Korea’s FTA Policy & Economic Relations with

Latin America

July 19, 2005

whkim@kiep.go.kr

Korea Institute for International Economic Policy

Won-Ho Kim, Director, Center for Regional Economic Studies

2

Economic Growth

0

100

200

300

400

500

600

700

800

197019721974197619781980198219841986198819901992199419961998200020022004

- 10.0

- 5.0

0.0

5.0

10.0

15.0

GDP(US $ billion)

Real GDP Growth Rate(%)

<GDP & GDP Growth Rate>

3

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

<GDP Per Capita, US$>

4

Trade

0

50

100

150

200

250

300

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

- 20

- 10

0

10

20

30

40

50

Balance(US $ billion)

Export(US $ billion)

Import(US $ billion)

5

• Korea has adhered to ‘multilateralism’ because its

trade relations were diversified.

• Before the1990s, most FTAs aimed for market access

through alleviation and elimination of trade barriers

• Recent FTAs, which include service, investment,

intellectual property rights, and government

procurement, aim at being comprehensive

• FTAs are promoted not between neighboring countries

but between countries in other regions

Characteristics of recent FTAs

6

1955-1970

1971-1980

1981-1990

1991-1995

1996-2000

2001-

2004.5

New agreement

6 14 10 49 76 53

accumulation 6 20 30 79 155 208

Source: WTO CRTA(Committee of Regional Trade Agreement)

□ Proliferation of FTAs□ Proliferation of FTAs

• FTAs expand due to deferred multilateral negotiations and the

opportunity cost of non-participation in Regionalism increases

• FTAs proliferated in the 1990s, 208 FTAs by May 2004, (300

FTAs will be in action by 2005)

• Recently, East Asian countries are actively promoting FTAs

7

Status Country Note

Implemented Chile- signed (2003.2)- entered in force (2004.4)

Under negotiation Japan- 1st negotiation (2003.12)- to be completed by end of 2005

Negotiation concluded Singapore - to enter in force 2005

Joint study concludedASEAN, Canada

- initiate negotiations in 2005

Joint study concluded EFTA - to be completed by end of 2005

Under joint study Mexico - to be completed by Sept. 2005

Joint studyIndia,

MERCOSUR, CJK

- to start soon

Status of Korea’s FTAs

8

Consideration for selection of FTA partnersConsideration for selection of FTA partnersStandards Details

Economic benefits GDP, Trade

Economic costs Restructuring costs

Opportunity costs

Political and diplomatic motivations

National security, diplomac needs

Usage of Leverage effect

Others Motivate to improve a domestic system

Interests of FTA partners

Faithful execution of agreements

9

9

Korea's Exports Markets

2004 2005(JAN~MAY) 2000 2001 2002 2003 2004 2005(JAN~MAY)11,005,758 4,820,063 Middle East 4.4 4.7 4.6 4.4 4.3 4.3

11,562,623 5,705,191 LatAm 5.4 6.5 5.5 4.5 4.6 5.144,592,658 21,192,288 Europe 16.3 15.9 16.6 16.5 17.6 18.85,633,121 3,191,728 Africa 1.3 2.0 1.8 1.6 2.2 2.8

129,525,186 57,241,489 Asia 47.1 46.5 47.6 51.3 51.0 50.749,763,175 23,673,680 China 10.7 12.1 14.6 18.1 19.6 21.0

46,232,267 18,235,341North

America 23.2 22.1 21.6 19.1 18.2 16.2

42,849,193 16,773,356 US 21.8 20.7 20.2 17.7 16.9 14.94,923,889 2,337,066 Oceania 2.0 2.2 2.2 2.5 1.9 2.1

620,181 256,111 New Zealand 0.2 0.2 0.2 0.2 0.2 0.2369,170 163,497 Others 0.2 0.1 0.1 0.1 0.1 0.1

253,844,672 112,815,918 Total 100.0 100.0 100.0 100.2 100.0 100.0

10

Korea's Imports Origins

2004 2005(JAN~MAY) 2000 2001 2002 2003 2004 2005(JAN~MAY)33,665,305 17,241,571 Middle East 16.1 16.6 13.7 15.1 15.0 16.86,651,153 2,689,745 Latin America 2.0 2.4 2.5 2.6 3.0 2.6

