Korea’s Policy for Enhancing FTA Utilization and Policy Implications

Inkyo Cheong Economics, Inha University Contact: inkyoc@gmail.com

www.FTAinfo.net/eng

Prepared for 2014 ARTNet (Bangkok, Sep. 22-23, 2014)

An early version of this paper was published as an ERIA Discussion Paper on the title of “Korea’s Policy Package for Enhancing its FTA Utilization and Implications for Korea’s Policy” in April 2014.

1. Background : Korea’s FTA Network

Korea’s Policy Package for Enhancing its FTA Utilization

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ASEAN

MERCOSUR

GCC

EFTA

EU

Singapore

Canada

USA

Russia

India

Japan

Colombia

NZ Aus.

Peru

In force or concluded Negotiations Pre-negotiations

China

Korea

Chile

Turkey Mexico

1. Background : Korea’s FTA Network

Korea’s Policy Package for Enhancing its FTA Utilization

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EU USA

Colombia

Peru

Korea Turkey

2008 was a critical year for Korea’s FTA policy

1. Background : Korea’s FTA Utilization

FTA Utilization Preferences as of 2008 (percent of respondents by country)

Source: Kawai and Wignaraja (2011)

Korea’s Policy Package for Enhancing its FTA Utilization

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2. Survey : Recognition of FTAs

Perception of Implemented FTAs (percent of respondents by country)

12.5

38.3

62.5

88

62

38

0.0

20.0

40.0

60.0

80.0

100.0

Chile ASEAN EFTA

Know Don't Know

Note: Survey based on 221 firm samples. Source: Cheong and Cho (2010)

Korea’s Policy Package for Enhancing its FTA Utilization

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2. Survey : Impediments to FTA Use

Impediments to FTA Use (percent of respondents by country)

Note: Survey based on 221 firm samples. Source: Cheong and Cho (2010)

35.83

4.17

34.17

10.8315.00

0

10

20

30

40

Low tariffpreference

Lack ofinformation

ROO-relatedcosts

Otheradministrative

costs

RemainingNTBs

Korea’s Policy Package for Enhancing its FTA Utilization

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2. Survey : Awareness of ROOs

Awareness of ROOs (percent of respondents by country)’

Note: Survey based on 221 firm samples. Source: Cheong and Cho (2010)

19.5

32.1

48.4

0

10

20

30

40

50

60

In details General issues No idea

8

Korea’s Policy Package for Enhancing its FTA Utilization

Policy maker and national coordinator

FTA Promotion and Policy Adjustment Authority (FTAPPAA)

3. Organization for the Promotion of FTA UItilization 3.1. A Control Tower

FTAPPAA

• FTAUC

• Assistance Centers

Implementation agency The National FTA Utilization Center (FTAUC) Regional (local) FTA Assistance Centers.

FTAPPAA

National FTA Utilization Center (FTAUC)

Regional (local) FTA Assistance Centers (13)

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Korea’s Policy Package for Enhancing its FTA Utilization

3. Organizations for the Promotion of FTA Utilization (2010) 3.2. Major Components of Korea’s FTA Support

Business demand survey

FTA business information

FTA expert, consulting

Direct assistance for business

FTA system maintenance

Major contents

Regular and special meeting and surveys for industrial agencies, representative companies

- FTA homepages for tariffs, rules of origin

- Seminars, workshops

- Guide books, pocket books, brochures

- Cyber-learning system on FTAs

- FTA class in universities and graduate schools

- Courses for FTA consultants and experts

- FTA business consulting

- FTA call center - Local FTA Assistance Centers

- Integrated Business ROO center

- Integrated FTA Info Center

Governent agency

- FTAPPAA and national related agencies

- National FTA Utilization Center (New)

FTAPPAA and related agencies

FTAPPAA and related agencies, universities, business forum, academic associations

Related national agencies, customs brokers, FTAPPAA

Korea Customs Services, Center for ROO, Chamber of Commerce, KITA, etc.

