9/04/2013

South Korea Begins 7th Round of Negotiations with China on Free Trade Agreement

Today, China and South Korea began the 7th round of Free Trade Agreement (FTA) negotiations in Shandong Province, China. The negotiations are expected to last until September 5th.

According to Xinhua News, the previously-held 6th round of the negotiations led to resolutions in the countries’ disagreements over “services, investment, rules of origins, customs clearance, trade remedies and intellectual property rights.” The current round of talks should be focusing on “agriculture, manufacturing industries, including automobile, machinery and oil sectors.”

China is South Korea’s largest trading partner so the upcoming FTA has the possibility to dramatically impact South Korea’s economy.  In 2009, Korean exports to China totaled USD 86 billion, with imports from China totaled USD 54.2 billion.  Contrast that with Korea’s trade with the United States in the same year – with exports to the U.S. totaling just USD 37.7 billion and imports from the U.S. totaling USD 29 billion.

Last year’s Korea-US FTA is still a somewhat contentious issue in that the results of it have yet to be fully realized.  Neither South Korea nor the U.S. seems to have benefit ted much from its enactment.

The existence of a Korea-China FTA likely sends a worrying message to the U.S., whose relationship with China is apparently permanently strained. South Korea, despite six decades of a strong military and economic alliance with the U.S. is still, and has been for quite some time, economically reliant on the Chinese.  As we know, the Chinese are reliant on the U.S. (decoupling not yet occurring).

South Korea’s perspective, however, is completely different.  It is now in an advantageous position where it can balance the concerns of its biggest security benefactor, the United States, against the needs of one of its biggest economic benefactors - China.  In the middle of this, Seoul has also been floating ideas about resuming talks for a Korea-Russia FTA and, somewhat surprisingly given the current state of affairs, even a Korea-Japan FTA.

Korea, historically, is no stranger to playing host to the insecurities of neighboring superpowers.  For maybe the first time in its history, however, the same unfortunate geographical quirk which placed Korea right between three much more powerful states now seems to be working in its favor.  South Korea is finally free and secure enough to safely balance the interests of its much more powerful neighbors to its own benefit, without fear of military intimidation.

When South Korea begins to finalize the contents of its FTA with China, the U.S. may be hoping that it remembers exactly why that is.
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