“Now is the Time for Food Sovereignty” – Korean Consumer Gyeonghee Yang on the Korea-China FTA

On November 10, 2014 at the APEC Summit in Beijing, President Park Geun Hye and General Secretary Xi Jinping announced that the Korea-China free trade agreement negotiations were “practically concluded.”Gyeonghee Yang is a consumer of the Korean Women Peasant’s Association monthly agriculture box scheme. She also volunteers with My Sister’s Garden, a project also run by the KWPA. She believes that consumers’ fates are entwined with that of producers’, and that they must work together to change the future of Korea’s agriculture. On Monday, November 24th, Jeong Eun Hwang and I met with her to discuss the Korea-China FTA from the perspective of a Korean consumer. (Interview by Stephanie Park, Interpretation by Jeong Eun Hwang). *This interview is the end of a 4-part expose by the International Strategy Center on the impact of the Korea-China FTA on Korean civil society.*


How did you as a consumer become interested in ethical consumption?
I quit my job 2-3 years ago. While I was working, I didn’t have time to consider ideas of consuming and consuming the ‘right’ way. After I quit, I felt that I should use my education to work to improve society. I first learned about the concept of ‘food sovereignty’ through a friend who was involved with the KWPA and their postings on social media. So I began to participate in the box scheme offered by the KWPA, and also began trying to find ways that I could contribute to their vision as a consumer. Through working with the KWPA, I began looking further into the issue of food justice and food sovereignty. An especially important text for me was the Nyeleni Declaration on Food Sovereignty[1]; I was shocked when I read it, and I also thought, “Maybe this is the answer to our future.” Food sovereignty is important to all human beings. As consumers, we should have the right to choose our own food that’s been produced sustainably and safely, and that is culturally proper. It seems funny to even have to say that that’s a basic right every human being should have, but the reality is that we live in a world where food sovereignty is taken away from us.

I’m not sure if I’m a ‘conscientious consumer,’ though. I think it’s hard to have a definite definition of what that looks like; rather, it can only be decided on a case-by-case basis. I’m not always doing the absolute right thing in terms of my consumption. But I know about and believe in the idea of food sovereignty, and I think there’s a problem with the current structure of food in Korea.

What would you say is the general consumer reaction to the FTA passing?
The general reaction seems to be that, as with all FTAs, people expect that prices will drop across the board. As for me, when I talk to friends, I ask them, “Am I a Korean or Peruvian citizen?” Because in relation to food consumption, these days sometimes it’s hard to tell. As an example, during the summer, it was really hot, so I ate a lot of frozen blueberries. One day I got curious and checked where they were from – and it turned out they were all from Peru. When the FTAs first began to pass, I thought it wouldn’t affect me that much – I don’t go out looking to buy and consume imported things. But I found that it already had. It’s not that I had consciously made the choice one way or the other as to whether I would consume foreign products – I didn’t really consider it that much – but I expected to at least know if I was. Instead, I found I was already unintentionally doing so. The government and society pushes you to do so – they make it hard to differentiate between domestic and international products and incentivize you to buy the international imported items by selling them at a cheaper price than domestic products.

The common argument is that the consumer can only benefit from the FTA passing; for example, market competition improves and prices go down, which is good for you, the consumer. Do you agree with that line of thinking?
I disagree with that statement for two reasons. The first is because after the Korea-EU FTA was finalized, people expected the prices of luxury brand items to go down – but actually, the prices increased. So FTAs don’t give consumers the benefits that they claim to.

The second reason is that, even in cases where this is true, it’s still not good for consumers in the long run with regards to food sovereignty. For example, the blueberries I ate this summer were cheaper and more convenient, but I feel that my decision to consume them will return to me as a boomerang effect, as it will do for the rest of society. If we consume more foreign produce, then foreign sales will increase; the, Korean food sales will decrease, and it will negatively impact the production of Korean food in the future.

Why is this a problem? For example, the Philippines, used to produce their own rice – but now, they have to import it all[2]. With the Korea-China FTA, our rice markets will open, and perhaps the same thing will happen to us, since they also did not have a vision for their country’s agriculture. Sure, we can buy and eat a cheaper price now, but it will have an impact on us in the future. I feel guilty about it as well – I am not a model consumer. But the policy decisions that are being made are so crazy – what choice do I have but to make the decisions that I have as a result?

Are consumer groups organizing any protests against the FTA? What are your own personal plans to oppose it?
I don’t have in-depth knowledge of what consumer groups are doing, but I know that there is one social media webpage on food sovereignty that held an education awareness initiative, encouraging people to learn about food sovereignty, FTAs, and to educate other people about these things – and a lot of regular people joined and became educated through that. There are also anti-FA demonstrations going on – I didn’t participate, but I know that consumer cooperatives are participating in that as well.

