CEPAL, July 18, 2018

Won-Ho Kim Hankuk University of Foreign Studies

Sustainability and Cooperation Commitments in Korea’s FTAs with Latin America

1. Shift of Korea’s “Economic Diplomacy” Paradigm

Periods Cold War Era 1990~1997 Since 1998

Paradigm/Diplomatic goal

Ideology competition

Logics of economic interests

Global partnership

Trade partners Western economies

Economies in transition included

More focus on developing world

Trade strategy GATT (1967) GATT/WTO WTO/FTA

Trade Policy Shift in Korea

• Korea

– Inthebeginningofthe1960s,Koreaundertookexport-leddevelopmentstrategyasaresource-poor,smalleconomytobeatradingnation

– Inthe1970s,KoreaswitchedtoupgradingtheindustrialstructurebyintroducingheavyandchemicalindustriesandestablishedGTCstodiversifyexportitemsandmarkets

■ Koreahadadheredto‘multilateralism’because

❑ Itstraderelationswerediversified.❑ Bytakingthebilateralroute,Koreawouldhaveruntherisk

ofultimatelydistortingitstradestructure.❑ AtthefirstWTOMinisterialConferencein1996,Korea

demandedtighterregulationsonregionalismagainstexpansion

❑ TheKoreanagriculturalsectorwasdesperatelyresistanttoliberalizationthroughGATT-URprocess

■ But,mushroomingRTAsallovertheworldincreaseddiscriminationandtradediversionagainstKorea.

■ Unprecedentedfinancialcrisis,1997-1998❑ Anymeasuretosecureexportmarkets;creationofMOFAT❑ Increasedreadinessforrestructuringandrenovating,eventradestrateg❑ Needtofollow-uptheEAregionalintegrationmovement

■ Consumer-orientedtradepolicytomaximizethewelfareofthegeneralpublic

– Afterthefinancialcrisisof1997-1998,Koreadevelopedamoreaggressiveinstitutionalframework:FTAinitiative

– FTAbecameonepillarofKorea’snewparadigmforeconomicdiplomacy

– Korea´sregainingofcompetitivenessafterfinancialcrisisacceleratedFTAnegotiations

Trade Policy Shift in Latin America

• LatinAmerica

– StructuralismwasdominantlargelyduringtheperiodbetweentheGreatDepressionandthedebtcrisisof1980s:ISIpoliciesandhightariffbarriers

– MembershipofGATTcamealsolate

– Instead,LatinAmericancountriespromotedintra-regionalintegration:LAFTA,theCentralAmericanCommonMarketandAndeanPactin1960sand1970s

– Afterthe1980sdebtcrisis,mostLatinAmericancountriestooktradeliberalizationmeasures

– Amongothers,MexicoandChilewereactiveinintegrationwithAsia(joiningAPECin1993,1994)

Korea´s First FTA (with Chile)

– Dec.1998,Inter-MinisterialMeetingdecidedtopursueFTAs,withChileasthefirstpartner

– Korea-ChileFTAwentintoeffectinApril1,2004

– ThemostdrasticoutcomewasthemarketshareincreasesofKoreancarsinChile,andChileanwineinKorea

– Korea-ChileFTAinspiredothercountries,bothinAsiaandLatinAmericafortrans-Pacifictradearrangements

Lessons Learnt from Korea-Chile FTA

– Koreastillhadtodealwiththedomesticfront– BasicPlanforAgricultureandRuralArea– FTAImplementationFund

–Underthedemocraticcontext,theKoreangovernmentrationalizedthelegalprocessofFTAnegotiation

– ProcedurebeforegoingaheadtostartFTAnegotiations(IMM,FTAAdvisoryMeeting,pubichearings,etc.)

– TheKoreangovernmentearnedconfidenceintradenegotiationandbegantodrawabolderplanforfutureFTAsinthenameof“FTARoadmap”in2003

– Simultaneous,multiplenegotiations–Minimizeopportunitycost– Trade-offpositiveandnegativeimpacts–Maximizegainsfromleverageofsimultaneousnegotiations

Korean FTA Strategy

1998~2013 2013~2017 2017~

Trade Negotiation Unit in Ministry of Foreign Affairs

and Trade

MinistryofTrade,IndustryandEnergy(MOTIE)

New Trade Negotiation Unit in MOTIE

“Simultaneous Multiple Negotiation” (2003)

“NewFTAStrategy” Crisismanagement

Deep Integration* + Sustainability Against protectionism

• Compesateliberalizationwithfurtherpenetrationintooverseasmarkets

• Respondtoregionalistdiscrimination

• Mega-FTAssuchasRCEP(andTPP)

