SEOUL, March 11 (Yonhap) -- The free trade pact with the United States has helped the South Korean economy cope with the global economic slump as exports of tariff-slashed goods to the American market served as a buffer against an overall drop in overseas demand, experts said Monday.
After years of hard negotiations and ratification procedures, the free trade agreement, dubbed "KORUS FTA," went into effect on March 15 last year, following a similar deal with the European Union that took effect in July 2011.
According to government data, South Korea's exports to the U.S. reached US$53.8 billion between March 2012 and January 2013, up 2.67 percent from a year earlier, while imports dropped 7.35 percent on-year to reach $39.1 billion over the cited period. South Korea enjoyed a trade surplus of $14.7 billion during the cited period, up 44 percent from a year earlier, the data showed.
"Given unfavorable conditions at home and abroad, the South Korea-U.S. FTA has produced some positive results in the past one year," said Choi Kyong-lim, Seoul's deputy minister for trade.
Vehicle exports to the U.S. gained 21 percent on-year to $10.22 billion over the cited period, while vehicle imports almost doubled to $720 million.
Auto parts, among others, benefited most from the trade pact with exports to the U.S. rising 12.6 percent to $5.23 billion, according to the data.
Foreign direct investment (FDI) to Korea reached a record high of $16.26 billion last year, up 18.9 percent from the $13.37 billion reported in 2011, according to the Woori Finance Research Institute.
The institute said the country's FTA with the U.S. and the EU as well as the elevation of Korea's sovereign credit rating boosted the status of the Korean economy, which in turn lured more foreign investment into Asia's fourth-largest economy.
"Lowered tariffs allowed local firms to sell their products overseas at lower prices, raising the competitiveness of those companies," said an official at the commerce ministry.
The KORUS FTA was expected to help South Korea's economy expand by more than 5 percent in the long run since it can lead to more exports by reducing various trade barriers, a study showed earlier. The deal could also create about 350,000 jobs that could ease local labor market conditions, a report compiled by 10 local think tanks claimed earlier.
The report by the economic institutes predicts South Korea will see its trade surplus with the U.S. increase by $140 million annually over the next 15 years after the FTA goes into effect. The nation's total global trade surplus will expand by an annual average of $2.77 billion, it forecast.
"It is too premature to say whether the KORUS FTA is beneficial or not to South Korea," said Kwon Hyuk-jae, a researcher at the Samsung Economic Research Institute.
Experts, however, say that Seoul and Washington still have lots to do regarding the KORUS FTA.
Earlier, the two allies agreed to hold a committee for "outward processing zones" on the Korean Peninsula on the day that marks the first anniversary of the implementation, but they have not scheduled related meetings due to a delay in parliamentary approval of the government reorganization bill in South Korea.
Under the trade deal, the two nations are leaving the door open for goods produced in the inter-Korean industrial zone in the North Korean border city of Kaesong to be treated as South Korean made goods.
President Park Geun-hye took office in late February but still has no Cabinet of her own, as her ministerial nominations and her government reorganization bill are still pending in parliament.
Under the proposed bill, the foreign ministry's trade negotiating functions are transferred to the commerce ministry.
Talks over possible renegotiations on the so-called investor-state dispute (ISD) in the trade pact are also suspended. The ISD clause allows companies to take governments to an independent international tribunal to arbitrate disputes. Those critical of the FTA claim that it may take a toll on South Korea.
South Korea and the U.S. have completed working-level reviews on the issue, but the Seoul government is still undecided over whether to make a formal request to renegotiate the issue due to a delay in parliamentary approval of the government overhaul bill.
The ISD mechanism between the Seoul government and foreign investors has been one of the key sticky issues, as some politicians here claim that the scheme could undermine South Korea's legal independence.
Also, the U.S. may ratchet up pressure on the Seoul government to lift restrictions on the beef trade.
Under a deal nearly five years ago, South Korea only imports American beef produced from cattle under 30 months of age due to worries over mad cow disease.
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