South Korea and China may start talks on a free-trade agreement (FTA) to increase the export of goods and services between the two countries, South Korean Trade Minister Kim Jong Hoon said.
“This can be a win-win,” Kim said on Saturday in Manado, Indonesia, where he attended a meeting of ASEAN trade ministers.
“Certainly there are sensitivities on the part of Korea and on the part of China. Now we are talking about how we can take care of these sensitivities mutually. Then, we can expedite going into negotiations,” he said.
Asian nations are seeking to increase trade among themselves and with the rest of the world to lessen their reliance on the US, where growth is faltering.
An agreement between South Korea and China will help the world’s second-largest economy import South Korean goods more cheaply, boosting sales of products ranging from Samsung Electronics Co chips to Hyundai Motor Co cars.
“If you look at the structure of trade between China and Korea, it’s more of a supplementary relationship than a competing one,” Lee Sang-jae, a senior economist at Hyundai Securities Co in Seoul, said by telephone.
“China’s reliance on Korea for imports could grow, and Korea’s trade surplus against China could further expand,” he said.
South Korea’s main exports to China include cars, electronics components, mechanical goods and oil products, while China sells cheap consumer goods and agricultural products to South Korea, Lee said.
China is South Korea’s largest trading partner with total volume between the two nations reaching US$180 billion last year, Kim said in an interview. South Korea’s trade surplus against China amounted to US$52.84 billion last year, a 39.5 percent increase from a year earlier, according to the Bank of Korea.
Chen Deming (陳德明), Chinese Minister of Commerce, on Saturday called on ASEAN and its six dialogue partners to lower trade barriers and push the Doha round of trade talks as financial markets face fresh uncertainties and challenges, Xinhua news agency reported.
China isn’t alone in pushing free-trade accords. Malaysia expects to conclude trade agreements with Turkey this year and with the EU and Australia next year, International Trade and Industry Minister Mustapa Mohamed said last week.
Still, any discussions on removing tariffs on South Korean goods for Chinese consumers may be hampered by concern that a deal could increase the country’s reliance on South Korea for supplies of key components and hinder the growth of its own industries, Lee said.
“It’s questionable whether it’ll be easily accepted in China,” he said. “Korea must want to push it, but it may not materialize quickly.”
An FTA between South Korea and the US has been on hold as the Asian country awaits the ratification of the accord by the US Congress before its own lawmakers approve the deal, Kim said.
South Korea is still “very close” to finalizing the agreement with the US and is negotiating free trade arrangements with a number of other countries including Australia, Turkey, Colombia, and Canada, he said.