[Smart Q&A: Lee Dong-ryul · Lee Seung-ju] Strategic Implications of the Korea-China FTA and Korea's Tasks

YouTube Link: video.eai.or.kr/120208_smartlees_k.flv

Professor Lee Dong-ryul holds a Ph.D. in Political Science from the School of International Relations at Peking University, China, and is currently a professor in the Department of Chinese Studies at Dongduk Women's University and the Chairman of the EAI China Research Panel.

Professor Lee Seung-ju holds a Ph.D. in Political Science from the University of California at Berkeley and is currently a professor in the Department of Political Science and International Relations at Chung-Ang University.

Strategic Significance of the Korea-China FTA

China's East Asia Strategy and FTA

China Considers the Korea-China FTA in the Context of a Strategy to Circumvent and Weaken the US Alliance System in East Asia

It is necessary to understand China's Free Trade Agreement (FTA) strategy within the context of its East Asian regional strategy. China is responding to the US-centered bilateral alliance system in East Asia not by directly challenging it, but through a "circumvention and weakening strategy." Specific actions taken in this regard include: 1) establishing strategic partnership relations with major East Asian countries, 2) leading regional multilateral cooperation (e.g., ASEAN+3, Shanghai Cooperation Organization, Six-Party Talks on the North Korean nuclear issue), and 3) forming regional economic networks through bilateral FTA agreements.

China's pursuit of FTAs harbors not only economic objectives but also a strategic aim to forge a new East Asian order centered on China. Categorizing the FTAs that China has concluded or is negotiating reveals the following types: 1) East Asian regional integration or order formation (ASEAN), 2) geopolitical considerations (Pakistan), 3) resource acquisition (GCC, Chile), and 4) formation of a Greater Chinese economic sphere (Hong Kong, Taiwan). Excluding FTAs aimed at resource acquisition, it can be observed that China primarily prioritizes strategic considerations when concluding FTAs. Korea is a key target country in China's FTA strategy from the perspective of East Asian regional order and geopolitical considerations. Furthermore, as China's third-largest trading partner, Korea holds significant implications in terms of trade.

Until the commencement of FTA negotiations, China will likely approach the FTA with Korea primarily from a strategic standpoint. However, once negotiations begin, given the substantial trade and investment volumes between the two countries, fierce negotiations over economic effects are highly probable.

Implications of the Korea-China FTA for Korea

Bilateral FTA Network Hub Strategy: "This will be a significant opportunity and challenge for Korean diplomacy in the US-China era."

Korea has successfully concluded FTAs with major economic blocs such as the European Union and the United States. The conclusion of an FTA with China, Korea's largest trading partner, signifies the nearing completion of Korea's long-pursued bilateral FTA network hub strategy. Notably, the Korea-China FTA is likely to act as a significant stimulus for Japan and provide substantial momentum for the future conclusion of a Korea-Japan FTA. If Korea subsequently concludes an FTA with Japan, it will become the only country in the world to have FTAs with all four major global economic blocs.

From a diplomatic, security, and strategic perspective, the conclusion of the Korea-China FTA will make Korea, excluding Singapore, the only country to simultaneously have FTAs with both the US and China. This presents a significant opportunity for Korean diplomacy in the US-China era, while also posing a considerable burden.

Korea's Tasks

Accurately Assess Korea's Current Standing in FTA Negotiations

"Precisely grasp the strategic space available to Korea through a sober assessment of reality."

The starkly divided assessments of the Korea-US FTA in the domestic political arena stem from a failure to accurately perceive Korea's power and position in the international community. As both the United States and China have selected Korea as an FTA partner within the framework of their respective regional strategies, it is imperative to accurately grasp the strategic space available to Korea based on a realistic assessment of its capabilities.

Adopt a Long-Term Perspective and Envision the Bigger Picture

"Consider strategies beyond the success of the bilateral FTA network hub strategy," "Approach the Korea-China FTA in the context of the economy-security nexus."

It is important to remember that China approaches FTAs from a regional strategy perspective and to formulate Korea's own grand vision for the East Asian regional order when engaging in FTA negotiations. With the prospect of FTAs with the EU, the US, China, and Japan, Korea needs to contemplate strategies beyond the success of its bilateral FTA network hub strategy.

In particular, consideration must be given to the economy-security nexus strategy. Given Korea's position of maintaining its traditional alliance with the US diplomatically and security-wise, while rapidly deepening economic interdependence with China, the economy-security nexus represents a critical challenge for Korea's future. Recalling that the Korea-US FTA played a role in mitigating Korea's economic dependence on China and moderating the pace of development in Korea-China economic relations, the impact of the Korea-China FTA's conclusion on Korea's strategic maneuverability between the US and China must be soberly calculated.

Minimize Difficulties in Domestic Negotiations

Korea-China FTA: "If it is unavoidable to pursue it, delaying the process will not be advantageous for Korea."

Given the strong domestic backlash against the Korea-US FTA, pursuing the Korea-China FTA at this time is expected to face significant domestic political hurdles. However, discussions on the Korea-China FTA have been ongoing for over six years since the agreement on joint private sector research in 2004, followed by joint government-industry-academia research, with China continuously requesting negotiations during this period. Therefore, further delay would place a considerable burden on the Korean government and may not be advantageous for future negotiations. Consequently, a negotiation strategy that involves expediting domestic procedures as much as possible to initiate negotiations, thereby satisfying China's strategic demands, and then meticulously pursuing economic benefits with ample time during the main negotiations is necessary.

Consider Changes in China's FTA Policy Environment

"Remember that negotiations will proceed in a much less favorable environment than in the early 2000s and prepare thoroughly."

China's FTA policy environment is rapidly changing. During the conclusion of FTAs with ASEAN in the early 2000s, China pursued FTA negotiations favorably towards ASEAN to alleviate concerns about China's rise among ASEAN countries. However, the Chinese government, particularly the Ministry of Commerce, is now demonstrating a tendency to pursue thorough cost-benefit analyses of FTAs. Consequently, negotiations may proceed in a significantly less favorable environment than in the early 2000s, and the negotiation environment could become even more disadvantageous over time. Therefore, thorough preparation is necessary. ■

The East Asia Institute (EAI) has been selected as a core research institution for the MacArthur Foundation's "Asia Security Initiative" program and is receiving financial support. EAI has been conducting Smart Q&A through video interviews with domestic and international experts, aiming to provide timely and in-depth analysis of current issues through question-and-answer sessions with experts in relevant fields. This manuscript was compiled by Researcher Kim Yang-gyu (EAI Center for Asian Security Studies) and Team Leader Kim Ha-jeong (EAI Center for Asian Security Studies) based on interview content. The opinions expressed are those of the individual experts and do not represent the views of the East Asia Institute. Please cite the source when quoting from Smart Q&A.