Korea’s Policy Package for Enhancing its FTA Utilization

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Utilization Ratio

Utilization target ratio of 60%

• 40% by 2012

• 60% by 2013

Consulting

4. FTA Utilization Targets 4.1 Utilization Ratio

‘10 ‘11 ‘12 ‘13 Total

Number of

Companies 600 2,000 3,000 5,000 10,600

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Korea’s Policy Package for Enhancing its FTA Utilization

Utilization Ratio Higher than 60% utilization ratio for most FTAs under implementation

• 69% for the Korea-US FTA

• 78% for the EU-Korea FTA

4. FTA Utilization Targets 4.2 Recent Performance

Export Import

2011 2012 March 2013 2011 2012 March 2013

Chile(‘04) - 75.2 78.4 95.8 97.9 99.1

EFTA(‘06.9) - 79.8 79.9 55.7 61.9 45.7

ASEAN(‘07) 33.1 37.7 41.5 73.8 73.8 55.1

India(‘10.1) 35.8 36.2 45.2 53.6 52.7 59.3

EU(‘11.7) 65.7 81.4 83.6 47.1 66.8 67.9

Peru(‘11.8) 61.3 78.0 90.4 52.6 92.0 67.7

USA(‘12.3) - 68.9 73.8 - 61.0 63.7

Source: Committee on Domestic FTA Promotion (2013. 9)

FTA Utilization Ratio by FTA and Export-Imports

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Korea’s Policy Package for Enhancing its FTA Utilization

5. Policy Package for FTA Utilization 5.1 New Package (2013)

Procedural improvement

FTA business information

Business capacity building

External affairs

Domestic FTA support

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Korea’s Policy Package for Enhancing its FTA Utilization

Procedural Improvement

Simplification of the certificate of origin (CO)

Support for obtaining the Authorized Economic Operator (AEO)

5. Policy Package for FTA Utilization 5.2 Details of Supporting Measures

FTA Business Information

Integrated FTA Business Portal

Integrated trade information system for FTA partners

Integrated portal for preferential tariff rates under Korean FTAs

Integrated portal for FTA rules of origin (ROO)

Business oriented domestic workshop for businessmen

Domestic FTA Support

Improve coordination for FTA business supports by various agencies

Install the regional FTA centers in major cities/localities/industrial hubs

Organize FTA Expos, FTA workshops in FTA partner countries

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Korea’s Policy Package for Enhancing its FTA Utilization

External affairs FTA implementation in FTA partner countries

Cooperation between customs authorities of FTA partners

Improve and update existing FTAs (especially tariff liberalization)

Outreach for FTA utilization by companies of FTA partners

5. Policy Package for FTA Utilization 5.2 Details of Supporting Measures

Business Capacity Building

National consulting system for companies

Education for FTA business professionals • FTA classes in undergraduate universities

• Graduate FTA courses/departments

System for the management of the rules of origin (ROO)

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Korea’s Policy Package for Enhancing its FTA Utilization

5. Policy Package for FTA Utilization 5.3 Examples of FTA Supporting Measures

Integrated portal for preferential tariff rates under Korean FTAs

16

Korea’s Policy Package for Enhancing its FTA Utilization

5. Policy Package for FTA Utilization 5.3 Examples of FTA Supporting Measures

Integrated portal for FTA rules of origin (ROO)

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Korea’s Policy Package for Enhancing its FTA Utilization

5. Policy Package for FTA Utilization 5.3 Examples of FTA Supporting Measures

FTA call center

Ask whatever on FTA utilization FTA call center Number 1380 anywhere in Korea

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5. Korea’s Policy Package for Enhancing its FTA Utilization

Business Mind for FTA Utilization

Common interests for exporters and importers

CEOs’ recognition on FTA businesses

Easy materials for CEOs

FTA business models

6. Policy Implications for developing countries

Implications Based on Korea’s Experience

Identify the barriers which prevent businesses to utilize FTAs

Coordination among national agencies

FTAs with large economies

Quality of FTAs

Cooperation between FTA partners

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5. Korea’s Policy Package for Enhancing its FTA Utilization

6. Policy Implications for developing countries

Tariff elimination ratios in Korea’s major FTAs

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Korea’s Policy Package for Enhancing its FTA Utilization

Political economy of active trade policy

National consensus for developing economy

Political leaders’ commitment for trade policy

Building human capacity for trade

Korea’s Policy Package for Enhancing its FTA Utilization

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6. Policy Implications for developing countries