• UpgradingexistingFTAs

• NewFTAswithemergingeconomies

• TrumppressuretorenegotiateKORUS

• China’scommercialretaliationwithTHAAD

*Singapore issues: investment, gov procurement, trade facilitation, competition policy + IPR

… As result

■ KoreahasgainedthelargestFTA“territory”intheworld❑ 15FTAswith52countries❑ TheonlycountrywithFTAswithallofUS,China,andEU❑ Covering77%ofWorldeconomyintermsofGDP❑ Covering71.1%ofKorea’stotaltrade

■ Ultimatemandate

❑ OvercomeprotectionismthroughasmoreanddeeperFTAsaspossible

❑ Bigcontrastwithpre-1997stance

▪ Korea, 4th largest energy consumer, 97% import - 9th CO2 emitter as of 2005, 83% energy supply based on fossil fuel because its key

industries belong to the heavy and petrochemical sectors.

▪ On August 15, 2008, celebrating the 60th anniversary of the Republic of Korea, the then-President Lee Myung-bak declared ‘low carbon green growth’ as Korea’s new vision for development for the next 60 years.

- from quantity-oriented, fossil-fuel dependent growth to quality-oriented… - “It is a new national development paradigm in which green technologies and clean

energies create new growth engines and jobs.”

▪ Presidential Committee on Green Growth was created in February 2009 for inter-Ministrial coordination and public-private consultation

▪ PCGG has prepared a Green New Deal (2009~2012), followed by a National Green Growth Strategy (2009~2050) and a Five-Year Plan for Green Growth (2009~2013).

▪ The Framework Law for Green Growth bill passed the National Assembly in late 2009. Its Implementation Decree proclaimed as of April 2010.

2. Korea´s Paradigm Shift to Green Growth

Amongthe10policyagenda,

10.GlobalGreenLeader

Enhanceinternationalcooperationforgreengrowthandclimateaction

IncreaseGreenODA&supportdevelopingcountries

BuildGreenHubKorea

FTAbecameoneofthetoolsalsotoenhancetheagendaofgreen

growth

Environment Clauses in Korea´s FTAs

Chile ASEAN EU Peru US Colombia Cent Am

Preamble o x o o o o oMain agreement/Annex Main Main Both Both Both Both Both

Obligation to enforce Env law x _ o x o x x

Env standards x x o x o x xEnv cooperation o o o o o o o

Consultation / Info exchange x o o o o o oMEA x x o o o o o

Exception clause o o o o o o oDispute Settlement x x o x o x xPublic participation x x o x o o oPublic submission x x o x o x xEnv goods / service x x o o x o o

Sustainability Commitments in FTAs

• Korea-ASEANFTA(FRAMEWORKAGREEMENTONCOMPREHENSIVEECONOMICCOOPERATION,2005)asthefourthofitskindincluded“Art.4HumanResourceManagementandDevelopment”,and“Art.11EnvironmentalIndustry”brieflyinitsAnnexEconomicCooperajon

• Korea-EUFTA(2010)asthesixthofitskindincluded“Ch.13TradeandSustainableDevelopment”,emphasizingtheprinciplesofILOandcommitmentsinMEA

• Korea-PeruFTA(2011)astheseventhofitskindincluded“Ch.18Labor”,and“Ch.19Environment”

Peru as the 2nd FTA Partner in Latin America

– Korea-PeruFTAwentintoeffectinAugust1,2011– Korea’s7thFTAafterChile,Singapore,EFTA,ASEAN,India,EU

– PeruwantedtocompetewithChileforaccesstoAsianmarkets

– Korea-PeruFTAisconsidered“thedeepest”ininvestmentandtradefacilitationamongEastAsia-LatinAmericaFTAs(IDB-ADB2014)

– Koreancars’marketshareinPerujumped,andthePeruviancuttlefishandsquidalsodominatedKoreanimportmarket

Korea-Peru FTA• Ch.18Labor

“establishaLaborAffairsCouncil…tooverseetheimplementajonofthisChapter

“committoinijajngcooperaWveacjvijesassetoutinAnnex18A”• labor-managementrelajons:formsofcooperajonanddisputesemlementamonglabor,management,andgovernment• socialsafetynetprograms• humanresourcesdevelopmentandmanagement•migrantworkers:disseminajonofinformajononlaborrightsofmigrantworkersineachParty’sterritory“NeitherPartyshallhaverecoursetoChapterTwenty-Three(DisputeSeYlement)foranymamerarisingunderthisChapter”

