Jan 13,2012
In September 2004, China first expressed interest in having a free trade agreement with Korea.
After more than seven years, and intentional foot-dragging by Seoul, some progress is finally being made.
Minister of Foreign Affairs and Trade Kim Sung-hwan said yesterday the government could launch formal talks with China on an agreement in the first half of the year after finishing domestic procedures.
During summit talks held earlier this week in Beijing, Chinese President Hu Jintao broached the subject of the Korea-China FTA, according to diplomatic sources. President Lee Myungbak told Hu that Seoul will soon start domestic preparations to begin official negotiations.
Minister for Trade Bark Tae-ho, who took office on Dec. 31, joined the latest presidential visit to China. It is rare for a trade minister to participate in a president's state visit.
"I held the first meeting with my Chinese counterpart Chen Deming," Bark said at his first press conference yesterday. "We agreed on the need for an FTA between the two countries and promised to meet again to hold official meetings."
Bark did not predict when the first negotiations could start.
He emphasized that a Korea-China FTA would be different from the FTA with the United States.
"Both sides agreed to hold sufficient pre-discussions to make our own lists of sensitive items before any official negotiations begin," Bark said. "If we don't reach an agreement about sensitive items, we won't embark on any official step."
Vulnerable industries
The government has been cautiously dragging its feet on the FTA with China due to an expected backlash from the agricultural industry. Geographical proximity is one of the advantages for doing trade with China, but it also means that fresh food products and produce can be imported from China, not only frozen items, and compete with local products.
It seems that major branches of the government started changing their views on the FTA around last July.
Minister of Strategy and Finance Bahk Jae-wan has led the change, saying "It's time to have a clear stance on our side." Following Bahk, Suh Kyu-yong, minister for food, agriculture, forestry and fisheries, said, "It is part of the current trend to push for an FTA with China."
Cho Chang-sang, director of trade policy at the Ministry of Strategy and Finance, said, "The faster a Korea-China FTA takes effect, the better it is for Korea." According to Cho, China has shifted its focus on becoming a highly industrialized country, which means that the economic and industrial gap between Korea and China will narrow rapidly. "The more time passes by, the less benefit Korea gets," he said.
According to a high-ranking official, the Chinese government strongly wanted to start negotiating before the change of power in Korea in early 2013, so Seoul couldn't delay any longer. In fact, the government unofficially had a plan to start FTA negotiations with China late last year but failed to do so because of the prolonged wrangling over ratification of the FTA with the United States and negative public opinion about the agreement.
Negative forecasts
Worries about the impact on the agricultural sector from a China FTA seem destined to grow.
Domestic think tanks have released numerous reports saying the damage to the agricultural sector will be five times greater than under the Korea-U.S. agreement.
The Korea Institute of International Economic Policy forecast yesterday that a Korea-China FTA would cause agricultural and fisheries production to decline by 14.26 percent compared to 2005. The institute estimated that agricultural production value would decrease by around 20 percent in 2020 based on an assumption that tariffs on all kinds of agricultural products, except for rice, would be lifted during the 10 years after the FTA took effect.
Given that annual agricultural production stood at 16.8 trillion won ($14.5 billion) in 2005, the figure could drop by 3.36 trillion won at the maximum a year.
Meanwhile, the government's estimation of damage by the Korea-U.S. FTA was a mere 815 billion won.
The Korea Rural Economic Institute also released a prediction that the agricultural sector will see a 2.77 trillion won loss if a Korea-China FTA reduces tariffs on agricultural products by 50 percent.
The institute projected that the loss will be three to five times bigger than the loss created by the FTA with the U.S. because China has an agricultural production system similar to that of Korea and raises almost the same products.
However, Deputy Trade Minister Choi Seok-young asserted that those forecasts are premature.
"It is inaccurate to make such forecasts before starting negotiations, and nobody knows what the Korea-China FTA will be like at the moment," Choi said. "Those reports are misleading," he added.
By Song Su-hyun, Lee Eun-joo
Jan 9, 2012
South Korean producer prices grew at the fastest clip in three years in 2011 on a sharp rise in crude oil prices, the central bank said Monday.
The producer price index, a barometer of future consumer inflation, rose 6.1 percent on-year in 2011, up sharply from a 3.8 percent gain in 2010, the Bank of Korea said. It marked the highest annual increase since a 8.6 percent surge in 2008.
In December, producer prices climbed 4.3 percent from a year earlier, the slowest gain in 15 months, as vegetable and fruit costs dropped, the BOK said.
The full-year jump in producer prices was attributable to higher oil costs, the central bank said. Prices of Dubai crude, South Korea's benchmark, surged 35.6 percent annually in 2011 and petroleum product prices rose 21 percent, according to BOK data.