Solidarity amongst the different sectors is crucial, because we as individuals have little power. We have to gather together in order to gain strength. At the same time, though, I know how difficult that is. So, what should I do? I can buy Korean produce, and participate in demonstrations, but as an individual, my contributions feel like they have little power. Truthfully, I’m not optimistic about things. The FTA is so powerful – it’s like a tsunami. What can we do against it? But I am continuing to think about how we can create solidarity; the path is not clear, but it is important to fight nevertheless.

Why do you think it’s important for consumers to act in solidarity with those whose livelihoods are directly affected by the FTA, such as farmers and small business owners?
There absolutely needs to be consumer solidarity with the farmers and small to midsized business owners, because humans are social animals. Consumers can’t exist alone as consumers; if there are no farmers, there can’t be any consumers. We need to think of ourselves as a community, where the goal is for all people to live well together, because our welfares are ultimately tied up together – you can’t separate ‘farmers’ and ‘farmers issues’ from that of the consumer.

As a consumer, what would your ideal vision of Korea’s food system look like, and what would that require from others (be it farmers, markets, the government, or other sectors)?
I think the most important thing is sustainability, to have a system where farmers can cultivate constantly and where their livelihood is secured. The Korean government doesn’t have a real policy on agriculture, which leaves Korean farmers vulnerable. For example, transnational seed company Monsanto has already entered the Korean market; most people aren’t aware that this has happened, but the result is that farmers are forced to purchase seeds and take up monoculture. If this continues, the biodiversity of Korea will be lost, and food will become a weapon. A better alternative is garden farming, which is traditional Korean farming. Through that, we can replant native seeds, and can plant many different crops so that the soil’s nutrients are sustained.

The Korean government’s policy is lacking, because it’s not for the farmers. The leaders don’t even think about the problem. Sometimes I even wonder: do they even know what agriculture is? I can actually understand that mindset to an extent, because when I was busy working, I also didn’t have time to think about such issues. But there needs to be an overall structural change. People need to be able to have a choice, and their choices should not be taken away. We also need to protect food for the next generation so that they can have the same rights and same choices that we have. To make all of this possible, we need to change the social system; and consumers need to be aware of that. That’s why education is so important – to show agriculture’s link to the most basic aspects of life.

The readership of the ISC’s World Current Report includes international readers: what would you like to say to them as a Korean consumer?
First, I am reminded of something I heard about ten years ago, that the Korean company Daewoo was doing a land grab in Madagascar. Under the Lee Myung Bak administration, they leased land there to grow agricultural products for Korea. Madagascar’s government supported the deal, but it caused a lot of problems for the people of Madagascar[3]. I was shocked when I heard the news about what had happened – it was at that time that I started to hate the concept of food security. I hate that term because I think it’s dangerous to see food as a security issue, because if we see it that way, food becomes a weapon and a justification to harm and oppress other countries. So I want to apologize to the people of Madagascar as a member of Korea society.

Secondly – I want to reemphasize the fact that there’s nothing one individual can do alone – that’s why we need solidarity. Global solidarity is definitely needed. I would like to recommend that people read the Nyeleni Declaration on Food Sovereignty if they haven’t already, in the hopes that it will inspire them as it inspired me.

And lastly, I would like to tell everyone a message, which is also my favorite quote from the Nyeleni declaration: “Now is the time for food sovereignty!”

[1] The Nyeleni declaration on food sovereignty was produced at the Forum for Food Sovereignty in Sélingué, Mali, in 2007. The forum was a result of people from grassroots movements all over the world coming together to discuss how they could shape the development of a sustainable food system. To read the full declaration, visit: http://nyeleni.org/spip.php?article290.

[2] In the past, the Philippines used to be self-sufficient in rice. Now, however, it is one of the world’s top importers of rice; in 2007, it was listed by the US Department of Agriculture as the number one importer of milled rice. This proved to be a problem during the 2008 world food price crisis when international rice prices skyrocketed, leading to national hunger problems. According to the Philippine Human Rights Information Center, “the country’s transformation from self-sufficiency to international dependency indicates a lot about how the government has been fulfilling its obligations in relation to the right of Filipinos to food.” To see the full report, visit: http://philrights.org/wp-content/uploads/2010/10/World-food-crisis-and-the-Filipinos-right-to-food.pdf.

[3] In 2008, South Korean firm Daewoo Logistics announced plans to buy a 99-year lease on a million hectares in Madagascar with intentions to industrially farm corn and palm oil. Production was mainly earmarked for South Korea, in the name of lessening dependence on imports. The plan was put on hold indefinitely in early 2009 after it earned massive international criticism.


