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In the broader perspective, Korea regards the FTA negotiation differently than Chile does; it is more like a “new experience” for Korea, but a “continuation” for Chile. Korea is just giving an FTA a try, and does not care whether this trial turns out to be a success or a failure. This is because Korea has never made an FTA with other countries before. It is quite contrary to the situation of Chile, which has already established several FTAs with most of its neighboring Latin American countries as well as Canada. Thus, it is generally expected that not only public opinion within Korea, but also Korean negotiators, would be more or less reluctant to, or at least not so active in, the negotiations.[1]

Chile and Korea have different historical backgrounds in trade; Chile has been an open economy to the world both in terms of export and import, while Korea has been open in export but rather closed in import so far. Korea has been a country very closed to imports from other countries because of its culture. Koreans think that they should protect their own industries from the competition. For a long time, imports have been considered as a threat to their industries.

Traditionally, agriculture is more than just a kind of industry for Koreans; it was long believed to be “the root” of all industries and has special meanings in the cultural context. It has been deemed as a so-called “basic industry,” without which a country cannot hold on to its sovereignty. Korea has been subsidizing its farmers for this reason. A typical example is the “dual price system for agricultural products,” which means the government buys products from farmers at higher prices and sells them to consumers at lower prices.

This multi-dimensional characteristic of Korea’s position demands that Chile understand and approach the negotiation more in terms of politics, rather than economics. This means that explaining the economic benefit from the FTA is not sufficient to lead the negotiation to success. It is especially true when the factor of the Korean government’s concerns over the next presidential election in 2002 is considered, since the FTA with Chile will negatively affect the ballots of farmers, nationalistic consumer associations, and others. Thus, what is really needed is, so to speak, a “comprehensive approach”: to persuade Korean public opinion, to soothe industries with interests at stake, and to stimulate negotiators to engage in these tasks at the same time.[2]

But, for Chile, the situation is different. During the last 10 years, Chile has developed an internationalization strategy, by multilateral, bilateral, and plurilateral approaches. Cancellation of negotiations for an FTA with Korea will thus bring about negative effects, especially for Chile’s image and credibility within the international community.

[1] Partially based on the interview with a Korean government officer who asked for anonymity.

[2] Ingyo Jung, The Economic Effect and the Meaning of Korean-Chilean FTA (written in Korea), Korean Institute for International Economic policy, April 2000, pp. 19-20. Ingyo Jung points it out in a slightly different context. “The FTA with Chile is more important in institutional aspect than in economic aspect. While the FTA will not be beneficial in its economic effect due to the distance between two countries and the small amount of trade, the FTA and the accordingly arranged institutions will be a great help in making further FTAs with large economies.”

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