• Ch.19Environment

“promotethedevelopmentofinternajonaltradeinordertocontributetotheobjecjveofsustainabledevelopment”“(environmental)measuresarenotappliedinadiscriminatoryandarbitrarymanneranddonotconsjtuteanunjusjfiablebarriertotrade”“establishanEnvironmentalAffairsCouncil...tooverseetheimplementajonofthisChapter,includingcooperaWveacWviWesundertakenunderAnnex19A”

• cooperajonontrade-relatedaspectsofbiologicaldiversity• prevenjonandmanagementofenvironmentaldisasters• environmentaleducajonNeitherPartyshallhaverecoursetoChapterTwenty-Three(DisputeSeYlement)foranymamerarisingunderthisChapter

Colombia as the 3rd FTA Partner in the Region

– Korea-ColombiaFTAwassignedinFebruary2013– KoreabecamethefirstAsianFTApartnerforColombia

– Korea-ColombiaFTAmetresistanceinColombia– Colombianautomotivesectorparticularlyhasbeenresistanttothe

treaty

– Korea-ColombiaFTAwentintoeffectasofJuly15,2016,afterfinalapprovalbytheColombianConstitutionalCourt

– ColombiancoffeeandcutflowerareexpectedtodominateKoreanimportmarketsoon

Korea-Colombia FTA• Ch.16TradeandSustainableDevelopment

“promotepublicparWcipaWonduringthewholeprocessofdesigning,implemenjng,andevaluajng,environmentalprojects,policies,andprograms”

“RecognizingthesovereignrightsofStatesovertheirnaturalresources”

“notfailtoeffecjvelyenforceitslaborlaws…inamanneraffecWngtradeorinvestmentbetweentheParjes”

“TheCouncilonSustainableDevelopment…mayalsoidenjfypossiblenewareasofcooperajon,and…shallreviewtheimplementajonandeffecjvenessofthisChapter”

• Ch.20DisputeSemlement

“Exceptforanymamerarising…underChapter16,thisChaptershallapplywithrespecttotheavoidanceorsemlementofalldisputes”

• Annex16-ACooperajonCooperaWveacWviWesmayinclude,butshallnotbelimitedto:

ENVIRONMENT• cooperajonininternajonalfora• informajonexchangeandjointworkoncorporatesocialresponsibilityandaccountabilityexchangeofviewsontheimpactontradebyenvironmentalregulajons,norms,andstandards

LABOR•exchangeofinformajon,parjcularlyonlaborlawandpolicy,labormarketstajsjcsandbestworkingpracjcesoftheotherParty•exchangeofmissionscomposedofofficials,professionals,techniciansand/orexperts•organizajonandparjcipajoninconferences,seminars,workshops,meejngs,andoutreachprograms,aswellastrainingsessions

Central America as the 4th Partner in the Region

– CentralAmericahasbeensignificantforKoreanSMEs

– Korea-CentralAmericaFTAwasofficiallysignedinFebruary2018

– ThiswouldbethefirstFTAbetween(six)CentralAmericancountries(5+Panama)asagroupandanAsianeconomy(cf.China-CostaRicabilateralFTA)

– Atthelastminute,Guatemalareservedtheirmembershipforlatertime

Korea-Central America FTA• Chapter16Labor

“freetradeandinvestmentshouldleadtojobcreaWon,anddecentwork,withtermsandcondijonsofemployment”“LaborCommiYeeshall…overseeandevaluatetheagreedcooperajveacjvijes…serveasaforumfordialogueonlabormamersofmutualinterest…reviewtheoperajonandoutcomesofthisChapter;andtakeanyotheracjonitdecidesappropriatefortheimplementajonofthisChapter”“NeitherPartyshallhaverecoursetoChapter22(DisputeSeYlement)foranymamerarisingunderthisChapter”“committoestablishcloserelajonshipthroughcooperaWveacWviWesinareasofmutualinterest”

• Chapter17Environment“recognizethateconomicdevelopment,socialdevelopment,andenvironmentalprotecWonareinterdependentandmutuallyreinforcingcomponentsofsustainabledevelopment”“TheEnvironmentalCommiYeeshall…overseeandevaluatetheagreedcooperajveacjvijes…serveasaforumfordialogueonenvironmentalmamersofmutualinterest…reviewtheoperajonandoutcomesofthisChapter”“NeitherPartyshallhaverecoursetoChapter22(DisputeSeYlement)foranymamerarisingunderthisChapter”“TheareasofcooperaWonbetweentheParjesinrespectofthisChaptermayinclude:environmentalmanagement;insjtujonalcapacityforenforcementofenvironmentallaw;cleanerproducjontechnologies;waterquality;airquality;energyefficiencyandrenewableenergy…”