“A Culturally Economically Independent Community” – Small Business Owner Jeong Moon Chae on the Korea-China FTA

On November 10, 2014 at the APEC Summit in Beijing, President Park Geun Hye and General Secretary Xi Jinping announced that the Korea-China free trade agreement negotiations were “practically concluded.” On November 21, 2014 ISC Policy and Research Coordinator Dae-Han Song interviewed Heo Jeong Moon Chae, owner of a wood recycling business on the impact of the Korea-China FTA on small and medium sized enterprises. *This interview is part 3 of a 4-part expose by the International Strategy Center on the impact of the Korea-China FTA on Korean civil society.*


Can you introduce the business that you operate?
We are a wood recycling business. We take wood pruned from trees in the mountains, or on streets and roads or wood discarded from construction sites. We take all of that and turn it into sawdust. Then, we provide it to organic fertilizer companies where it is mixed with animal manure. Or, we provide it directly to livestock producers to help them dispose of their animal manure. We employ five people in the factory; one in the office; and 4 truck drivers – since we transport materials on a large-scale.

How did you feel when you heard that the Korea-China FTA was “practically concluded”?
When I heard the news, my first reaction was, “We are screwed!” There had been talk about it for a while, but they hadn’t announced that it would be that day. While our direct clients are livestock owners and organic fertilizer producers, the ones that use the fertilizer are farmers. So for us to do well, farmers have to farm a lot.

The FTAs are killing farmers. So crops from the fields will decrease. Then, the amount of fertilizer that is produced will decrease. If fertilizer factories go out of business then we go out of business. When the Korea-New Zealand or Korea-Australia FTAs were being negotiated, the livestock portion was very important to us. That’s because our business is connected to farmers and livestock. Only when they do well, do we do well.

Many people say, “Korea can only survive when our big corporations do well, in particular Samsung.” What do you think of that? Why are small and medium enterprises important?
When we say small and medium enterprises, we are talking about a whole range of businesses. Any business with revenue under 10 billion won (about US$ 10 million) is considered a small and medium sized enterprise. We are a family owned business. In that regard, we are small. Our revenue is 2 to 3 billion won. However, we are big in the sawdust industry: While we are small, there are many other smaller companies.

Samsung, Hyundai, LG – they are big international companies. But in our sector, there are other businesses and self-employed people associated and connected with us. Let’s say there are a hundred of us [sawdust producers] nationally, then us along with all those connected to us, like smaller businesses and truck drivers connected to us, will greatly outnumber those that can be employed at Samsung or Hyundai.

When a large corporation enters a market and starts to gobble us up, then we turn from independent producers to subcontractors. As that happens, more and more of the profits get concentrated in the conglomerates like Samsung and LG; of course, these profits aren’t going to their employees or the small and medium enterprises. They are simply going to the stock holders.

In the news, you hear announcements of various policies that supposedly make Korea a good place to start a business. But in reality, none of these benefits go to small and medium sized businesses. For example, when it comes to taxes, they say that they need to increase corporate taxes. The impact of those taxes on small businesses is great. But, the big corporations get to reap a lot of benefits. For example, if you use more than a certain amount of electricity then the government subsidizes you. Small businesses can’t even apply to this. There was recently an article about how almost all electricity subsidies were going to the top ten corporations. And like we hear in the news, corporations utilize lawyers, exploit the legal structure, and find loopholes to get out of paying taxes. Small businesses don’t have that type of influence.

Just because Samsung, LG, and Hyundai do well does not mean that our people will do well. It just means that the largest shareholders in those companies reap great profits.

What do you think will be the impact of the Korea-China FTA to small and medium sized businesses?
If we look at the Korea-China FTA, the basic premise is that Korea would gain services, finance, and intellectual property from China; in exchange, it would hand over agriculture and manufacturing. If we look at small and medium enterprises in our country, they are focused mostly on manufactured goods and domestic industries. When they talk about intellectual property rights in the Korea-China FTA, they are talking about hallyu [i.e. Korean entertainment (e.g. movie, music, television) industry]. Experts have said that manufacturing is ruined.

Politicians use economic indices to fool people. When our country’s GDP goes up, we still have to investigate where that money goes. The direction the government is going is scary. Agriculture and manufacturing provide the basic goods in people’s lives: They are the essential goods; Stocks are just paper. Yet, the ones with the stocks keep making more money.

What would you say is the character of small and medium sized businesses?
Well, as I said before the designation comes from your level of revenue. Many small and medium sized corporations are playing the role of subcontractors for big corporations. But if the government continues to only help and support big corporations, then more of these small and medium sized enterprises will become subcontractors to the large corporations.

Companies produce goods. They also hire workers. These workers use their wages to consume goods. If we continue down these pro-big corporation policies, they are going to destabilize this circulation.

