A7 - Rebalancing Korean trade policy: from bilateral to multilateral free trade

Summary

Korea's successful experience with export-led industrialization ­strategies is shared by all East Asian economies. An essential ingredient or ‘enabler’ in this so-called East Asian miracle is the open multilateral trading regime. For this reason, although ‘new regionalism’ was surfacing in the form of bilateral or regional free trade agreements (FTAs) in other regions of the world, the East Asian economies steadfastly adhered to multilateralism by refusing to pursue regional or bilateral FTAs during the 1990s.

Yet, alerted by the Asian financial crisis of 1997–1998 to failings in the global economic order, as well as by the growing evidence that further multilateral trade liberalization after the Uruguay Round on both the WTO and APEC (Asia-Pacific Economic Cooperation) track was not likely in the foreseeable future, East Asian countries began to shift from multilateralism to regionalism, especially to bilateral FTAs, by the end of the decade. In a belated domino-effect-type reaction to the proliferation of FTAs elsewhere in the world, they thus began to pursue bilateral FTAs individually, competing to a certain extent with one another. Among them, Korea has probably been the first and the most aggressive pursuer of such bilateralism.

Korea began to pursue bilateral FTAs in the wake of the Asian financial crisis and launched the negotiation of its first FTA in 1999. This was the Korea–Chile FTA which was signed in 2003.