeos Chucky-san

      • Chucky3176

        #1) I have low faith in the Chinese government respecting WTO rulings that goes against them. What makes you think China will respect any rulings that favors South Korean in trade disputes? They have shown me time in and time again, China have thumbed their noses at international rulings and international law. Look at how they deal with the South China sea dispute with Philippines, Vietnam, and other neighbors.

        #2) that may be an advantage, but it’s also a disadvantage for South Korea to be even more depended on Chinese economy as it already is. It’s because of the dependence on China, South Korea cannot do anything regarding the Chinese illegal fishermen, China supporting North Korean nuclear programs, and China sending back North Korean refugees. Korea is scared to its peep saying anything to China that would offend them, and hurting Korean trade with China.

        #3) On the contrary. I do not support protectionism. I am for open trade with friendly countries. Except that I do not support open trade with China who has constantly disrespected South Korea’s sovereignty. And the FTA with Japan is a waste of time, so it doesn’t matter one way or another.

        • Justin_C

          1) Hmmm, because as far as I know, the WTO court is adjudicated by the independent panel of judges and not controlled by the Chinese government? I’d rather say that it is heavily in favour of the US in fact. Canada has gotten severely shafted in that regard by entering into NAFTA. I am not talking about territorial disputes – I am talking about trade disputes. Territorial disputes, China could be very bullish, yes. But arbitration through WTO is a neutral matter. I think (I am conjecturing here) that is what the Korean govt has in mind rather than trying to enter into negotiation on behalf of the Korean injured party every time.

          2) Well, I am not sure about that. Regional trade being what it is by nature. But I grant you that point. Again, I think the whole FTA thing is about shifting the ground to more neutral arena so as to avoid this situation. I am sure if South Korea could physical move its territory, I am sure it would migrate somewhere towards the Cali coast but they are right next to China so they may as well take on as many safeguard mechanisms as possible… I think….?

          3) Well, the whole point of free trade is so that you can be economically dependent and still be mutually beneficial? If China exports more to South Korea, China will also be dependent upon South Korea and that gives South Korea some leverage, right? I think you can disagree but the argument may be stacked against you, haha :p

  • dim mak

    Elephant in the room being that Asian countries are much too protectionist and nationalistic to have free trade with each other, something that nobody addresses every time a free trade proposal comes up

    Give it up, it ain’t gonna happen

    • Chucky3176

      You are right, it ain’t going to happen. And that’s why South Korea is in a far better situation than China and Japan who can never sign an FTA with anybody.
      South Korea already has FTA with US, EU, and a whole bunch of countries. If China and Japan wants to avoid uncompetitiveness, they are going to have to invest in South Korea to take advantage of South Korea’s FTA’s with others.

      • takasar1

        fail logic

  • Cleo

    Noda’s head is not like the rest. Does this mean he is so much smarter?

    Ya think?

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