"Even though global raw material prices showed a downward trend, crude oil prices stood at a three-digit number in all months of 2011 except January," said Lee Byung-doo, a BOK economist.
Despite the slowdown in December, volatile oil prices and sanctions against Iran will likely exert upward pressure on producer prices in coming months, he said.
"If raw material prices stabilize, it will have a positive impact on consumer prices. But because of the Iran issue, they may not go down easily," Lee said.
South Korea's consumer prices rose 4 percent in 2011, hitting the upper ceiling of the BOK's 2-4 percent target band. The central bank forecasts consumer prices to grow 3.3 percent this year.
President Lee Myung-bak and the BOK Gov. Kim Choong-soo said price stability will be their top priority this year.
The BOK froze the benchmark rate at 3.25 percent for the sixth straight month in December on higher external economic uncertainty.
Policymakers are scheduled to meet on Jan. 13 for the first rate-setting meeting of this year.
Jan 12, 2012
Korea will beef up efforts to provide a better business environment for foreign enterprises by "actively" reflecting their opinions in its policymaking process, the nation's finance minister said yesterday.
"We will actively reflect the opinions of the EU Chamber of Commerce, and make redoubled efforts to improve areas such as investor protection and property rights registration," Bahk Jae-wan told a gathering of European business people.
Bahk promised to push ahead with measures to lower land rents and make conditions more foreigner-friendly so foreign companies can do business in better management and living conditions.
He added that the free trade agreement between Korea and the EU, which went into effect in July last year, will benefit both regions by diversifying export industries highly dependent on certain countries and helping lower inflation.
The FTA can also act as a "driving force" for creation of jobs and income by boosting investment and expanding trade, especially in the service sector, he noted.
The minister urged the EU to use Korea as a "hub" in East Asia, through which it can introduce its advanced service industries and increase the share of its products in the region.
Bahk also said there are new countries considering whether to invest in the bond market here, emphasizing he will closely cooperate with their central banks to minimize any possible volatility from increased capital inflow. The government will make efforts to encourage long-term investments and expand the size of the overall capital market aimed at easing shocks from massive money flows in and out of the nation, he added.
Jan 11, 2012 -
A top U.S. Chamber of Commerce official said the Korea-U.S. free trade agreement, which is set to take effect soon, will further enhance economic relations between the two allies.
"In this Korea-U.S. FTA, it's a gold standard agreement, we already have a strong economic relationship, we got a great security relationship, a strong political friendship, but it takes the economic relationship to the next level," said Tami Overby, vice president of the U.S. Chamber of Commerce.
It is projected that the deal will add an estimated $10-12 billion in two-way trade and promote job growth while expanding market access to companies by eliminating 95 percent of bilateral tariffs within the first three years on both sides of the Pacific.
The agreement resolves many of the challenges currently thwarting the full economic potential of Korea-U.S. bilateral trade.
And Overby disagrees with the ongoing argument that many jobs will be lost due to the pact.
"This agreement will create jobs in both countries because it's going to open up trade opportunities," she said during a one-day visit to Seoul on Monday.
The International Trade Commission estimated that with $10-12 billion in fresh and new exports, more jobs will be created in both nations.
The U.S. chamber along with Korean Ambassador to Washington Han Duk-soo are about to start their second phase in promoting the accord by visiting small- and medium-sized companies in the United States to explain the advantages the deal entails.
"We will travel the U.S. helping companies take advantage of the new deal, making sure they understand what are the opportunities, how to use the FTA, what does it mean and highlighting success stories," she said.
As soon as the pact goes into force, there will be companies taking advantage of it the first day because of the decrease in tariffs; within three years 95 percent of tariffs will go to zero.
"Korea was alre a good partner, they are the United States' seventh-largest trading partner, over $85 billion in two-way trade. At that time, before the middle of October, we only had 17 FTAs, only two in Asia, none in Northeast Asia," she said.
During her visit, the biggest concern Overby has heard from her Korean counterparts has to do with the continued global economic difficulties and the challenges being posted in the European Union.
"The good news is in the U.S., we are seeing some positive signs, unemployment numbers of falling. This trade agreement will further help boost our economic growth, but about the FTA, I'm talking to (Korean) business people, a few (Korean) government officials, everyone is very excited," she said.
To make sure business is growing on a positive note, the U.S. chamber will re-interview companies they originally spoke to in their "Faces of Trade" publication three months after the deal comes into force to make sure that trade is growing as expected.
"I expect, just like the EU found out, we're going to see some good numbers quickly," she said.
By Yoav Cerralbo
Office of Commercial Affairs, Seoul
Source : http://www.depthai.go.th