Northeast Asian Economic Cooperation and Korea's FTA Strategy

Overview



FTA policy is not merely a component of foreign economic policy. It is intrinsically linked to the direction in which a nation's strategy for economic advancement will be guided. Pursuing economic advancement through external openness and enhanced international competitiveness necessitates an active FTA policy. While domestic resistance may arise, it must be overcome by establishing social infrastructure capable of mitigating such opposition. FTA policy is also closely intertwined with a nation's foreign policy strategy. The decision of which countries to engage with, at what level of agreement, and when to conclude FTAs can significantly influence foreign strategy and the formation of regional order, as FTAs promote trade and cooperation among member states while potentially discriminating against non-member countries.



The pursuit of regional cooperation, including FTAs, is also active in East Asia. This has been a notable shift in the region since the 1997 financial crisis. A sense of shared community among East Asian nations, coupled with China's rapid growth and proactive efforts, is accelerating regional cooperation. Amidst growing attention on the role of ASEAN plus Three (APT), comprising the Association of Southeast Asian Nations (ASEAN) and the three Northeast Asian countries, regional cooperation, including FTA conclusion, is actively unfolding at both bilateral and sub-regional levels among countries in the region. Of course, underlying the competitive pursuit of this regional cooperation are efforts by individual nations to secure economic interests and enhance their influence. Particularly prominent are the competition for influence in East Asia between China and Japan, and the efforts by Korea and ASEAN to serve as hubs for East Asian regional cooperation networks. The role of the United States, seeking to maintain its influence in East Asia, is also an important variable. The specific shape of East Asian regional cooperation will be determined by how these actors' efforts interact. In this international context, Korea's future and the future of the regional order could be significantly altered depending on the choices Korea, as a middle industrial power in Northeast and East Asia, makes and how it pursues them.



The participatory government was the first administration to systematically and comprehensively pursue Korea's FTA policy. Although the FTA negotiations with Chile were concluded and the groundwork for FTA negotiations with Japan was laid during the "People's Government" era, FTA policy was, at best, a secondary aspect of foreign economic policy. However, with the participatory government, the basic framework necessary for pursuing FTA policy was completed through the ratification process of the Korea-Chile FTA in the National Assembly. An FTA roadmap was announced, and the legal and institutional systems for its implementation were established. Consequently, FTAs with Singapore and EFTA were concluded, and negotiations with Japan, ASEAN, and Canada are currently underway. Furthermore, preparatory work for FTA conclusion with several other countries is in progress. In this regard, the participatory government's FTA policy can be assessed as having achieved relatively good results in a short period.



However, the participatory government's FTA policy can also face significant criticism from a broader perspective. Firstly, there is the inefficiency of the FTA policy. The FTA policy, pursued at a substantial social cost, is limited to FTAs with small open economies, and the enhancement of international competitiveness through structural reforms has not been secured, suggesting that resistance to openness will continue. Secondly, there is the conflict in foreign policy objectives. The participatory government has set the goal of Northeast Asian cooperation and the establishment of Korea as an economic hub in Northeast Asia. However, considering the reality of Korea's trade, its FTA policy is inevitably pursued at a global level. Moreover, given the reality of Korean foreign policy, where security diplomacy takes precedence over economic diplomacy, FTA policy is relegated to a lower priority in national policy. The unrealistic national goal of becoming an economic hub in Northeast Asia hinders the active pursuit of FTA policy. Thirdly, there is a non-strategic approach to FTA policy. Considering that FTAs are important tools for economic and security diplomacy, it is natural that they should be pursued in a manner that effectively achieves national economic and security interests. However, the participatory government has lacked consistency in the fundamental goals and direction of FTA pursuit, making it unclear where it is heading. For example, it is unclear whether the primary objective of FTA pursuit is Northeast Asian cooperation, East Asian cooperation, or the establishment of a global network. While cooperation on all three levels can be pursued simultaneously, the establishment of strategic priorities is necessary.



For Korea's FTA policy, and by extension its foreign trade strategy and national development strategy, to be pursued effectively and efficiently, three fundamental improvements are necessary. First, a basic consensus among the public and political forces regarding the direction of development as a trading nation must be formed. Of course, such a consensus requires social agreement on how to distribute the gains and losses from openness, along with social infrastructure capable of implementing this policy. Second, the objectives and countermeasures for domestic and international negotiations must support such a development strategy. For agreements at a basic and abstract level to have practical binding force, the objectives and strategies of individual negotiations must be set and pursued in light of these agreements. Third, an institution for trade policy decision-making and implementation must be established to effectively execute the development strategy of a trading nation. The relationship between economic diplomacy and security diplomacy, and the legal and institutional framework to support them, must be established.



With the growth of our economy, our role and responsibilities on the international stage have also increased. Korea is no longer a least developed country. However, it is also not a great power capable of dictating the international order. Rather than setting idealistic foreign policy objectives, it is desirable to choose policy objectives that can realistically maximize our national interests within the context of changing international relations. Goals such as a Northeast Asian community or an economic hub in Northeast Asia are not only unrealistic but also result in the waste of attention and capabilities needed for the pursuit of more important foreign policy objectives.

Author

Jeong Jin-young, Professor at Kyung Hee University