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.
The Seoul Perspective 