Is there a possibility that large corporations will start subcontracting Chinese companies?
Now, with tariffs gone, they will probably examine that possibility. If before we used raw materials from our country, now we start to import them. There’s a lot of propaganda saying that this FTA will benefit small and medium sized enterprises. From the point of view of a corporation, the FTAs can be profitable. For example, when we sign FTAs with Europe or Japan then we can acquire cheap machinery that they specialize in. Then, the domestic company that produced this machinery goes bankrupt.

Already, we import refuse from Japan. Even in my instance, because prices in Korea are more expensive, I start to wonder if I should produce sawdust with cheaper materials from China or Russia. This doesn’t allow for circulation within our own country. However, when we look at it from the perspective of profit, we can’t but consider these things.

Why is domestic circulation important?
Because we are living in this country. If we just calculate in terms of money, then through the exchange rate maybe we can get cheaper materials or cheaper labor. But, this is our country. I live in this land. The number of jobs here will decrease. Maybe tourism from China will increase. But what is someone like me supposed to do? The only type of job I would be able to get will be at a tour agency, or selling tourist goods, or learning Chinese and becoming a guide. The food we eat, the clothes we wear – they won’t be produced by us. I can’t work in those companies nor would I be able to start such company. I would only be able to work in a big corporation or at welcoming tourists. Wouldn’t the structure of a country become strange? Can that still be considered a country? I think it distorts its character as a community that is economically and culturally independent.

What can the government do to protect small and medium sized enterprises?
They have to change the direction of its policies. Korea is calling itself a business friendly environment. But, those benefits do not apply to small businesses. It is just a country where it is easy for big business to succeed and foreign companies to invest in. If we keep going in this way, only retailers will remain. We will not have people that produce and create value, but simply ones that exploit the exchange rate. The structure of our country could potentially change from producing to simply being consumers and retailers.

During the Lee Myung Bak Administration, as part of his green energy plan, he started to burn tree and wood refuse for energy. Companies like ours and the ones that use saw dust to make wood planks had a fit. The materials that would have gone to assembling wood-planks were now going for use as alternative energy. As the supply of materials shrinks, the prices increase. To deal with this, we created the Association of Recycled Wood.

When the government set a specific percentage of discarded wood to be used for altnerative energy, the big corporations started to enter. Previously, the companies that turned this wood refuse into saw dust and recombined them into planks were all small companies. As we started to produce woodchips, big corporations came in. Dong Suh Foods would create a corporation that would produce wood chips. Because they have a lot of capital, they would create huge wood chip processing facilities. In that process, many of the small companies went out of business. So through our Association, we are working to limit the entry of big corporations and designate this sector to be friendlier towards small and medium sized companies.

Is there anything you want to say to people abroad?
People abroad also have to live and survive day by day. So, some of them will eat Mac Donald’s hamburgers even though they know it’s not good for them. It may be healthier to prepare food at home; but because there isn’t time or money, they do not. I wish those living abroad would examine their lives in a larger perspective: “What are you eating? How are you living your lives?” Instead of just being, “I can’t help it, I don’t have any money.” I wish they would ask themselves, “What are the connections? Why don’t I have money in my pocket? What is the impact on my health? Who is taking my money?” Then it will become clear how we need to transform society to create true peace and fairness for ourselves, our neighbors, and posterity.

“Heralding the Death of Korean Farmers” – Korean Women Peasants Association Vice President Kyeongrye Han on the Korea-China FTA

On November 10, 2014 at the APEC Summit in Beijing, President Park Geun Hye and General Secretary Xi Jinping announced that the Korea-China free trade agreement negotiations were “practically concluded.” Kyeongrye Han is a farmer on Jeju Island and the Vice-President of the Korean Women Peasants Association. On Friday, November 21st, I and ISC Communications Coordinator Jeong Eun Hwang met with her to discuss the recent passing of the Korea-China FTA and its impact on Korea’s farmers. (Interview by Stephanie Park, Interpretation by Jeong Eun Hwang). *This interview is part 2 of a 4-part expose by the International Strategy Center on the impact of the Korea-China FTA on Korean civil society.*


Firstly, why are Korean farmers opposing the Korea-China FTA?
It’s not that we only oppose the Korea-China FTA; rather, we are against FTAs of all forms. Throughout its history the government has lacked a basic vision for agriculture, and since the 1960s when industrialization started, Korean agriculture has been sacrificed more and more for the sake of developing industrial power. Even Korea’s own agricultural and trade policies happen at the expense of Korea’s own agricultural industry. All FTAs destroy Korean agriculture. Korean farmers know that the FTA and government policies will kill them; they know it, instantly.