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FTAs in effect - Chile - Apr. 2004 Effective

- Peru - Colombia

- Aug. 2011 Effective - Jul. 2016 Effective

FTA concluded Central America 5 Signed on Feb 21 2018

Negotiation underway Ecuador (SECA)* 5th round Nov 2016

To start soon MERCOSUR (TA)**Joint feasibility study 2007; Negotiation declared May 25

2018Negotiation stalemated Mexico

Since 2008; To join Pacific Alliance as associate member

*Strategic economic cooperation agreement **Trade agreement

LAC Partners for FTA

Ecuador

– EcuadorpreferredSECA“StrategicEconomicCooperationAgreement”– KoreawillbecomethefirstAsianFTApartnerforEcuador

– KoreaexpectstoexpandresourcecooperationanddiversifyoilimportsourcesbyconcludingaSECAwithEcuador

– EcuadorexpectsanewexportswindowwhilecompetingwithotherAndeaneconomies

MERCOSUR

– KoreaandMERCOSURcompletedajointfeasibilitystudyonatradeagreementinNovember2007

– Nofurthermeasuressincethe“MOUfortheEstablishmentofaJointConsultativeGrouptoPromoteTradeandInvestmentsbetweentheRepublicofKoreaandMERCOSUR”inJuly2009

– WithgovernmentchangesinArgentinaandBrazil,MERCOSURpolicydirectionhaschanged

JointStatementforInitiatingNegotiationsforKorea-MercosurTradeAgreementinMar.2017NegotiationformallydeclaredinMay2018

Mexico

–ThetimingofFTAproposaltoeachotherwasmismatched■ Korea-MexicoSECA/FTA

❑Sept.2005Summitsagreetonegotiate“SECA”❑Feb.-Jun2006Concluded3roundsofnegotiation❑Aug2007Decisiontonegotiate“high-level&comprehensiveFTA”❑Dec.2007-June2008Tworoundsofnegotiations,thenstalemated

–KoreahasinvestedlargeprojectsinthesteelindustrybyPosco,andintheautomobileindustrybyKiaMotors,etc.

–ThetwogovernmentsagreedinApril2016tojointlystudytoresumethenegotiationsoon.

WhetherKoreatakesanindirectpathbyjoiningTPPlostsignificancesincetheTrumpadministrationcamein.MexicoandKoreabecomesharingcommonintereststodiversifytradePacificAlliancemaybeanoption

Characteristics of the Four FTAs

• FourmajorrightsintheILODeclarajon:thefreedomofassociajonandtherighttocollecjvebargainingtheeliminajonofallformsofforcedorcompulsorylabortheeffecjveabolijonofchildlabortheeliminajonofdiscriminajoninrespectofemploymentandoccupajon

•ConsultajonandcooperajonpreferredinsteadofDisputeSemlementprocedures,unlikeKORUS•Cooperajonacjvijesencouraged,but

•FTAsfurtherinsjtujonalizeandintensifytheon-goingcooperajonprograms,ratherthancreajngthem

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2014 Goias Industry Federation MOU 2015 Waste management masterplan

2008 Leon/Rivas City, Waterworks Facility FS2016 Corn Island Green Energy Town building

project 

2014 Capiata City, Sewage facility FS2017 Sewer improvement masterplan

2014 Trinidad Citty, Water and Wastewater Infrastructure FS

2012 Manta City, Water and Wastewater Infrastructure improvement FS

2011 Sewage treatment FS, Provincia Guaviare2013 Sewer improvement masterplan2015 Waste management improvement masterplan

2010 Pisco Copper Mine, Waste copper sludge incinerator FS2012 Sewer improvement masterplan2012 Lima Landfill Construction FS2013 Departamento Huánuco Water treatment FS 2014 Juliaca City Sewage treatment FS 2015 Apurimac Sewage treatment FS

2010 Mejillones Edelnor, Desulfurization-denitrification equipment of thermal power plant FS

2012 Air management improvement masterplan

CAR, EPC – KEITI MOUCAR, EPC trainees for ISCET

2014 Waste management masterplan Local officials as trainees for ISCET

Environmental Cooperation Projects

2013 Sewer improvement masterplan2015 Meteorological observation modernization FSRecuperación Río Lerma trainees for ISCET

CEPAL, July 18, 2018

Won-Ho Kim Hankuk University of Foreign Studies

Sustainability and Cooperation Commitments in Korea’s FTAs with Latin America