During 2016, Korea has shown renewed efforts on the economic diplomacy front, particularly so towards Latin America. In that region, free trade agreements (FTAs) are in place with Chile, Peru, and Colombia ― the latter of which came into force July 15. Currently, multilateral negotiations are underway with countries from the Central American Integration System (SICA) since June and bilaterally with Ecuador since August 2015. Negotiations for an FTA with Mexico, stalled since 2012, are expected to be re-launched by the end of this year.
While on the economic front the expansion of Korea's networks with Latin America will help the country secure new markets in the midst of falling exports, on the diplomatic front this trend holds greater significance. Through this strategy, Korea is institutionalizing long-term cooperation with Latin American countries. More importantly, considering that Korea was the first East Asian country to seek FTAs with Latin American partners in the early 2000s, and that since then both China and Japan have followed suit, Korea can be seen as leading the way for economic integration between the two regions.
After signing its first-ever FTA in 2004 with Chile ― for whom it was also the first with an East Asian country ― South Korea has inked FTAs with 52 countries. Among them, the FTA with Peru was signed and entered into force in 2011. Adding the recently enforced one with Colombia, and the upcoming ones with SICA, Ecuador and eventually Mexico, Korea will have trade agreements with 11 countries in Central and South America. Comparatively, Japan holds FTAs with three countries (Mexico in 2004, Chile 2007 and Peru 2011) and is negotiating one with Colombia. As for China, despite being one of Latin America's biggest trading partners, it has so far institutionalized economic ties through FTAs only with Chile (2005), Peru (2009) and Costa Rica (2011).
Beyond the potential for expanding commerce on Korea's traditional exports, FTAs with Latin America are expected to create opportunities for Korean businesses in new areas such as energy and infrastructure, medicine and food, among others. Even further, the inclusion of a Youth Forum in the 2016 Korea-Latin America Partnership Forum held in Seoul in June reflects the Korean government's aim to support people-to-people exchanges with the region, with a view to nurture a sustainable network for business-to-business exchanges in the future.
For Latin America, free trade with Korea naturally represents both challenges and opportunities. On the one hand, strong domestic opposition from sectors such as the automobile industry has been a key factor behind stalled negotiations with Mexico and delayed enforcement with Colombia. On the other hand, the potential for increasing Latin American exports to Korea is clear. Trade between Central America and Korea has seen an average annual growth of 16 percent within the last two decades, reaching up to $5 billion in 2014. As illustrated by the Chilean example, this would only increase in the aftermath of an FTA. Korea's bilateral trade with Chile, which stood at $1.6 billion in 2003, surged more than 300 percent up to $6 billion in 2015. Based on this successful experience, Chile and Korea are now seeking to further expand the scale and scope of their agreement into new sectors.
However, the importance of Korea-Latin America commercial ties goes well beyond bilateral trade figures. As stated by Andres Rebolledo, Head of the Department for International Economic Relations of the Chilean Ministry of Foreign Affairs, during his recent visit to Seoul, the Chile-Korea FTA "was the first step for Chile's insertion in Asia and served as a model for FTAs with the other great economies in the region, China and Japan." Similarly, Colombian trade experts have emphasized the importance of the Colombia-Korea FTA, being not only their first with an Asian country but also serving as a platform for furthering Colombia's relations with East Asia as a whole.
As illustrated so far, Korea's engagement with Latin American countries should be seen not only as pursuing the urgent task of revitalizing the Korean economy, but also as an opportunity to play a strategic role in nurturing interregional exchanges. By building up on Latin America's growing interest in Asia and by steering the institutionalization of economic ties through FTAs, as well as fostering closer bilateral and multilateral cooperation, Korea has a clear chance for leadership in East Asia―Latin America relations.
The writer holds a master's degree in Korean studies from the Academy of Korean Studies and a master's degree in development policy from the KDI School of Public Policy and Management. She can be reached at faure.ag@gmail.com.