As for the Korea-China FTA specifically, China has a lot of arable land, and production costs there are much lower than in Korea (anywhere from a fifth to half of the cost). China is also geographically very close, much closer than any other country Korea has signed an FTA with; they also produce almost exactly the same types of produce as us. Because of these factors, even the smallest openings of Korea’s market to China will have a huge impact on Korean farmers that may be impossible to recover from.

For example, currently there are Sanitary and Phytosanitary Measures (SPS) in place for Chinese products; produce and meat should be frozen or processed – nothing live. This is so that if there is contaminated produce or livestock, Korea can halt trade. While the measure is currently still in place, China is pressuring Korea to remove it, and both have committed to renegotiate its terms in the future. Removing this provision will remove the primary barrier to Korea’s livestock and fresh produce. Typically, products should be quarantined and checked, a process which takes two-three days, but if the measure is removed, the process would be shortened to just a few hours, making it easier for Chinese producers to penetrate the Korean market with more perishable items. If it is renegotiated, fresh fruit, vegetables, and livestock will be able to enter the country from China, and one of the last measures to protect Korean farmers will be gone. China already produces 70% of Korea’s agricultural imports without the FTA; if the FTA takes effect, it will destroy Korean farmers and Korea agriculture completely.

As a farmer, how do you feel the impact personally of the FTAs?
I farm 120 cows at a time; before the KORUS FTA was signed, I received a reasonable price for them at the market. But since then, the price continues to steadily decrease. The government subsidizes those who can’t continue farming because the money they earn does not recoup production costs – but that will stop this year. I and other farmers can no longer be guaranteed our livelihoods through farming. If the market continues to open, this uncertainty and decrease in our welfare will just continue until we have nothing left.

The Korean government is arguing that this is the smallest opening of the agricultural and marine products market amongst all of the FTAs it has signed, and thus sees its negotiations as a victory. What do you have to say to that?
First, it’s necessary to point out that the content of the agreements have not been fully released, so the accuracy of the statement can’t be verified. It’s true that from what we have seen so far, the government did try to protect agriculture, and it’s true that the concessions they made are less than we had expected. However, such facts are nevertheless meaningless: even without the FTA, China already has such a large presence in our agricultural markets that even the smallest opening will cause irreparable damage. Furthermore, they may have protected agriculture now – but after ten years, they are supposed to agree to lowered tariffs, and after twenty years, there are supposed to be almost no tariffs. So in the long run, it’s impossible for the government to say they care about Korean farmers and agree to sign the Korea-China FTA. It’s merely the difference between killing Korean farmers swiftly now or dragging it out over the next two decades.

What about the argument that the future of Korea’s agriculture actually lies in exporting agricultural products to China, or in processing internationally imported agriculture into Korean processed products to then be exported internationally? Do you think that idea holds any merit?
That idea is so ridiculous it seems almost childish. China’s processed product market is already incredibly competitive – their range of products is so wide, and they already have lower prices than Korean products. Korea wouldn’t be able to compete in the Chinese market. Furthermore, the people making that argument have their own biased motivation for doing so. One of the major proponents of this idea is Kim Jae-soo, the CEO of the Korea Agro-Fisheries and Food Trade Corporation (aT), which is an organization that imports Chinese products and distributes it into the Korean market. The Korean government is supposed to be responsible for dealing with food supply and demand in Korea; for example, if they predict a shortage, they are supposed to import food to make up the difference. However, even if they make an error and miscalculate, they still release the Chinese products into the Korean market and drive Korean farmers’ prices down. So the passage of the FTA benefits groups like aT. Honestly, it’s because of people who think like this that we’re in the predicament we’re in now!

What actions are Korean farmers taking to protest the Korea-China FTA?
The Korean and Chinese governments will finish negotiating the agreement by the end of this year; after that, it will be passed to the National Assembly to be ratified in 2015. Our plan is to stop the ratification. The full contents of the agreement have yet to be released, but as it will include negotiations with industrial production, it will also have a powerful effect on small and midsized business enterprises, as well as workers. Despite the emphasis here in Korea on chaebol[1] companies, they only employ 20% of Korea’s workforce; the other 80% comes from small and midsized businesses. So clearly the FTA is not only an issue for farmers, but for laborers and entrepreneurs as well. Consumers are also wary of Chinese products because of health and safety issues in the past. We plan to come together to form a coalition and struggle together to pressure the National Assembly not to ratify the agreement. The important thing that we’re considering now is how best to mobilize all groups, from farmers to workers to consumers. So far, the FTA problem is largely considered a farmer’s problem, a specialized problem, but in reality it’s not – it affects all sectors.

