Korea is China’s Canada

World Development Indicators - Google Public Data Explorer

 

Ignoring the (obvious very different) composition of their economies, this is a helpful way of thinking about Korea’s future place in the world.

Some relevant statistics (from Wikipedia):

United States Canada China Korea
Export Partners  Canada 19.1%
Mexico 14.8%
China 7.4%
Japan 4.2%
United Kingdom 3.2%
 United States 78.5%
China 4.4%
UK 3.0%
Japan 2.3%
Mexico 1.2%
Hong Kong 1.0%
 Hong Kong 17.4%
United States 16.7%
Japan 6.8%
South Korea 4.1%
 China 24.4%
United States 10.1%
Japan 7.1%
Import Partners  China 18.4%
Canada 14.9%
Mexico 12.5%
Japan 5.8%
Germany 5.3%
 United States 50.6%
China 11.0%
UK 6.2%
Japan 6.2%
Mexico 5.5%
South Korea 4.5%
 South Korea 9.4%
Japan 8.3%
Taiwan 8.0%
United States 7.8%
Australia 5.0%
Germany 4.8%
 China 16.5%
Japan 13.0%
United States 8.5%
Saudi Arabia 7.1%
Australia 5.0%

 

A High-Level Korea-China FTA – Did Somebody Lie? (Translation)

Dateline: 26 August 2014

From: 한국경제 (Korea Economy)

The prospects for concluding the Korea-China FTA by the year’s end, a target which was reaffirmed by President Park Gun-hye and Chinese leader Xi Jinping at their summit meeting in July, are said to be unclear. With the negotiations encountering difficulties, the two sides have reportedly failed even to confirm a date for the 13th round of talks planned for next month. Amid seemingly intractable differences regarding market opening for manufacturing and agricultural products, the path to a “high-level FTA,” the goal declared at the outset of the negotiations, is thought to be longer than ever. The proclamations of the two countries’ leaders are looking more and more like empty promises.

Although negotiations for the Korea-China FTA began in May 2012, little progress has been made so far. While China has taken the position that manufactured goods in which Korea is interested, such as petrochemicals, machinery and steel, should be included on the list of highly sensitive items, Korea has countered by making the same request for agricultural goods of interest to China. Against this backdrop, expectations were high that the Korea-China summit meeting would produce a breakthrough, but so far the negotiations have failed to get past the starting point. In fact, China has reportedly made a habit of reversing its position for no apparent reason, even on issues where the two sides have previously reached an consensus. Meanwhile, domestic conditions in Korea, such as resistance by farmers, have not grown any more favorable. Naturally, progress on the negotiations has been slow. Under these conditions, even if an agreement is reached, it would be a kind of hollow shell of an FTA full of exceptions for various goods.

Even businesses that had been watching the negotiations with optimism are feeling disappointed. Korean companies, which had once urged the swift conclusion of the FTA, have little to look forward to in the current circumstances, where agricultural and manufacturing businesses are treated as bargaining chips. Moreover, achieving the goal of a high-level FTA would require China to reform laws and institutions in areas such as intellectual property rights. The fact that China has shown no inclination to do so is another source of disappointment. In this environment, it is hard to expect any tangible effects even if an FTA is concluded.

The APEC Summit will be held in Beijing this November. China is conscious of the ongoing negotiations for the US-led TPP and perhaps thinks that, when it comes to the Korea-China FTA, a symbolic outcome will be enough. If that is the case, then Korea began negotiations with China under a misapprehension. At the very least, one wonders if somebody lied to the president about a “high-level FTA.”

Korea’s Demographic Decline

“South Korea to go extinct by 2750,” says the Wall Street Journal, citing a simulation commissioned by the Korean National Assembly.

Of course the framing is silly, but it highlights the severity of the demographic problem Korea faces, one that was at least accelerated by misguided government policy.

It’s worth comparing Korea’s population growth over the last century to that of the Philippines.

World Bank, World Development Indicators - Google Public Data Explorer

As of 1960, the Philippines’ population was only about 5% larger than Korea’s. Today, it’s nearly twice as big.

A South Korea with 70 or 80 million people would be a far more secure and influential country than it is today.

