BAE KEUK IN

The South Korean government has announced it will sign a comprehensive Free Trade Agreement (FTA) with Japan by 2005.

But there is strong apprehension within South Korean society that an FTA may lead to a greater trade deficit vis-a-vis Japan, or that it may fixate the technology gap in areas where Japan is highly competitive, like precision parts and automobiles.

The government, nevertheless, has said it hopes to begin negotiations for an FTA. A senior official at the Ministry of Foreign Affairs and Trade explains the reasoning behind the decision. "The sense of crisis that we might be left behind is growing," the official said.

South Korea relies on trade for 67 percent of its gross domestic product. But it lags way behind in the global FTA trend. South Korea's first FTA was finally signed with Chile, but even that has yet to be ratified by parliament.

It is becoming increasingly apparent that to be left behind and outside the growing web of FTAs will lead to not only weaker competitiveness in exports, but also disadvantages in diplomatic and national security fields. Furthermore, both China and Japan have begun actively seeking FTAs with countries in the Association of Southeast Asian Nations (ASEAN). If South Korea lags behind any more in signing FTAs, it will be completely left behind in the movement toward the creation of an "East Asian Economic Community."

On Oct. 8, South Korean President Roh Moo Hyun revealed his intentions to press ahead with FTA negotiations with ASEAN members. He clearly spelled out the need for this policy shift and said, "If we remain as isolated as we are, South Korea will fall into economic difficulties."

Yet, there is no end to the South Korean government's problems. The most worrisome is its relations with China. Even Chang-Jae Lee, director of Center for Northeast Asian Economic Cooperation in the Korea Institute for International Economic Policy, who has been a strong supporter of an FTA with Japan, is anxious that "a bilateral FTA between only South Korea and Japan might make China feel isolated."

Apparently, China has signaled to South Korea its willingness to negotiate a "trilateral FTA among South Korea, China and Japan." The Korean government is wary an exclusive bilateral agreement with only Japan may complicate its relations with China.

China is now the second largest importer of South Korean goods, behind only to the United States. In 2002, South Korea's exports to mainland China made up 14.6 percent of total exports, while exports to the United States comprised 20.2 percent. If exports to Hong Kong are included, total exports to China comprise 20.9 percent-more than exports to the United States. Exports to Japan, on the other hand, make up only 9.3 percent of the total. The importance of the Chinese market is overwhelming.

According to this year's trade figures to September, South Korea had a trade deficit of $13.2 billion (1.45 trillion yen) with Japan, but a surplus of $8.2 billion with China. In order to achieve a balance of trade, a trilateral South Korea-China-Japan FTA would be far more advantageous for South Korea than a bilateral agreement with Japan.

But FTA negotiations with China have not even entered the preliminary stage. The South Korean government's decision to go ahead with negotiations with Japan was based on its judgment that the creation of an"East Asian Economic Community" was an inevitable trend. The government is also seeking to secure a niche for itself in the process of creating an Economic Community, as the mediator for China's participation.

At the same time, as a joint panel of Japanese and South Korean academic, business and government representatives said in its final report of Oct. 2, a bilateral FTA "will become a symbol of the partnership between the two countries and contribute to increased regional cooperation in East Asia."

Regarding "post-FTA" relations between South Korea and Japan, a senior official at South Korea's Ministry of Foreign Affairs and Trade has expectations that "once the relationship grows in volume through increased exchange of goods, money and people, the present state of things-where we are always stumbling over things such as historical issues-could gradually become a thing of the past."

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Dong-A Ilbo reporter Bae Keuk In, 34, covered the 2002 World Cup soccer tournament co-hosted by Japan and South Korea. As a member of the paper's economic news department, he is in Japan until November as a guest researcher at the invitation of The Asahi Shimbun Asia Network.