What would be a better alternative to the FTA? What is Korean farmers’ vision for the future?
The biggest problem is that the Korean government doesn’t have a vision for the future of agriculture. They ignore Korean agriculture, because in their mind, it doesn’t have competitive potential in the international market, so it’s not worth their energy or attention. But food shouldn’t be in the hands of the global economy. It’s Korea’s responsibility to provide its people with safe and healthy food, and its laws and regulations should reflect that. There was an assemblyman who proposed a law that would guarantee food security – it’s currently stalled in the National Assembly. But basically, the government would purchase basic produce from farmers and sell it to consumers for a reasonable price. This is my vision; that farmers’ livelihoods, farming production costs, and the future of Korean agriculture are valued and protected by the law.

Why should people internationally care about this development? And how can those that stand in solidarity with Korean farmers best support them in this struggle?
We need to focus not only on the Korea-China FTA, but the bigger picture. In Korea, the government is pursuing all of these FTAs because they’re attempting to join the TPP, or Trans-Pacific Partnership[2]. Under the TPP, there would be no tariffs allowed on any agricultural products, which would be disastrous for Korean farmers and Korean food sovereignty. Internationally, these agreements only benefit the more powerful countries – the lesser countries shoulders the impact, which they do in the name of overall ‘economic gain’ – but it’s not a fair exchange. In Korea, Korean farmers and workers are the ones to absorb all of the negative impact. Agreements like FTAs and the TPP are all about neoliberal economic policy; they benefit the 1%-ers of the world, but bring a lot of suffering to the 99%-ers of the world. Therefore, as human beings, it’s obvious that we have to oppose them, and international activists need to spread awareness that FTAs and the TPP is only in the interests of transnational capital, not people.

[1] Term for large Korea’s business conglomerates

[2] The Trans-Pacific Partnership (TPP) is a proposed regional free-trade agreement. As of 2014, twelve countries throughout the Asia-Pacific region have participated in negotiations: Australia, Brunei, Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Korea expressed interest in joining in November 2010, and was invited to negotiating rounds by the US after the conclusion of the KOR-US FTA in December 2010.

“Free Trade is a Tool” – Professor Lee Hae Young on the Korea-China FTA

On November 10, 2014 at the APEC Summit in Beijing, President Park Geun Hye and General Secretary Xi Jinping announced that the Korea-China free trade agreement negotiations were “practically concluded.” On November 19 2014, ISC Policy and Research Coordinator Dae-Han Song interviewed Hanshin University Professor of International Relations Lee Hae Young to more broadly understand the impact of the “practical conclusion” of the Korea-China FTA negotiations. [Photo sourced from the Hankyoreh.] *This interview is part 1 of a 4-part expose by the International Strategy Center on the impact of the Korea-China FTA on Korean civil society.*


What is your reaction to the Park and Xingping Administration’s announcement of a “practically concluded” Korea-China FTA?
There are no such thing as “practically concluded” and “not practically concluded” trade negotiations. Either a negotiation is concluded or it is not. But since this bilateral meeting was in an APEC summit, they came up with “practically concluded.” We can understand this announcement as an expression of both parties’ commitment to finishing this agreement.

What happens next?
After the agreement is concluded, we [South Korea] have a legal screening. Then we have to have a scrubbing, where we take out and iron out the parts that don’t work legally. Then we have an initialization. Then we have to sign it. We still have a ways to go, probably until the end of this year. Investment and services is very important to us, so these parts need to be negotiated very well. To evaluate the success of the negotiations, we need to see the schedule of concessions and commitments which the government has yet released.

Getting a negative list for services is important to us. Currently we have the positive list which only lists what will be opened up. They say the financial sector is included but we don’t know the contents yet. China said that they opened up the entertainment sector, but they are allowing only 50-50 joint investments. All this makes me wonder if there is anything to expect from the service sector negotiations.

Going from the positive to the negative list in the service sector will be a huge undertaking. If now they only identify sectors to be opened up, later they can only identify sectors to protect with the rest being opened up. Switching from the positive to the negative list will not be easy. As you know, China is very important for Korean investment. There is a lot of money being invested.

The Korea-China FTA, has provisions for investment protection, but most of those investment protections are already included in the Korea-China BIT. Trade liberalization is about being able to invest anywhere you want; protection is about protecting that which is already invested. They are saying that now they will go from protection to liberalization. But this will not be so easy. There is a lot of Chinese investment money. That means that Chinese investment money can invest wherever they want in Korea. In addition, the government has to guarantee full rights to them through the ISD. This will be very difficult.

If there are so many difficulties ahead, why did the governments make the “practically concluded” announcement?
Both countries’ interests were aligned to make such a statement. Since the US TPPA is in its final stages, China needed to make Korea a stepping stone [for its own regional bloc] as soon as possible. In order to break through the US attempt to create a TPPA, China is pushing its FTA Asia Pacific (FTAAP).

