7 - Regional Trade Arrangement between ASEAN and Korea: Korea's Perspective

Summary

INTRODUCTION

Until the 1997 East Asian financial crisis, Korea had been achieving successful economic growth without any concrete economic co-operation agreements with neighbouring countries. Korea had also favoured multilateral trade liberalization and voiced strong concerns about the proliferation of regionalism and its discriminatory effects. However, responding to the worldwide movement towards regionalism in the 1990s and the necessity for regional economic co-operation after the financial crisis of 1997, Korea is now showing enthusiasm for regional trade arrangements (RTAs) and actively participating in multiple negotiations with both intra- and inter-regional countries for free trade agreements (FTAs).

As a tangible example of enthusiasm for economic co-operation, Korea concluded an FTA with Chile, which went into effect in 2004. Korea signed an FTA with Singapore in August 2005 and agreed to an FTA with the European Free Trade Association (EFTA) in July 2005. Korea is independently discussing setting up bilateral FTAs with Japan, Canada, Mexico, India, and the United States and actively participating not only in the formation of a plurilateral FTA with China and Japan, but also the signing of a multilateral agreement with ASEAN, MERCOSUR, and ASEAN plus Three.

In particular, Korea has proposed conducting a comprehensive study on closer economic relations between Korea and ASEAN and launching a meeting of experts. Over the past four decades, the relationship between ASEAN and Korea has been one of consistent growth. This success largely derives from complementary aspects on both sides. Bilateral trade and investment between Korea and ASEAN have been steadily increasing in recent decades. Even though trade volume decreased in 1998 due to the financial crisis, it recovered after 1999. Currently they are each other's fifth largest trading partner and ASEAN is the third-largest destination for foreign direct investment (FDI) from Korea.

In discussing the deepening interdependence between Korea and ASEAN, this chapter firstly deals with why Korea shifted its policy stance from supporting multilateralism to regionalism and why Korea chose ASEAN as an immediate partner to form an FTA with by carefully analysing the economic relations between the two economies in section two.