Review of Korea's Free Trade Agenda Progress

An independent report has found that "Korea has made impressive overall progress" towards achieving APEC's free trade and investment goals.

The findings were presented in the 'Individual Action Plan (IAP) Study Report' on Korea's progress towards APEC's 'Bogor Goals' of free and open trade and investment by the year 2020.

Presented to a "Peer Review Session" of representatives from APEC member economies in Phuket, Thailand, the report is an assessment of how well individual member economies are progressing towards APEC's free trade and investment goals.

The Individual Action Plan (IAP) Study Report was prepared by Dr. Robert Scollay, Associate Professor of Economics at the University of Auckland, who noted that as Korea has actively sought to become the northeast Asian business "hub" there had been strong emphasis on liberalization and reform from Korea's political leadership.

"As in all periods of major economic reform, political commitment has been a crucial factor behind the progress that has been achieved to date, and a continuation of that political commitment will also be crucial in building on that success," Dr. Scollay stated in the report.

Korea's Senior Official at the review session, Deputy Minister for Trade Negotiation, Dr. Kim Hyun-Chong, said Korea's renewed vigor towards pursuing economic reforms are a central element of Korean Government policy.

"President Roh gave all ministers a clear message to be proactive in identifying and addressing areas for reform," Dr. Kim.

"Be prepared to change everything but your spouses to create a new paradigm in implementing economic reforms" was the message the President conveyed to government officials on the issue of economic reform.

"Korea's determination in the area of economic reform will take us to our objective of an average per capita income of $20,000 and does not let us get stuck at the current average per capital income of $10,000."

Dr. Scollay said that in the area of encouraging and facilitating Foreign Direct Investment (FDI) the review found that "Korea has made impressive progress in liberalizing its FDI regime and in enhancing the transparency of its policy toward FDI.

"The Korean government has actively set out to identify areas for further improvement, and progress towards enhancing the environment for FDI continues to be made, despite resistance from some sections of Korean society."

The report noted that Korea remains committed to reform and achieving their free trade and investment goals and that there have been considerable reductions of Korean tariffs since 1996. The report also makes the point that there are challenges involved in reducing agricultural tariffs.

"Although the degree of applied tariff reduction has accordingly been modest, Korean non-agricultural tariffs are generally at 8% or lower and can accordingly be considered within 'striking distance' of the Bogor objectives.

"The same cannot be said of tariffs on agricultural products, which remain very high on average. As is well-known, Korea faces major political challenges in achieving significant progress on agricultural tariffs."

At the same time the report notes Korea's progress in removing Non-tariff Measures stating that "Korea has eliminated all but one of the remaining quantitative restrictions in line with its WTO obligations. The abolition of the Import Diversification Scheme removed the most significant remaining non-tariff barriers."

The review congratulates Korea on its progress in bringing Korea into alignment with the global economy in relation to Standards and Conformance.

"Korea has been actively pursuing the different elements of APEC's standards and conformance agenda. Progress in aligning Korean standards with international standards has been particularly impressive."

In the area of enhancing the transparency of regulatory regimes eliminating domestic regulations that may distort or restrict trade, investment or competition, the report was positive.

"The scale and scope of Korea's activity in this area over the last five years can only be described as very impressive - and not fully captured in Korea's IAP. Strong political will has been the key to the progress that has been achieved.

"The need to maintain both momentum and coherence in such a far-reaching program is both a challenge and a source of further demands for regulatory improvement."

Dr. Scollay also notes in the report that Korea has also taken "significant steps to open its government procurement system and to fulfill APEC objectives in this area."

"Korea adopts a principle of reciprocity in opening its government procurement market under which all signatories of the WTO Government Procurement Agreement are eligible to participate in international tendering and the appeal procedures available through the International Contract Dispute Mediation Committee."

"Korea has traditionally placed high importance on APEC. In 2001 APEC Member economies accounting for 70% of Korea's exports, 67% of its imports, 62% of inward FDI into Korea, and 67% of Korea's own investment overseas.

"The contribution to sustained economic growth in the Asia-Pacific region from expansion of trade, investment and economic cooperation in the region as promoted by APEC is seen as critical for Korea's own growth and prosperity.

The 'Individual Action Plan Study Report' for Korea and a Fact Sheet on the role and objectives of Individual Action Plan peer reviews are now available.