Korea is a country at cross-roads. As a small but innovative economy, it has always depended on free trade for growth. But as it faces competition from South-East Asian economies, the export-lead model may no longer work after serving the country well for five decades. It has also lead to dependency on trade with China which is starting to raise serious longterm strategic concerns. The choice for Korea is between the cul de sac of protectionism – or more open and diversified trade.
The landmark Korea-EU FTA will give Korea preferential market access to world’s largest market, while many of Korea’s neighbours are still struggling to fight protectionist sentiments at home. But such benefits rarely come free – and Korea must agree to open its markets. This has been portrayed in the debate as having serious implications for Korean agricultural sector but Korea is a country with almost no cultivable land and one of the highest food prices in the world.
In this brief, Lee and Erixon analyse the impact on Korea from this landmark FTA – drawing from the recent experiences in Korea from the global financial crisis, they concludes that many of the concessions made in the agreement will also bring benefits. Increased competition and access to complementary technology will boost productivity and increase value-added; a new, unified European Union under the Lisbon Treaty will also push for fair and equitable rules in trade, and counter the China’s increasing economic leverage; while the agricultural imports do not threaten the base crops produced by Korean farmers but increase variety and lower food prices.