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The uncharted territory of the Korea-China FTAFearful of being flooded by Chinese imports, many Jeju producers are protected from the free trade agreement
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승인 2015.03.11  15:58:23
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▲ Towering China comes to play with Jeju as a nervous stone grandfather (dolhareubang) looks on. Image by Agne Latinyte

Based on an article by Li Xiaoxue in the Jeju Jugan, The Jeju Weekly’s Chinese sister paper. Translation by Li Liangyun with additional research by Melanie Couchman.

On May 2, 2012, China and South Korea held an inaugural meeting on a possible Korea-China Free Trade Agreement (FTA) before issuing a “Joint Ministerial Statement” on bilateral negotiations to “enhance a future-oriented comprehensive cooperative partnership” to boost regional growth.

After two years and 14 rounds of negotiations, the deal was finally struck on Nov 10, 2014, as South Korean president Park Geun-hye and Chinese president Xi Jinping met at the Asia-Pacific Economic Cooperation (APEC) summit, Beijing.

Rather than more mature industries such as steel and petrochemicals, Seoul expects the slashing of tariffs to pave the way for small and medium-sized businesses in China, particularly clothing, leisure goods and high-end electronics.

Korea has followed an export-oriented growth strategy since the 1960s and has focused heavily on automobiles, electronics, shipbuilding and other industries. This approach has been, for the most part, highly successful, but the Korea-China FTA signals a future of liberal bilateral trade between Korea and its larger neighbor.

This is not, however, a one-way street, as once-protected industries are now likely to be penetrated by cheaper, mass-produced goods from across the East China Sea. This comes at a time when China’s presence is on the rise all across Korea, from business and tourism to immigration and international marriage.

Korean agriculture is believed to be particularly vulnerable, and the removal of trade barriers is cause for some concern in Jeju where many are employed in the industry. So, how might the typical Jeju farmer be affected

Firstly, it must be stressed that many items are excluded from the FTA, as much as 7 percent of bilateral trade. (Most FTAs exclude 1-2 percent of bilateral trade items.)

The items excluded include 852 Chinese goods, mostly agricultural, 11 of which are specific to Jeju: mandarins, green onions, garlic, radish, cabbage, carrots, ribbon fish, milkfish, and potatoes.
In return 637 Korean exports items, mostly industrial products like cars and steel, were excluded from liberalization.

▲ President Park Geun-hye meets with Xi Jinping, president of the People's Republic of China. Photo courtesy Cheongwadae

In addition to these defensive measures to exclude Chinese goods and protect domestic markets, the island is also planning “attack” strategies. This involves differentiating higher-priced local products from cheaper Chinese alternatives in terms of quality, thus appealing to Chinese consumers and increasing exports.

To ensure such quality, and justify higher prices, the province is pushing agricultural mechanization, larger-scale production, new methods of storage and improved distribution. For example, the National Agricultural Cooperative Federation will be controlling much of the mandarin and winter vegetable distribution henceforth, and farmers are receiving consultation on marketing and branding.

Good Agricultural Practices (GAP) certification will also be sought across the island in a move toward the entire region aligning with GAP principles and, eventually, going organic. Jeju Development Institute is also planning to introduce more productive seeds, as well as innovations in developing, processing, and circulating produce.

The FTA could also have a knock-on effect on tourism, especially with a significant proportion of Chinese visitors increasingly lured by cheaper, tax-free items at Korean duty-free shops. Following the FTA, “hot consumer items” such as cosmetics will flow into China at prices comparable to Korea, leading analysts to suggest visitor numbers might dwindle.

Choe Seok-beom, professor of economics and trade at Cheju Halla College, believes that the FTA is a natural part of Korea’s economic growth, and adaptation to changing times is essential to survive harsh global competition. Over time, says Choe, all trade barriers between countries are likely to disappear, a goal set by the World Trade Organization.

On the other hand, according to China Institute of International Studies researcher Shi Yongming, quoted in the Beijing Youth Daily, there are fears the FTA could increase economic tension between Korea and Japan, with unknown consequences.

“The Japan-Korea economic structure is becoming relatively homogeneous, which means when China signs the FTA with Korea, there will be more competition between Korea and Japan within the Chinese market.”

So, while the signing of the FTA will undoubtedly offer many advantages to citizens in both countries, there will be some losers in addition to the increase in goods freely flowing cross-border. The FTA also points to a more resilient and maturing relationship between these two Asian powerhouses as they both adapt to a world of fewer tariffs and freer trade.

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