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세계지식포럼 "지역통합과 한미 FTA 이후"

작성일: 2007-10-17
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Regional_integration-Tae yul Cho(final).doc

Regional Integration

and the Next Step of KORUS FTA

Statement

H.E. Cho Tae-yul

Deputy Minister for Trade

Ministry of Foreign Affairs and Trade

World Knowledge Forum 2007

Sheraton Walkerhill Hotel, Seoul

October 17, 2007

It is an honor and privilege for me to speak at this important forum today. I would like to thank Maekyung for giving me this opportunity.

Since several years ago, we have been witnessing a surge in free trade agreements in East Asia. Korea only recently jumped into the bandwagon of proliferating FTAs, and in June of this year, concluded a free trade agreement with the United States, a landmark deal in the history of Korea’s trade negotiations.

Today, I have been asked to speak about “Regional Integration and the Next Step of KORUS FTA”. Let me start by sharing with you some of my thoughts on where we are now in terms of regional economic integration, and how Korea is going to respond to it, and then discuss what are the implications of the KORUS FTA for regional integration in East Asia.

My Presentation today is purely a personal observation and, in no way, represents the official view of the Korean government.

Regional Economic integration in East Asia

Until recently, East Asia lagged far behind Europe and North America in terms of regional integration. It was only a couple of decades ago that the idea of East Asian economic integration began to evolve. In the late 1980s, the APEC was launched as an Asia-Pacific response to the success of European integration. But, since the financial crisis of 1997, the APEC has somewhat lost its dynamism. The East Asian countries became more interested in sub-regional grouping. Skepticism among the countries in the region over the so-called “Washington Consensus” appeared to have played a role in such a changing attitude. With the danger of financial crisis in some of its key member countries, the ASEAN might have felt the need to expand linkages with the Northeast Asian countries, particularly Japan and China. It was against this backdrop that the ASEAN+3 process has been activated over the past decade.

Since the late 1990s, countries in East Asia have indeed aggressively joined the global FTA race and an intricate web of FTAs has been spreading throughout the region. Around 20 FTAs have been concluded and their implementations are well underway, while about 20 more FTAs are now in the process of negotiations.

Moreover, a number of feasibility studies are underway as an attempt to integrate bilateral FTAs into a broader framework of sub-regional or regional FTAs. China, Japan and Korea have been engaged in a joint study for concluding a trilateral FTA. ASEAN and Plus Three countries in Northeast Asia have also undertaken a joint study on the feasibility of ASEAN+3 FTA. An ASEAN+6 FTA, adding Australia, New Zealand and India to the ASEAN+3 countries, is also being explored. A possible formation of a broader region-wide FTA, that is, a Free Trade Area in the Asia- Pacific, also known as FTAAP, has been discussed as well within the APEC framework since last year.

Korea’s FTA policy and its Achievements

Only a few years ago, FTA was not even a familiar term to many people in Korea. Until 2003, Korea and Mongolia were the only two WTO member countries that had not concluded a single FTA, despite the fact that there were already over 130 FTAs in effect around the world. As such, Korea was a latecomer in the FTA race, but, has emerged rapidly to become a key player in the game.

We now have four FTAs in force with Chile, Singapore, the European Free Trade Associations (EFTA), and finally the ASEAN covering goods. Earlier this year, we successfully concluded the most significant FTA with the world’s largest economy, the United States. Negotiations with Canada, India, and the European Union are also well underway. Further negotiations with the ASEAN on services and investments are right on track and proceeding smoothly. FTA negotiations with Japan have been stalled since 2004, but are likely to resume, once Japan is ready to achieve a high level FTA including agriculture. If all these on-going negotiations are concluded successfully, the number of countries with which Korea will have signed a free trade agreement would reach 47.

We have also been conducting a track 1.5 feasibility study for a bilateral FTA with China, and are actively working on a track 2 study on a trilateral FTA with China and Japan. In addition, Korea initiated and led the feasibility study on an East Asia FTA(EAFTA) since the early 2000s, within the ASEAN+3 framework. The East Asia Vision Group (EAVG) and the East Asia Study Group (EASG) are both children of Korea-initiated joint work of ASEAN+3 countries. From this year on, Korea is taking the lead in the phase two study on an EAFTA and participates in the track 2 joint study on an ASEAN+6 FTA.

What then was the driving force behind Korea’s ambitious and strategic multi-track FTA policy? The answer is Korea’s uneasiness about the potential danger of being a nutcracker between China and Japan.

A basic objective of this proactive FTA policy is to secure global market access for Korean business. Trade expansion creates additional national wealth and brings about a higher standard of living. But, trade expansion is not the sole purpose of Korea’s aggressive FTA policy. An equally important goal is to upgrade the Korean economy by exposing its domestic industries to open competition. The only way to ensure that Korean companies grow into world-class businesses is to have them sharpen their competitive edge, by competing with the best companies from around the world.

