A Shift From Japan
to USA:
Korea’s FTA policy
Yul Sohn(Yonsei University)
Presentation at the GIARI, Waseda University,February 25, 2010

Korea’s FTA policy
 Primary goal: Enlarge export markets
 A simultaneous, multi-track strategy (8/03)
 “Enlargement,” but a staged approach; steppingstone for a larger market
 Singapore for ASEAN
 Mexico and Canada for USA
 EFTA for EU Japan and China

Radical Shift Roh Government: regional focus
 Northeast Asian Center State Northeast Asian cooperation initiatives
 Japan and C/J/K

 Market changes
 The rise of China and the declining US share in

Korea’s trade Nonetheless…from Japan to US

Question
 Why did Korea change its policy orientationfrom Asia to USA?
 What occurred to the years 2004-6 the Korean

Government chose KORUS FTA negotiations?

The nature of FTA deals with US

US is reactive:
Because US is so powerful, it is generally assumed that US initiates
and drives most trade negotiations. But it is a follower in FTA games.
 US typically select and accept the requests proposed by smaller
partners; US responded by making calculation of both economic andpolitical interests.
 Korea has to make more concessions and remove more barriers thandoes US.
 Four preconditions ( beef, pharmaceuticals, autos, and screen
quotas): NO deal unless Seoul demonstrate its ability to delivercompromises.
High degree of political risk
 But, we did not clearly know why and how both did so.
The rise of KORUS FTA idea
 Spring 2004: The Korea-Canada FTA idea floated.
 Fall 2004: APEC Spring 2005: contact with the US September 2005: Roh’s decision Winter 2005-6: Four preconditions
 February 2006: beginning Constraint: TPA

Trade as…
 Trade is a means to increase wealth.
 Trade is an extension of foreign policy.

 Trade is intimately intertwined with domesticpolicy.

Korea’s trade with Asian countries,
1998-2006

US Trade Dependence: Korea, Japan, China andASEAN
Unit: US $ millions

Korea

China

Japan

ASEAN

1997

1999

2001

2003

2005

2006

1997-2006변화

To US

21,85029,60031,35834,36941,50043,306

2 timesTo World

144,102

143,881

150,436

193,802284,333

334,675

2.3%

15%

21%

21%

18%

15%

13%

To US

74,65584,530

97,915

135,665

211,058

252,900

3.3

To World

372,930

370,912459,088664,937

1,054,322

1,288,660

3.4%

20%

23%

21%

20%

20%

20%

To US

118,383

130,195

122,701

117,384

136,002147,230

1.2

To World

421,466

419,456

403,517471,906

594,887

646,779

1.5%

28%

31%

30%

25%

23%

23%

To US

65,42972,021

69,31575,121

93,978109,985

1.7

To World

356,833

358,933

386,259

472,144

652,921780,726

2.2%

18%

20%

18%

16%

14%

14%

* 출처: IMF, the Direction of Trade StatisticsIntraregional Trade in Northeast Asia
Intraregional Trade in Northeast Asia
160.0

140.0

120.0

Korea-Japan
Korea-China
China-Japan

80.0

60.0

40.0

20.0

Year

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

0.0

1984

Billion $100.0

China Trade (Korea, Japan, ASEAN)
30

25

24
22

20

20
18

15

15
12

12
10
7
50

4
10
1980

331 10 01982

4

51 10 01984

1 20 0
1986

3424
30 0
1988

3220 01990
한국32
14321992

6526531994
일본7538531996
아세안9539531998

106311642000

13 13108452002

77200481482006

Securitization
 FTA as a means to broader foreign policy objectives.
 High level of economic interdependence reduces the likelihoodof war.
 Security externalities: deepening of economic interdependence
causes a spill-over effect to political side.
 Gowa: Trade with an ally makes both parties stronger, whereas
trade with an enemy creates what is called “a securitydiseconomy.” Securitization: broader notion of securityTrade policy is thought of as realizing strategic anddiplomatic objectives.

Securitized trade in East Asia (US)

From security-embedded economic relations to de-securitizationof economics


During the CW period: SF system and “political bargain”
During the 1990s: the heyday of American neoliberalism
Political pressure for market opening (gaiatsu)

Re-securitization of Economic Relations in the post-9/11 World?
 The transformation of American trade policyBipartisan Trade Promotion Act of 2002(Trade Promotion Authority)
 Competitive liberalization (and the rush towards bilateralism) Balancing economic and strategic (security) considerations
 National Security Strategy of the USA(2002, 2006)
US Trade Policy during the Bush years
 Robert Zoellick
 “Competitive liberalization”: supplement

multilateralism with bilateral and regional
negotiations.
 TPA
 Partners with strategic interests
 The Democratic Party Labor and environmental regulations

What does US want?
 FTA with Singapore and Australia
 FTA negotiations with Thailand and Malaysia

 Korea as the largest economy since NAFTA

Re-securitization
 Reinforce friendly democratic regimes in a politicallytroubled region.
In KORUS case, economic interdependence has alreadydeepened that political effects of further deepening might
be not so substantial in the near future.

 Establish a bridgehead in a rapidly integrating Asia

centered on China as well as help to spurliberalization in northeast Asia.

Strategic concerns Curb the rising tide of China’s economic andpolitical influence in the region.
 China’s ascendency:
 Trade volumes up
 ASEAN Plus Three An FTA would ensure that US has an

institutional presence in East Asia.
 Anticipate “domino effects” (i.e., Japan)

What does Korea want?
 Economic incentives

Market access (not substantially large)
 Global standards (intangible assets) Domestic political risks
 Strategic incentives: strengthening bilateral ties

Alliance drifting?
 Northeast Asian community → A balancer in Northeast Asia →Economic balancing?
 History issues
To Conclude
 “first” strategic/securitized FTA
 The President and Minister for Trade Vested interests
 Stalled: America’s domestic politics; Beef andCandlelight