Global FTA Trends and Implications

 

Global FTA Trends and Implications

This survey was conducted by the Institute for International Trade (IIT) of the Korea International Trade Association (KITA) in Seoul.

Principal Investigator : Myeong Jin-ho (thetotoro@kita.net), Research Fellow, IIT of KITA

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As Free Trade Agreements (FTAs) proliferate all over the world, so the proportion of trades between FTA-concluded countries is continuously increasing. As of March 2011 and FTAs effective and noticed to the World Trade Organization (WTO), the FTA-based trades form 49.2% (in 2009) of all trades in the world.

However, ill-matched with its position as the world's trade power, Korea's FTA-based trades were 14.8% of its all trade amount, which is only one third compared to the average. This figure is the lowest among the world's top 10 trading countries such as the US, China, Germany and France. Germany and France, members of the EU, are conducting more than 70% of their trades through FTAs thanks to their high proportion of intra-EU trades. The US shows a relatively high score of 34.1%, and China and Japan that are Korea's biggest competitors also show higher figures of 19.2% and 16.5%, respectively.

As to recent discussion over the ratification of the Korea-EU FTA and the Korea-US FTA, some insists that the time is not yet ripe for the FTAs. However, the abovementioned figures confirm that Korea is lagged behind its competitors in terms of FTA-based trades.

If the Korea-EU FTA and recently agreed Korea-US and Korea-Peru FTAs come into effect, Korea's FTA-based trades will form 35.1% of its all trades, which will be higher than those of China and Japan but still lower than the world average. In the case of China and Japan, their FTA-based trade rates will be 19.4% and 17.6%, respectively, even if all FTAs that they have agreed come into effect. When all FTAs that are currently under negotiation (7 FTAs with 12 countries) are effective, only then Korea will reach the world average.

Accordingly, it is necessary to ratify the FTAs with the EU and the US as soon as possible and to establish favorable trade environments by continuously agreeing additional FTAs, so that the companies would not in a disadvantageous position amidst fierce global competition. This will also contribute to export growth, create more jobs by foreign investment and stabilize consumer prices by reducing importing prices, thereby benefiting all citizens.

[sources : KITA.org]