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Amended KORUS FTA to barely affect S. Korea's real GDP: study

2017/11/10 09:55

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By Kim Eun-jung

SEOUL, Nov. 10 (Yonhap) -- Additional market openings following a possible amendment to the free trade agreement (FTA) with the United States is not likely to have a visible impact on the South Korean economy because the two countries have already scrapped tariffs in many sectors, a study showed Friday.

The Ministry of Trade, Industry and Energy unveiled an economic feasibility study on the renegotiation of the five-year-old deal, known as the KORUS FTA, which was conducted by three state research institutes during a public hearing held in Seoul.

A low-level FTA would increase 0.0004 percent of the real gross domestic product (GDP) in South Korea and contribute to US$12 million in terms of consumer benefits, while a high-level FTA would add 0.0007 percent to the real economy and improve the welfare of local consumers by $24 million, the joint study said.

Real GDP measures the value of finished goods and services adjusted for inflation.

The Korea Institute for International Economic Policy (KIEP), the Korea Institute for Industrial Economic & Trade and the Korea Rural Economic Institute jointly conducted the feasibility study.

"The number of remaining items are limited and tariff levels are already low, so an additional opening of the manufacturing sector is not expected to produce any marked fallout," Kim Young-gui, a researcher at KIEP, said during the public hearing attended by trade officials, experts and citizens. "The macroeconomic effects could rise if the two sides abolish or lower nontariff barriers and adjust other sectors."

   The joint study didn't disclose detailed figures on each sector due to worries it would reveal South Korea's strategies before entering full-fledged renegotiations with the U.S. counterpart.

The study said the FTA has expanded trade and improved market access between the two nations over the past five years.

The findings said South Korea's import from the U.S. edged down 0.8 percent from 2012, while shipments to the U.S. rose 5.3 percent.

The U.S. share of the Korean market has risen from 8.3 percent in 2012 to 11.1 percent in the first half of this year, while the corresponding figure for South Korea went up from 2.6 percent to 3.1 percent, it noted.

The ministry said it will reflect their opinions when crafting its strategy and notify its intention to renegotiate the deal to parliament within the month. This process will wrap up the domestic procedures needed for opening talks.

The U.S. administration has to send a letter notifying Congress that it intends to launch KORUS FTA negotiations in 90 days, and hold public hearings and disclose its goal 30 days prior to official talks.