mofa eNewsMaker

The free trade agreement (FTA) between Korea and Colombia has been settled on June 25, after almost three years of negotiations since December 2009. Minister Park Tae-ho of Foreign Affairs and Trade and Colombian Minister for Trade Sergio Díaz-Granados officially announced the settlement of the Korea-Colombia FTA at the Presidential Palace, Bogotá in the presence of the leaders of the two countries.

The FTA between Korea and Colombia has been settled on June 25 (Photo: Cheong Wa Dae)

The move has made Colombia the tenth country to enter into an FTA with Korea. Korea will mark the one-year anniversary of the implementation of the EU-Korea FTA on July 1. In addition, June 23 was the 100th day since the implementation of the Korea-US FTA. Since 2004, when the Korea-Chile FTA was implemented, such FTAs including the Korea-ASEAN FTA, Korea-EFTA FTA, Korea-EU FTA, KORUS FTA, Korea-Singapore FTA, Korea-India CEPA, and Korea-Peru FTA have been implemented along with the settlement of the Korea-Turkey FTA.

Every since the Korea-Chile FTA, which was the very first FTA Korea signed, the amount of trade between the two countries has increased by four times, making Korea one of the top five trading partner countries for Chile.

For example, in 2003 before the Korea-Chile FTA was implemented, approximately 10,810 Hyundai Motor vehicles were sold. Currently, with the Korea-Chile FTA, Korean vehicles take up over 30% of the market share in the Chilean automobile market. Korean electronics including TVs, mobile phones, air conditioners, refrigerators, and washing machines also take around 60 to 70% of the market share. The export of Korean mobile phones to Chile has especially increased greatly, with an annual average increase rate of 100%.

Two months after the implementation of the Korea-US FTA, Korean exports to the U.S. have increased by 11.3% compared to the same period last year. Despite the total exports of Korea decreasing by 4% due to the European financial crisis and the slowdown of Chinese economic growth, Korea’s exports to the U.S. increased thanks to the KORUS FTA. The export of items benefited by the FTA has increased by 19.4% thanks to the lower or removed tariffs. Since the first four months of 2012, Korea’s exports to the U.S. especially increased by 31 times compared to the same period last year. It also brought the small and medium sized enterprises of Korea the so-called “Korea-US FTA effects,” greatly increasing their export of items such as condensers, gears, calliper brakes, and ball bearings.

Last year, the export growth rate of Korean small and medium-sized enterprises to the EU was 18.9%, much higher than Korea's total export growth rate. In addition, Korea’s export growth rate of certain items that benefit from the FTA in terms of tariffs was 26.1%.

Foreign direct investment (FDI) flows from the EU to the Korean manufacturing industry have also been active since the third quarter of 2011 with an increase of 100%. Germany, the UK, and the Netherlands have especially invested in chemistry while Sweden and Luxembourg have invested in electrics and electronics; despite the European financial crisis, the Korea-EU FTA remarkably increased the FDI inflow to Korea.

On June 27, the Institute for International Trade under the Korea International Trade Association published a report on the results of the Korea-EU FTA. The report noted some tangible results and effects from the FTA, mentioning the export growth rate of LCD TVs at 1659.8% and jet fuel at 1163.0%. According to the report, export of Korean small diesel cars has increased by 668.0% while car stereos saw an export growth rate of 150.4%.

According to the Ministry of Strategy and Finance, Korea has the third largest economic territory in the world as of May 2012. The term ‘economic territory’ means a nation’s GDP combined with the GDPs of its FTA countries, divided by the world GDP. Currently, Chile has the world’s largest economic territory at 78.5%, Mexico has the second largest at 64.1%, and Korea ranks at third with an economic territory of 57.3%.

Accordingly, the Japanese newspaper Nikkei said in June that Korea is moving towards becoming a hub of free trade. It evaluated Korea’s FTAs by saying “By implementing the KORUS FTA, Korea has built an economic territory which is almost 60% of the world GDP.”

Thanks to the active settlements and implementations of FTAs, Korea became the ninth country to exceed USD one trillion in trade in December 2011, following the U.S., Germany, China, Japan, France, England, and Italy. Joining the 'one trillion club’ meant that Korea’s trade advanced from the periphery to the center of the world’s market.

Korea is the first Asian country to establish an FTA with Colombia. Last year, the amount of trade between the two countries was over USD 1.9 billion. Korea has mostly exported automobile, car parts, and synthetic resins to Colombia, while Colombia has exported coffee, crude oil, and ferro alloys to Korea. Through the FTA, a tariff on Korean cars will be eliminated in ten years while a tariff imposed on coffee from Colombia will be gone either immediately or in three years.

“The Korea-Colombia FTA is expected to expand the amount of trade between the two countries by five times or more for the next five years,” President Lee Myung-bak said during an interview with Colombian newspaper El Tiempo. “The Korea-Colombia FTA will help Colombia to advance into the Asian market while Korea will boost up its opening and developing businesses and trade in the South American market.”

Korea is currently negotiating FTA deals with such countries as China, Mexico, Canada, and New Zealand. It is also preparing for FTA negotiations with countries like Malaysia, Russia, and Vietnam. The current state of Korea’s FTAs can be found at
http://www.mofat.go.kr/ENG/policy/fta/status/overview/index.jsp?menu=m_20_80_10 and FTAs in general, as well as global FTAs are found at http://www.sice.oas.org/agreements_e.asp

By Jessica Seoyoung Choi Korea.net Staff Writer

Joint Statement on the Conclusion of Negotiations for the Free Trade Agreement between Korea and Colombia