From the Korean government’s point of view, this announcement can be sold to the public as a huge foreign policy success. The Chinese market is very important for Koreans. Thus, there is an interest for the Korean government to publicize that we have made inroads into the Chinese market.

Are there any misconceptions about the Korea-China FTA?
One myth is that the Korea-China FTA will give a huge boost to manufacturing in Korea. Automobiles have been left out of the Korea-China FTA. Yet, automobiles were supposed to benefit manufacturing. In that regard, I think the government exaggerated the benefits of the Korea-China FTA.

The second myth is that the government protected agriculture and livestock by maintaining high tariffs through concessions. The reality is very different. In reality, the part of the final price [that which the consumer pays] made up by tariffs is just about 1-2 %. The value of a tariff is determined not by the final price but by the cost of the product upon import. So if an item costs 100 won, but its cost at the price of import was 20-30 won, the tariff that is applied is based on the 20-30 won. So in reality tariffs contribute very little to the final price of a good.

Who benefits from all this?
It will be the corporations that export and that were included in the FTA. The schedule of concessions and commitments has not yet been released. We would have to take a look at that, but possibly: auto, steel, machinery, electronics. Auto has been taken out so they are not really going to benefit. However, some auto parts will probably be tariff free. However, the key auto parts have been excluded. As regards to steel, there will be access, but there is already an excess of steel in China. Then, we have electric and electronics. But that is a toss-up. We can win or lose. That’s because there will also be cheap electronic goods coming into Korea.

There will be profits for sure but it’s unclear exactly who will get it since the schedule of concessions and commitments has not been made public. If you are a Korean exporting company that has advanced technology and capital I think you will receive some sort of benefit.

Who wants this?
The way I look at it, FTAs have become a type of group thinking. There is a notion among the Korean power elite that we must have FTAs. This is group thinking. Have they examined whether the FTAs yielded what they promised? Let’s look at the Korea-EU FTA. It has already been three years. Before, the Republic of Korea had a 10 billion dollar surplus with the EU; now, it has a trade deficit. Yet, no one is taking responsibility. At the beginning of the Korea-EU FTA, they stated that there would be a total GDP growth of 5.6%, that 260,000 jobs would be created, and that exports would increase. Jobs didn’t increase, GDP didn’t grow, and Korean exports plummeted.

There is a cartel of silence. No one says anything. This cartel of silence keeps the group thinking going. If someone outside states, “That’s not true.” There’s no response.

The government talks about a linchpin policy between China and the US. What do you think about this?
It’s a fantasy. The concept behind the linchpin is that we can be the pin that connects the two G2 countries. Maybe this could be true if Korea’s economy was sizable enough to have an impact on both countries, but if we look at Korea’s economy within China’s or the United States, it is just one component in it. It may not be negligible – China is the 4th trading partner and the US is the 8th trading partner – but it is not enough. You have to play a much larger role in each of the economies for Korea’s economy to influence them.

Who loses from this?
Agriculture, livestock, and fisheries in particular the small and medium scale ones; small and medium merchants and enterprises. 90% of small and medium enterprises produce for domestic consumption. For example this table that we are sitting at or printing business cards. If the Korea-China FTA takes place, then these small medium enterprises might as well just move their factories in China produce their goods there cheaper and then export them freely to Korea since there are no tariffs.

What will be the impact of this on people?
There will be an increase in unemployment and a reduction in income to all those connected. The decrease in income will decrease consumption and savings. If there is a decrease in consumption, then there will be a decrease in production. And so the economy will worsen.

In some regards the Korea-China FTA is different from the Korea-EU or Korea-US FTAs, as China can be considered technologically weaker than Korea, unlike the United States and the EU. What are the differences if any between the Korea-EU and Korea-US FTA with the Korea-China FTA?
In terms of the level of liberalization, the Korea-US FTA is at the highest level and is the most comprehensive. Service was also liberalized the greatest. The Korea-EU FTA is about the same. It started after the Korea-US FTA and the Korea-US FTA served as its prototype. So the Korea-EU FTA was like Korea-US FTA plus more. The Korea-US FTA became the prototype FTA for Korea.

If we compare the FTA with China to that with the US and the EU, it is much lower. All the chapters are there, but the level of liberalization in the service market, or the liberalization of investment is lacking.

Is this because Korea wanted it this way? Or is it because conceding to more would not have fit with China’s economy?
In terms of GDP, Korea has recently become a developed country and China is a developing one. However, in terms of the size of China’s manufacturing, its market, and size of its capital – all of these surpass even that of the United States. So, in that regard, if China says no, then it’s no.

