Korea, China Mark 1 Year of Free Trade
Erin Yoon, Dec. 16, 2016, 9:39 a.m.
The Korea-China free trade agreement marks its first anniversary on Dec. 20. Even though Korea's overall exports to China shrank more than nine percent so far this year, those of products that enjoyed tariff cuts under the FTA decreased only 1.7 percent.
Some here smell economic retaliation after Korea decided to let the U.S. station a Terminal High-Altitude Area Defense battery here, which China opposes. But experts said the FTA is just entering its second year and more tariff cuts are to be phased in as time goes by.
Under the FTA, tariffs on more than 90 percent of products will disappear over the next 20 years. It covers some 958 Chinese products worth US$8.7 billion in exports, while Korea saw $8 billion worth of export opportunities open up in China.
The Korea International Trade Association polled 605 exporters, and 65 percent said they are enjoying the benefits of lower tariffs.
Korea remains the top exporter to China for the fourth straight year, and Chinese direct investment in Korea totaled $1.66 billion in the first nine months of this year, up 8.5 percent compared to the same period of 2015.
Weak overall exports to China dissipated the benefits. Even with the FTA in effect, Korea's exports to China fell for 16 months until October and the outlook remains murky.
Han Jae-jin at Hyundai Research Institute said, "Compared to other FTAs the degree of market-opening is small, so immediate effects may seem miniscule. But the scale of overall trade between the two countries is huge, so the long-term effects on the Korean economy are positive."