ASEAN-Korea Relations: Security, Trade, and Community Building

6. ASEAN–Korea Economic Co-operation: Thailand’s Perspective

6 6 ASEAN–Korea Economic Co-operation: Thailand’s Perspective Chanin Mephokee BACKGROUND Encouraged by the success of surging exports following its first free trade agreement (FTA) with Chile in 2004, South Korea unveiled an ambitious plan to push for FTAs with more than fifteen countries by 2007. To achieve its goal, South Korea has launched negotiations with fifty trading partners worldwide. It is believed that the FTAs would ensure more benefits for South Korea’s export-driven economy. After all, South Korea is the world’s eleventh largest economy. According to Trade Minister Kim Hyun-Chong, a long-term strategy to expand trade through a liberalized economy with less trade barriers is necessary for the South Korean economy, as it is presently facing unfavourable external conditions, such as soaring oil prices, the stronger won against the U.S. dollar, and more non-tariff trade barriers. Therefore, the FTA is the solution for South Korean companies to gain access in foreign markets. However, South Korea has lagged far behind other members of the World Trade Organization (WTO) in free trade accords. Before South Korea Chap6.indd 69 Chap6.indd 69 1/24/07 2:09:10 PM 1/24/07 2:09:10 PM 70 Chanin Mephokee concluded its accord with Chile in March 2004, it was one of only two WTO members not party to any FTA, the other being Mongolia. Presently, the country is in negotiations to eliminate trade barriers with sixteen nations, including the ASEAN states, Canada, the four-member European Free Trade Association (EFTA), and Japan. Joint research is being conducted with seven nations, including India, Mexico, and Russia, on the feasibility of free trade negotiations. Moreover, South Korea has also established plans for negotiations with twenty-seven nations, such as the United States, China, and the European Union (EU). South Korea and ASEAN have a long history of economic partnerships. They first established sectoral dialogue relations in November 1989. South Korea was accorded Full Dialogue Partner status by ASEAN at the Twenty-fourth ASEAN Ministerial Meeting (AMM) in July 1991 in Kuala Lumpur. In order to enhance ASEAN–South Korea economic co-operation, the leaders of ASEAN and South Korea expressed their commitment towards the development of a comprehensive partnership at the ASEAN–South Korea Summit on 8 October 2003 in Bali, Indonesia. They tasked their ministers to discuss the possibility of establishing a free trade area. Subsequently, an ASEAN–Korea Experts Group (AKEG) was established to draw up the Joint Study Report on the feasibility of an ASEAN–South Korea FTA (AKFTA). The Joint Study has since been completed. One of the key recommendations is to realize the AKFTA by 2009 (one year earlier than the completion of the ASEAN–China FTA) between ASEAN-Six and South Korea. This is with due consideration for special and differential treatment for the developing countries of ASEAN and additional flexibility for the newer ASEAN countries, namely Cambodia, Laos, Myanmar, and Vietnam (CLMV). CLMV would be given an additional five years to realize the FTA. According to the plan, 80 per cent of their products would enjoy zero tariffs by 2009, and non-tariff products would account for 96 per cent of the total on both sides by 2015. South Korea signed an FTA with Singapore on 4 August 2005 in Seoul. It is the second South Korean FTA after its agreement with Chile. According to the agreement, the two sides would remove tariffs on most of their goods and services within ten years. As planned, South Korea would be signing an FTA with ASEAN at the ASEAN–South Korea Summit in December 2005. ASEAN–SOUTH KOREA ECONOMIC RELATIONS ASEAN and South Korea are important trading partners. The volume of trade between these two entities has been growing remarkably. In 2003 Chap6.indd 70 Chap6.indd 70 1/24/07 2:09:10 PM 1/24/07 2:09:10 PM 71 ASEAN–Korea Economic Co-operation: Thailand’s Perspective ASEAN became South Korea’s fifth-largest trading partner, accounting for 10.4 per cent of South Korea’s total trade volume. ASEAN exported to South Korea US$17.1 billion or 4 per cent of ASEAN’s total exports to the world and imported from South Korea US$15.1 billion or 4.2 per cent of ASEAN’s total world imports (Table 6.1). Table 6.1 South Korean Exports...