It's a Deal: ASEAN-South Korea FTA

♠ Posted by Emmanuel in , at 6/05/2009 01:35:00 PM
Here is another important data point in ASEAN's (Association of Southeast Asian Nations) goal of forming a single market by 2015 . With WTO negotiations stalled, ASEAN countries have not turned their back on trade and have actively sought free trade agreements with regional counterparts [1, 2]. ASEAN can now chalk up South Korea alongside the antipodean pair of Australia and New Zealand. In the works are deals with India, Japan, and China. Think of ASEAN's activities as a hub-and-spoke arrangement. Within ASEAN, they are striving to create a single market by 2015. In turn, this is complemented by various efforts to sign FTAs with counterparts in the wider Asia-Pacific region. From the Manila Times:
The leaders of South Korea and the group of 10 Southeast Asian nations ended a two-day summit by also pledging further cooperation to boost Asia’s financial sector by supporting the development of a stronger regional bond market. In an immediate move to strengthen economic ties, Seoul and the Association of Southeast Asian Nations (Asean) signed an agreement to complete a free-trade pact they hope will nearly double trade to $150 billion by 2015.

The signing procedure comes after the two sides reached a free-trade agreement on investment in April this year, wrapping up years of negotiations to step up bilateral trade and investments. South Korea’s Foreign ministry expected that the agreement with each member of the Asean would go into effect within a year.

South Korea and the Asean have had free trade talks on four areas, such as merchandise, services, investment and dispute settlement, with the first round of negotiations launched in February 2005. The investment accord is the final plank of a comprehensive pact that also covers trade in goods and services. The trade in goods pact went into effect in 2007 and the services agreement last month after talks began in 2005.

In 2008, two-way trade was worth $90.2 billion, compared with $46.4 billion in 2004. Asean is South Korea’s fifth-largest trading partner, and that country’s investments in the region topped $5.9 billion also in 2008...

South Korea is pushing to further increase its presence and influence in Asean, which has a combined population of almost 600 million and gross domestic product (GDP) of around $1.3 trillion. GDP, a key measure of the economy, is the total cost of all goods and services produced in the country in a year.

Analysts said Seoul’s neighbors China and Japan were already ahead in engaging the regional bloc. South Korea’s Finance ministry said the country sees Asean “as an export market which can offset sluggish markets in developed countries,” especially after the global financial crisis.

Apart from exports, Asean officials said South Korean companies were expected to benefit from infrastructure spending, which is a major part of government stimulus packages in Southeast Asia. Seoul will also have better access to the region’s massive wealth in natural resources including timber, rubber and oil and gas.
The rationale for both aides looks clear: South Korea gains better access to Southeast Asian consumers to help offset falling demand in the West. Meanwhile, ASEAN countries open up more opportunities for their agricultural and natural resource exports. Whether projected trade gains materialize will be interesting to watch.