Of course, Korea’s per capita income and standard of living are much, much higher than the Philippines. But the same is same true of China. Catch-up economic growth is hard, but doable. Catch-up population growth is another matter.

All countries will face such a demographic decline eventually, but those countries will have the advantage that manage to push it as far into the future as possible. In this regard, the United States is doing a better job than any other advanced country.

As Korea-China FTA Talks Flounder, Prospects for Conclusion by Year’s End Uncertain (Translation)

Dateline: 25 August 2014

From: 한국경제 (Korea Economy)

By: 김재후 (Kim Jae-Hu)

Despite determination by the two nation’s leaders, working-level negotiators cite “difficulties”

Negotiations over the Korea-China FTA have reached an impasse. The prospects for an agreement by the end of this year, the goal announced by President Park Gun-hye and Chinese leader Xi Jinping at their summit meeting in July, have become uncertain. The reason is the inability of the two sides to narrow differences of opinion surrounding the opening of their agricultural and manufacturing markets.

On August 24, a high-ranking government official revealed that working-level negotiators from the two sides had been unable to make progress during unofficial discussions that took place in Beijing on August 22. At the 12th round of negotiations held in Daugu from July 14 to 18, consensus had been reached on certain matters related to the service sector, but the two sides remained as far apart as ever when it came to the opening of their agricultural and manufacturing markets, the official remarked.

Due to the large gap between the two sides, an agreement has still not been reached even on the date for the 13th round of official negotiations, which were expected to begin next month. The atmosphere is reportedly such that, depending on the situation, it is possible the negotiations will not reopen at all next month. Official negotiations typically confirm concrete agreements reached through working-level trade negotiations behind closed doors.

Negotiations have been tense, with Korea demanding expanded access to markets such as petrochemicals, machinery and steel, and China insisting on greater openness in the agricultural products market. Korea considers agricultural products to be highly sensitive items and would like to see them excluded from concessions (i.e., market opening). China, on the other hand, wants to include petrochemicals, machinery and steel in the list of highly sensitive items.

According to a working-level negotiator, after nearly a month of unofficial negotiations, there remain over 10,000 product categories for which the two sides have not been able to reach an understanding on the question of market opening.

About 12,000 product categories will be covered by the Korea-China FTA. It is the task of working-level negotiators on both sides to categorize these into “normal track” items, for which tariffs will be eliminated within 10 years of the agreement’s entry into force, “sensitive track” items, for which tariffs will be eliminated in 10 to 20 years, and finally “highly sensitive items,” for which tariffs will be eliminated only in part or which will be excluded from market opening altogether.

As another negotiator explained, if the disagreements were only related to manufacturing out of the various product categories, it would be possible to make gradual progress on the negotiations by offering piecemeal concessions. However, that kind of give and take is not easy in this case, where Korea and China disagree about the completely different areas of manufacturing and agriculture.

The cause of the negotiating difficulties is thought by some analysts to be the stubbornness that China has shown in negotiations with Korea over the FTA since the very beginning. This in turn is due to China’s concern about the effect its concessions to Korea will have the next time it negotiates an FTA with another country. There are also indications that the determination expressed by the two countries’ leaders to reach an agreement by the end of the year has not extended down to the working-level.

According to one government official, an agreement by the end of this year means that an agreement must be announced, at the latest, by the time of the upcoming APEC summit, which will open in Beijing on November 10.

Only 78 days remain until the APEC summit. It is not clear whether the two sides will be able to reach an agreement on the 12,000 product categories as well as areas such as services by then. In regard to services, too, nothing has been decided apart from a broad framework for the overall approach to liberalization.

Some trade experts argue that, if the two sides cannot muster the strength to push forward with the agreement by the November target date for completion, Korea will have to focus its main energies on the Trans-Pacific Partnership (TPP).

In fact, a meeting between the chief negotiators for the TPP, in which Korea has been weighing the possibility of participation, is set to open in Beijing before the APEC summit. The TPP participants, including the United States, Canada, Mexico and Japan, will gather in Hanoi, Vietnam, next month. The United States, which is leading the negotiations, has announced its desire to reach an agreement by the time of the APEC summit.