30,535,455 13,618,687 Europe 12.5 13.4 14.3 13.8 13.6 13.22,847,276 1,131,210 Africa 1.8 1.2 1.1 1.1 1.3 1.1

111,246,531 50,303,442 Asia 43.8 44.7 47.5 48.7 49.6 48.929,584,874 15,537,486 China 8.0 9.4 11.4 12.3 13.2 15.1

30,971,458 13,562,454North

America 19.5 17.1 16.3 14.9 13.8 13.2

28,782,652 12,583,755 US 18.2 15.9 15.1 13.9 12.8 12.28,498,005 4,210,538 Oceania 4.3 4.5 4.5 3.8 3.8 4.1

879,269 371,556 New Zealand 0.4 0.5 0.5 0.4 0.4 0.447,504 27,030 Others 0.0 0.0 0.0 0.0 0.0 0.0

224,462,687 102,847,787 Total 100.0 100.0 100.0 100.0 100.0 100.0

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Korea's Trade Partners

2004 2005(JAN~MAY) 2000 2001 2002 2003 2004 2005(JAN~MAY)44,671,063 22,061,634 Middle East 10.0 10.5 9.0 9.5 9.3 10.218,213,776 8,394,936 Latin America 3.8 4.5 4.0 3.6 3.8 3.975,128,113 34,810,975 Europe 14.5 14.7 15.5 15.2 15.7 16.18,480,397 4,322,938 Africa 1.5 1.6 1.4 1.4 1.8 2.0

240,771,717 107,544,931 Asia 45.5 45.6 47.6 50.0 50.3 49.979,348,049 39,211,166 China 9.4 10.8 13.1 15.3 16.6 18.2

77,203,725 31,797,795North

America 21.5 19.7 19.1 17.1 16.1 14.7

71,631,845 29,357,111 US 20.1 18.4 17.7 15.8 15.0 13.613,421,894 6,547,604 Oceania 3.1 3.3 3.3 3.1 2.8 3.01,499,450 627,667 New Zealand 0.3 0.3 0.3 0.3 0.3 0.3

416,674 190,527 Others 0.1 0.1 0.1 0.1 0.1 0.1478,307,359 215,663,705 Total 100.0 100.0 100.0 100.0 100.0 100.0

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Korea’s (Economic) Relations / LA•Trade

•Dynamic expansion in the 1990s

•Fluctuation due to respective economic crises

•Recent stalemate of the trade volume, but improving in 2004 -> US$18 billion

•Investment (about US$2.5 billion)

•Dynamic increase in the mid-1990s

•Lost momentum since the financial crisis

-Recent diversion to China

•ODA: Credit lines; Grants

•Korean residents: About 130T (50T in Brazil, 25T in Mexico, 20T in Argentina, 10T in Paraguay…)

13

• Financial Cooperation• Joining IDB in March 2005• CABEI under study

• FTA• Chile since April 2004• Mexico under joint study• MERCOSUR under discussion• CACM under consideration

• Consultation Channels• SICA• MERCOSUR• Rio Group Troika

14

Korea’s Exports Variation

Total Asia Europe North AmericaLatin AmericaMiddle EastOceania Africa1990 4.2 3.2 28 -6.4 20.9 13.3 -6.1 -1.61991 10.5 15.6 6.6 -4.1 36.1 26.4 0.9 172.21992 6.6 15.6 -7.6 -2.6 73.5 5.7 9.9 -26.51993 7.3 17.5 4.3 -0.9 -0.8 5.8 4.3 -18.11994 16.8 18 12.5 12.5 30.7 4.4 7.4 71.21995 30.3 35 50.3 18.1 14.6 26.1 25.7 -111996 3.7 6.8 2.6 -11.8 21.6 17.2 28.3 11997 5 4.2 16 1.2 -3.3 -10.7 10.4 35.51998 -2.8 -16 15.8 5.3 2.3 29 20 -7.51999 8.6 14.4 -9.2 27.7 -2.5 -2.8 -5 -16.82000 19.9 23.2 7.9 28.7 8.4 18.6 15 -4.62001 -12.7 -13.8 -14.9 -17 3.8 -5.9 -6.4 32.42002 8 10.6 12.7 5.6 -8.9 5 10.5 -3.32003 19.3 28.4 18.1 5.1 -0.7 14.6 34.7 8.82004 31 30.4 39.8 25.3 31.4 28.1 0.4 80.6

