South Korea, China may begin free trade talks

Bloomberg/Seoul

China’s Deming (left) and Korea’s Kim at the Asean Economic Ministers Meeting in Manado, Indonesia

South Korea and China may begin talks on a free trade agreement to increase the export of goods and services between the two countries, South Korean Trade Minister Kim Jong Hoon has said.“This can be a win-win,” Kim said in Manado, Indonesia, where he attended a meeting of Association of Southeast Asian Nations 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.”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 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,” said Lee Sang Jae, a senior economist at Hyundai Securities in Seoul. China’s reliance on Korea for imports could grow, and Korea’s trade surplus against China could further expand.”Officials at the Chinese commerce ministry weren’t immediately available to comment.South Korea’s main exports to China include automobiles, 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 $180bn in 2010, Kim said. Korea’s trade surplus against China amounted to $52.84bn in 2010, a 39.5% increase from a year earlier, according to the Bank of Korea.Chen Deming, China’s commerce minister, called on the Association of Southeast Asian Nations and its six dialogue partners on Saturday to lower trade barriers and push the Doha Round of trade talks as financial markets face fresh uncertainties and challenges, Xinhua reported.Still, any discussions on removing tariffs on Korean goods for Chinese consumers may be hampered by concern that a deal could increase the country’s reliance on Korea for supplies of key components and hinder the growth of its own industry, Hyundai’s 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 materialise 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 finalising the agreement with the US and is negotiating free trade arrangements with other countries including Australia, Turkey, Colombia, and Canada, he said. The agreement will benefit South Korea’s chemical, petroleum products and electronics manufacturers including LG Electronics and Samsung Electronics, while hurting pork, milk, cheese and cattle producers, Kim said.South Korean President Lee Myung Bak’s government will spend $20bn over the next 10 years to help farmers compete by modernising techniques and upgrading their skills, Kim said.