Key is to remain competitive in manufacturing
After many twists and turns, the National Assembly approved a free trade agreement with China, Monday, which will eventually remove most tariffs on goods traded between Seoul and Beijing. The pact is expected to take effect this year, following the completion of necessary administrative procedures in both countries. The ratification is fortunate, considering the tariff cut benefits that would have gone up in smoke unless the pact was signed.
However, this time was no different when it comes to the shameful backwardness of Korean politics. The ruling and opposition parties agreed to create a 1 trillion won fund for farmers and fishermen who have argued that the free trade deal would severely undermine their livelihoods.
The fund is to be established based on donations from private companies, state corporations and agricultural and fisheries cooperatives. But it is actually a modified version of the trade profit-sharing system championed by the main opposition party.
Business organizations reacted angrily, saying the fund is nothing but an unprecedented quasi-tax. In fact, it's highly likely that contributions to the fund will be coercive, given that it's unclear which companies and industries will benefit from the Korea-China FTA. All this shows that politicians are seeking to flatter farmers and fishermen ahead of next year's parliamentary elections without considering the fact that the latest deal envisions the least opening of farm and fisheries markets, compared with other FTAs.
Even so, the agreement will be a boon to the Korean economy, which has been struggling with sluggish exports. More than anything, it will pave the way for Korean businesses to make full-blown forays into China, Korea's largest export market.
Once put into effect, the deal will immediately eliminate tariffs on 958 Korean export items worth $8.7 billion a year, and Korean officials say the pact would trigger a growth of nearly 1 percent and create 53,000 jobs over the next 10 years.
It's also encouraging that goods produced in the Gaeseong Industrial Complex in North Korea will be treated as made-in-Korea articles under the deal. Most hopefully, sales of cosmetics, fashion goods, food and beverages and farm products will get a big boost in China, as the world's second-largest economy's policy promotes domestic consumption.
The China FTA won't be a panacea though. First and foremost, there is concern that what Korea obtains from the pact will fall short of expectations because the scope of market opening is quite limited. It's disheartening, in particular, that tariffs on many key manufacturing items to China will be lifted in 10 years as Korea yielded too much in that sector, focusing on protecting its farm market.
Then there is the point of whether Korea will remain ahead of China in manufacturing competitiveness 10 years from now. If not, the deal could be a poisoned chalice for Korea.
In a nutshell, Korean companies have no other alternative but to move upmarket by developing cutting-edge technologies. To this end, they have to ceaselessly carry out restructuring and innovation.
After many twists and turns, the National Assembly approved a free trade agreement with China, Monday, which will eventually remove most tariffs on goods traded between Seoul and Beijing. The pact is expected to take effect this year, following the completion of necessary administrative procedures in both countries. The ratification is fortunate, considering the tariff cut benefits that would have gone up in smoke unless the pact was signed.
However, this time was no different when it comes to the shameful backwardness of Korean politics. The ruling and opposition parties agreed to create a 1 trillion won fund for farmers and fishermen who have argued that the free trade deal would severely undermine their livelihoods.
The fund is to be established based on donations from private companies, state corporations and agricultural and fisheries cooperatives. But it is actually a modified version of the trade profit-sharing system championed by the main opposition party.
Business organizations reacted angrily, saying the fund is nothing but an unprecedented quasi-tax. In fact, it's highly likely that contributions to the fund will be coercive, given that it's unclear which companies and industries will benefit from the Korea-China FTA. All this shows that politicians are seeking to flatter farmers and fishermen ahead of next year's parliamentary elections without considering the fact that the latest deal envisions the least opening of farm and fisheries markets, compared with other FTAs.
Even so, the agreement will be a boon to the Korean economy, which has been struggling with sluggish exports. More than anything, it will pave the way for Korean businesses to make full-blown forays into China, Korea's largest export market.
Once put into effect, the deal will immediately eliminate tariffs on 958 Korean export items worth $8.7 billion a year, and Korean officials say the pact would trigger a growth of nearly 1 percent and create 53,000 jobs over the next 10 years.
It's also encouraging that goods produced in the Gaeseong Industrial Complex in North Korea will be treated as made-in-Korea articles under the deal. Most hopefully, sales of cosmetics, fashion goods, food and beverages and farm products will get a big boost in China, as the world's second-largest economy's policy promotes domestic consumption.
The China FTA won't be a panacea though. First and foremost, there is concern that what Korea obtains from the pact will fall short of expectations because the scope of market opening is quite limited. It's disheartening, in particular, that tariffs on many key manufacturing items to China will be lifted in 10 years as Korea yielded too much in that sector, focusing on protecting its farm market.
Then there is the point of whether Korea will remain ahead of China in manufacturing competitiveness 10 years from now. If not, the deal could be a poisoned chalice for Korea.
In a nutshell, Korean companies have no other alternative but to move upmarket by developing cutting-edge technologies. To this end, they have to ceaselessly carry out restructuring and innovation.
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