Evaluation of the Chile-Korea FTA and Policy Implications for Korea's FTA Policy

Inkyo Cheong () and Jae-Hwa Jeong ()
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Inkyo Cheong: Inha University
Jae-Hwa Jeong: Korea International Trade Association

East Asian Economic Review, 2004, vol. 8, issue 1, 169-195

Abstract: This paper evaluates the Korea­Chile FTA focusing on the market access of goods and tries to draw policy implications for Korea's future FTA policy. Moreover, it analyzes problems involving the FTA negotiations with Chile and Korea's domestic ratification process, and suggests overall policy implications for Korea's FTA initiatives and appropriate future directions for each FTA now under consideration. Korea and Chile agreed to eliminate tariffs over all the industries including agriculture and tariffs on almost all the products, except some highly sensitive products, will be phased down to zero eventually. In consideration of reality of Korea's agriculture, rice, apples and pears were excluded from the tariff elimination list in order to minimize damages. On the other hand, tariffs on passenger and commercial vehicles and computers, which took up 67% of Korea's total export to Chile, are eliminated immediately. Korea has experienced many trials and errors in the process of promoting the first Korea­Chile FTA. It is because Korea had no experiences regarding FTAs at all and the severe protests of less competitive industries made it worse. The examples of problems in the process of the Korea­Chile FTA are that parties supporting the FTA did not expand enough and that too much cost was paid to persuade the opposing farmers. Moreover, there were few coordinating activities on the political side This paper evaluates the Korea­Chile FTA focusing on the market access of goods and tries to draw policy implications for Korea's future FTA policy. Moreover, it analyzes problems involving the FTA negotiations with Chile and Korea's domestic ratification process, and suggests overall policy implications for Korea's FTA initiatives and appropriate future directions for each FTA now under consideration. Korea and Chile agreed to eliminate tariffs over all the industries including agriculture and tariffs on almost all the products, except some highly sensitive products, will be phased down to zero eventually. In consideration of reality of Korea's agriculture, rice, apples and pears were excluded from the tariff elimination list in order to minimize damages. On the other hand, tariffs on passenger and commercial vehicles and computers, which took up 67% of Korea's total export to Chile, are eliminated immediately. Korea has experienced many trials and errors in the process of promoting the first Korea­Chile FTA. It is because Korea had no experiences regarding FTAs at all and the severe protests of less competitive industries made it worse. The examples of problems in the process of the Korea­Chile FTA are that parties supporting the FTA did not expand enough and that too much cost was paid to persuade the opposing farmers. Moreover, there were few coordinating activities on the political side for lack of strong leadership, even though the negotiations were in a stalemate for a long time. The policy directions that this paper suggests are first to make a plan for structural reforms of industries including agriculture and then to provide some measures and rational standards for supporting industries that are damaged due to FTAs. In addition, the FTA promotion system including related procedures is to be reinforced and consideration and implementation of ways to boost FTA supporting parties are required. At last, this paper emphasizes that the Korean government should arouse sympathy among the public for market opening, suggest its firm objectives and plans for trade liberalization, and provide realistic and concrete measures for promoting FTAs.

Keywords: FTA; Economic Integration; Tariff Concession; Industrial Re¡ⓒadjustment (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F18 (search for similar items in EconPapers)
Date: 2004
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