The KORUS FTA and its Implications for the Region

The KORUS FTA, signed in June after 10 months of tough and intensive negotiations, is a comprehensive and high-quality agreement with state of the art regulations on e-commerce, telecommunications, financial services, competition and intellectual property rights.

We expect that this landmark deal will serve as a springboard for Korea to leap into an advanced economy adhering to global rules and standards. It will also serve as a testimony of Korea’s commitment to achieving economic growth through a string of bold reform and liberalization policies.

For the U.S, the trade deal is the most commercially significant since NAFTA, and the first trade pact with a major Asian economy. With ever-growing economic interactions and two-way flow of trade and investment, the KORUS FTA will not only deepen the already strong interdependence of the two economies, but also further strengthen the more-than-50-year alliance between the two countries.

The implications of the KORUS FTA are not limited to the bilateral relations. It will function as an economic highway linking the U.S. to East Asia. It will provide the U.S. with a strong economic foothold in East Asia while enabling the U.S. to participate more actively in regional economic integration.

The KORUS FTA will also enhance a bargaining leverage for Korea in pursuing FTAs with other countries in and out of the region. There are already a number of signs that our trading partners yet to conclude FTAs with Korea are alarmed by the KORUS FTA. It will also lessen Korea’s growing dependence on China and promote Korea’s strategic position in Northeast Asia as well as in the relations between Northeast Asia and the rest of the region, the ASEAN in particular. It will allow Korea to lead by example in terms of reform and liberalization. The high-quality KORUS FTA could also be used as a model for bilateral and sub-regional FTAs in this region.

Prospects of East Asian Regional Integration

Given the fact that the Asian countries traditionally place greater emphasis on state-first ideology and lack experience with, and a history of, integration, building an East Asian community is no easy task. Huge differences in size, power and level of development among countries in the region and strong rivalry between China and Japan could also serve as stumbling blocks to regional integration.

However, East Asia has already taken meaningful steps towards regional integration. We must work together to build upon the progress made thus far, further strengthen the growing sense of community, and spread the trend of reform and liberalization throughout the region.

In my view, there are three key issues to consider when we discuss the prospects of East Asian regional integration.

The first issue is how to deal with ASEAN’s resolve to keep the driver’s seat in the process. ASEAN is trying to retain the initiative in the process of regional integration. They also fear that the dynamic center of the region is likely to shift to Northeast Asia, thereby marginalizing the ASEAN in the process.

Another question is whether or not and how to engage the U.S. in the process. The idea of sub-regional grouping in Asia-Pacific was met with strong opposition from the U.S. when Prime Minister Mahatir of Malaysia floated the idea of an East Asian Economic Caucus in 1990. The U.S. later exhibited a rather relaxed attitude toward the sub-regional grouping, but had not shown a keen interest in, or response to, the dynamic process of sub-regional integration in East Asia. It was only last year that the U.S. came up with an idea of FTAAP as a long-term prospect during the APEC Leaders Meeting in Hanoi.

The U.S. initiative, though somewhat slow a response, was perfectly in line with the comments of a White House official that I met in Washington in 2000. He then told me that a quiet reaction from Washington should not be viewed as a lack of interest, and emphasized that a sub-regional initiative should not overshadow the larger APEC process. But it is still an open question how the other countries in the region will respond to the U.S. initiative.

Finally, there is a question of who will take on a leadership role. In East Asia, there is still no figure to fill the shoes of Europe’s Jean Monnet. Nor is there a country in East Asia to lead the process as the U.S. has done with NAFTA. Neither Japan nor China would take the leadership role and, even if they did, it is not clear whether others would willingly follow.

Therefore, success or failure of East Asian regional integration largely depends on whether or not and how we reconcile and harmonize the different economic, political and strategic goals of major players in the region.

The KORUS FTA provides some food for thought in seeking answers to these questions. In order to ensure further development and growth, East Asia should continue to build a stronger and more dynamic relationship with the rest of the world. East Asian integration should, therefore, be an inclusive rather than exclusive one. It should also seek a community of more open, competitive, liberal and value-added economies.

With its geo-strategic location and growing economic strength, Korea could play a constructive role as a catalyst or facilitator in moving towards a desirable form of regional economic integration. The KORUS FTA has shown that Korea is willing to take risk, if necessary to achieve its goals, and to lead by example, in seeking a high level of trade and investment liberalization throughout the region. And, above all, the KOURS FTA itself is a gateway connecting the two most economically vibrant regions in the world of today and in the future.

Thank you very much.

***