Jan-Mar 2005 12.8 8.1 22.2 10.5 25.4 18.7 27.6 22.1

<Figure 3> Asia's Export to Latin America (1992, 2002)

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(US$ millions)

<Figure 4> Trend of Asia's Exports to Latin America

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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Share (%)KOR

JPN

HK

CHI

SIN

MAL

AUS

THI

NZ

17

Korea’s FDIs in Latin America

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300Latin America

World

(US$million)

18

Performance of Korea-Chile FTA

*FTA: April 2004~February 2005**Source: KITA

- 1500

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- 500

0

500

1000

1500

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2500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 FTA

US$million

Exports Imports Balance

19

Major Exports to Chile

FTA2002 2003 2004

FTA (April 2004~February

2005)

US$ m var US$ m var US$ m var US$ m var

Total Exports - 454.0 -20.7 517.2 13.9 708.3 36.9 734.8 58.6

Automobile immed 11.3 347.0 162.3 1340.5 250.1 54.0 261.1 59.0

Mobile phone immed 31.0 -64.0 23.1 -25.4 57.2 147.2 70.9 225.7

Light oilImmed, 5

44.7 - 81.6 82.6 66.5 -18.5 68.5 60.7

Chemical products

Immed, 5

33.4 -9.2 46.8 40.1 59.2 26.4 67.9 61.8

Steel & Iron 5 yrs 28.3 -13.5 28.6 1.2 27.7 -3.2 28.6 6.1

Auto partsImmed, 5

1.3 -20.3 18.9 1303.0 23.0 21.6 22.1 30.3

Wash machine

excluded

20.2 -10.2 15.3 -24.3 19.1 24.8 17.1 36.1

Color TV immed 13.9 43.2 7.5 -46.4 13.3 78.1 14.8 96.8

Tire10, 13 yrs

9.2 -15.6 10.4 13.2 13.9 33.5 13.5 29.3

Camera, Cam immed 2.5 23.0 3.6 45.8 9.8 169.2 9.9 100.8

Refrigeratorexcluded

7.8 -5.2 5.7 -27.6 7.1 24.5 6.7 15.3

VCR immed 2.8 85.2 2.9 3.3 3.4 17.1 3.3 53.3

%/total 　 45.5 　 78.7 　 77.7 　 79.5 　

20

Major Imports from Chile

　　 FTA

2002 2003 2004FTA (April 2004~February 2005

US$ m

%US$ m

%US$ m

% US$ m % var

Total imports - 753.9 100.0 1057.

7 100.0

1933.5

100.0 1752.8 100.

0 54.3

Copper products(74)Immed,

7429.3 56.9 513.1 48.5 954.2 49.3 862.3 49.2 63.8

Copper ore(2603) immed 120.6 16.0 219.1 20.7 513.1 26.5 442.2 25.2 58.3

Chem Timber Pulp immed 69.5 9.2 81.8 7.7 94.6 4.9 89.9 5.1 14.9

Metil Alcohol immed 0.1 0.0 82.9 7.8 86.0 4.4 69.4 4.0 -32.6

Red iron ore immed 39.6 5.2 15.3 1.5 37.6 1.9 37.3 2.1 132.

4

Molibden ore immed 4.3 0.6 10.3 1.0 47.7 2.5 60.9 3.5 463.

5

Pork 10 yrs 3.9 0.5 23.1 2.2 42.9 2.2 41.6 2.4 58.4

Grape 10,sason 8.7 1.2 13.7 1.3 13.1 0.7 10.9 0.6 -2.2

Thornback 10 yrs 5.7 0.8 10.0 0.9 8.5 0.4 6.7 0.4 -31.2

Wine 5 yrs 0.9 0.1 2.4 0.2 6.8 0.4 7.6 0.4 169.

7

% of Copper related prod

- 72.9 69.2 75.9 74.4

21

International price of copper

*Spot Settlement Price

**Source: New York Mercantile Exchange, Inc. (http://www.nymex.com)

76.7569.7

74.8

104.3

120.5

148.7 150

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160

2002 6년 월 2002 12년 월 2003 6년 월 2003 12년 월 2004 6년 월 2004 12년 월 2005 2년 월JUN 2002 DEC 2002 JUN 2003 DEC 2003 JUN 2004 DEC 2004 FEB 2005

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Thank You