Emphasis on free-trade deals has increased access for Korean exports
President Lee Myung-bak’s emphasis on business diplomacy for the past three years has been catapulted Korea to the forefront of free trade and international global coordination that helped the world tide over the worst downturn since the Great Depression.
Korea’s first CEO-turned-president is praised for pulling the country out of the financial crisis with a package of comprehensive stimulus measures and open-market credited with policies. The Lee administration welcomed foreign investment, cut taxes, inked FTAs with some of the world’s largest economies while encouraging labor to cooperate more with management.
Since he took the office on Feb. 25, 2008, the Lee administration has been orchestrating trade pacts with smaller economies of South America and Southeast Asia, building experiences to push for two major trade pacts most relevant to Asia’s fourth-largest economy ― Korea-European Union FTA and Korea-U.S. FTA.
With the Korea-EU deal set to take effect on July and the Korea-U.S. pact awaiting congressional approval, the agreements are expected to further boost exports.
“Korea’s FTA policies are based on beliefs that open trade regimes can mutually benefit economies in partnerships,” Lee said at an economic forum Thursday.
“If Korea can seal FTAs with China and Japan, it would consolidate East Asian economic bloc and offer a new form of trade partnership for the region.”
The Korea-U.S. FTA was revised last year where the two countries agreed to scale back tariff cuts for cars. The Lee administration is credited for pulling through the parliamentary ratification of the deal that was halted for two years due to calls from Washington that auto and beef trade agreements were lopsided.
Lee’s teams are also praised by business groups for signing FTA with the EU on Oct. 6 following over two years of negotiations. Korea-EU FTA will open up Korean products to the EU economy which is the biggest in the world with more than 500 million consumers and GDP of more than 12 trillion euros ($16.3 trillion), according to the European Union.
In the first two years of his term, Lee made over 20 overseas visits and has invited more than 50 foreign heads to Seoul.
Leading up to the G20 Seoul Summit last year, Lee was involved in numerous working group discussions with the G20 preparation committee and pushed ministers to reach accords.
He made a visit to the October meeting of the G20 Finance Ministers and Central Bank Governor’s in Gyeongju, the last ministerial talk before the Seoul summit, to urge finance chiefs to hammer out a compromise on trade imbalances.
In his speech, he joked that if the finance ministers failed to come to a compromise, they could find themselves in the awkward position of being without transportation service at the end of the weekend meeting.
“So, I ask you to reach an agreement for the future of the world economy,” Lee said in his Gyeongju speech.
“If you don’t reach a compromise, we may not operate bus, train or airplane services when you go back home.”
The Gyeongju meeting is remembered to have produced the most breakthroughs among ministerial talks including an agreement on the overhaul of the International Monetary Fund. Dominique Strauss Kahn, managing director of the IMF, called the 6 percent shift of voting rights to emerging economies in the institution a “historical agreement” reflecting power shifts in the world economy.
Leading up to the Seoul summit on Nov. 10-11, Lee is to have made numerous phone calls to his G20 counterparts to smooth conflicts over foreign exchange policies and trade imbalances. The Lee administration had challenging task to mediate tension between surplus and deficit countries fighting over exchange rate regimes for trade advantage.
“As a host country of the world’s premier economic forum, Korea not only reflected the views of the G20 member countries, but also paid great attention to what the non-G20 nations had to say. Korea received positive evaluations from the international community because of this,” Yoon Deok-ryong, Senior research fellow Korea Institute for International Economic Policy.
Such effort has been seen in the Korea-initiated G20 agendas put forward by the Lee administration.
The two Korea-initiated agendas include the establishment of Global Financial Safety Net, an insurance mechanism gathering stand-by fund for countries facing liquidity crisis. The idea was first proposed by Lee in his 2009 World Economic Forum speech. The idea is well received by the G20 and IMF and is taken over by the French, the G20 chair for this year, as an official agenda item.
Korea has also put forward development issues on the agenda, proposing to build long-term growth plans for underprivileged countries.