Then can we say that the Korea-China FTA is closer to what China desires?
Yes, because what we would have desired is a greater opening of the services market. The automobile market would also have been opened up. But, this can cut both ways. Hyundai knows that while Korea’s automotive industry is internationally competitive, opening up the auto market will also allow Chinese cars to enter. If they do, we won’t be able to compete. We wouldn’t be even able to compete with Chinese assembled German cars. These cars would just be slightly more expensive than the Equus [Korean luxury car]. Furthermore, if Korea can produce economy cars for 10 million won, China would be able to produce Chinese cars at a fraction of that cost even if the technology is inferior.

Do you think new FTAs in Korea and around the world will keep on being created or will something shift in the future?
I think we will reach a turning point soon. Currently, Korea is only missing an FTA with Japan. That will get figured out when Korea joins the TPPA. At that point, Korea would have had established an FTA with most countries. The only countries that remain will be the developing ones. But that won’t be very significant: As the number of FTAs increase, their impact decreases. Two FTAs don’t yield double one FTA. This is because while FTAs create trade, they divert it at the same time. Also on a global scale, tariffs have been going down for a long time. With the expansion of FTAs, they have been further decreasing. At some point they will be zero.

I think that we will stop once the US achieves the level of liberalization that it desires. This is not something that could keep going on infinitely. It is also not a sustainable structure. We started with small FTAs in the 50s and 40s now 60-70 years later it expanded so greatly; during that time, the WTO was created. It was created based on one country one vote, but because the United States is an empire it couldn’t accept that. So to bypass that process, it started to do FTAs bilaterally. The FTA is a old historical relic.

Regional Comprehensive Economic Partnership and Free Trade Area of Asia Pacific, and Trans-Pacific Partnership Agreement – will they converge or remain divided?
It will not be easy. In a global market economy, all markets don’t grow equally. Some countries boom and others bust. Each country has different conditions. They all differ in their levels of industrial development, the character of their market, or the opening of its financial markets. The US is using FTAs to weaken the structure of the WTO because what it wants cannot be achieved by the WTO. So will this naturally come together into one system? No one is interested in this. They are just driven by whether it can make a profit or not. They don’t care about what will happen in the future.

The government predicts a 2-3% increase in the GDP, what is your response?
That’s not going to happen. You can be sure of that. It’s risky for me to say that, but I am sure about it. They used Computable General Equilibrium (CGE) economic modeling to calculate those values. It is an economic modeling program that estimates the impact of trade. But, there are too many assumptions. That result only comes out when all the assumptions hold. But, the assumptions are too unrealistic. If unemployment rises, then it is supposedly reabsorbed into another sector. If there is a deficit in one sector, then this is balanced by surplus in another. So, supposedly it all balances out. If this were true why have the levels of unemployment in Europe and Korea increased? And if after all these assumptions, if you still don’t receive the values that you want then you “massage” the data a little bit. The government has been tossing around 2-3% GDP growth for a while. Our estimates come out to a tenth of that. Some of us academics did an independent estimate and we got something like 0.3%. And this is the total growth over 10 years. If we look at that compared to the Korean GDP, this is insignificant. As regards to employment, our data shows that there will be 21 new jobs every year. 21 jobs?!

So in short the Korea-China FTA has little benefits but a lot of pain.
No, this means that it can give great benefits to some and great detriment to others. If we look at it in its net totality, its benefits may be very little, but some sectors may gain a lot while others lose a lot. One part makes a whole lot of money, but another part loses 98%. What remains is 2% growth. The parts that can gain a lot will be for example the companies that focus on exports.

Is it possible for 2nd 3rd round negotiations to take place in the future?
Yes, of course if both countries want it then they can because it is a bilateral agreement. Renegotiation is possible on everything.

What does a just and fair trade treaty look like?
It will look like the People’s Trade Agreement in Venezuela. Venezuela is an oil producing country. Cuba does not have oil; it does not have energy. So, Venezuela sends Cuba oil, and Cuba sends medical services. Don’t both countries benefit? I think this is free trade.

Why is it possible over there, but not in Korea?
Sure, that economy is significantly smaller than Korea’s, but free trade is a tool, it is not the end. Free trade is for something. Why are we doing free trade agreements? In the case of the People’s Trade Agreement, they do it to provide for example eye surgery for people. They do it because Cuba does not have oil. This is comparative advantage. But here, it is for profit. What is the weakness of that country? How can we exploit that weakness and profit the greatest and be free to escape? The purpose of these international agreements is to guarantee profits. The profits of the conglomerates are the most important thing. If there is any money left, then maybe use some of that for welfare programs. But there is no motivation such as treating people’s eyes. The People’s Trade Agreement is also the same as the free trade agreements, it is about getting rid of tariffs. But the question is why are we getting rid of these tariffs? Over there it is to treat ill people, here profit for conglomerates is the main purpose.