[Editorial] FTA with Vietnam

Korea and Vietnam announced Monday the launching of negotiations on a free trade deal between the two countries. The announcement by their trade ministers in Hanoi followed six rounds of preliminary talks since June 2010.

Formal negotiations are scheduled to begin in September, with a final conclusion likely to be reached within the first half of next year, according to trade officials here.

We hope negotiations will proceed smoothly to ensure the early signing of the agreement, which would bring many benefits to both countries, which have seen their bilateral trade volume increasing by double digits annually in recent years. Seoul’s negotiators are expected and advised to show more flexibility in bridging differences to reach the deal.

Vietnam, with a population of more than 91 million, is Korea’s 15th-largest trading partner and eighth-biggest export market. Korea has recorded trade surplus with Vietnam since 2006, with the surplus exceeding $8.4 billion last year.

In addition to leading to an increase in bilateral commerce, the FTA with Vietnam would also help Korean companies expand exports to other member states of the Association of Southeast Asian Nations.

Korea concluded a free trade accord with the 10-member ASEAN in 2007. Under the agreement, however, Korea’s major exports goods, including consumer appliances and cars, are exempted from tariff benefits due to different positions among the association’s members.

About 2,500 Korean companies operating in Vietnam are poised to strengthen their competitiveness in the region when the free trade pact is concluded between the two countries.

The bone of contention in the upcoming negotiations is expected to be how much the two sides should concede to each other’s key demands ― opening up the market here to Vietnam’s agricultural products and lowering or eliminating tariff barriers against Korean cars and electronic goods.

It seems that with its accumulating trade surplus, Korea can be more accommodating. It needs to take a long-term strategic approach in enhancing economic ties with the Southeast Asian nation, which has a growing consumer market and abundant labor force sharing a similar Confucian cultural background.

Vietnam is now one of a long list of countries with which Korea has signed or is pushing to conclude a free trade agreement.

The country signed its latest accord with Turkey last week. It has already sealed free trade deals with Chile, India, Peru, the U.S. and EU as well as ASEAN. Korea also launched free trade talks with China, its biggest export market, in May.

With the global economic downturn aggravated, concerns are mounting over Korea’s heavy reliance on exports, prompting calls for measures to boost domestic spending. The sense of urgency was deepened by recent government data showing that exports fell 8.8 percent from a year earlier to $44.6 billion in July, while imports dropped 5.5 percent to $41.9 billion.

It is certainly necessary to stimulate domestic consumption but the need for stimulus should not reduce the importance of expanding overseas markets. Efforts should be made more strenuously and persistently than ever to increase and create demands for Korean products across the world, especially in emerging markets. Vietnam is surely one of the countries that would best reward such endeavors if we are ready to properly reciprocate.