When South Korea’s first Free Trade Agreement (FTA) with Chile took effect in 2004, grapes quickly became a contentious issue. As the fifth most consumed fruit in the country, the inclusion of grapes in the tariff elimination worried growers who feared, “We’re done.” Grape production fell from 376,000 tons in 2003 to 330,000 tons in 2006 as Chilean grapes flooded the domestic market. But it was not the end for Korean grape farmers. In 2006, they began to improve their grape strains by importing Shine Muscat seedlings from Japan, and by 2017, they started exporting to China. By last year, grape exports had increased 24 times from $1.88 million in 2010 to $44.69 million. Korean Shine Muscat grapes are now considered premium fruits in FTA partner countries like Cambodia, Singapore, Thailand, and Vietnam. The income of grape farmers per 1,000 square meters rose from 3.12 million won in 2005 to 5.98 million won in 2020, showing that the FTA, initially feared to harm farmers, actually helped increase their income.
According to the Korea International Trade Association (KITA) on April 23, last year South Korea ranked eighth in the world in terms of trade volume and exports by country. The combined value of the country’s exports and imports reached $1.2752 trillion (about 1,757 trillion won), which is 85% of Japan’s $1.5028 trillion. Back in 2003, when South Korea was just starting to engage in FTAs, Japan’s trade volume was 2.3 times that of South Korea’s. While South Korea’s trade volume has more than tripled since then, Japan, which was reluctant to enter into FTAs, has not seen as significant an increase.
The FTA was a strategic move to expand South Korea’s stagnant export market. In 1983, the country ranked 12th in global trade (exports and imports combined), with exports and imports ranked 13th and 14th respectively, but it remained out of the top 10 rankings in any category for the next 20 years.
Even as China’s trade rankings climbed annually, South Korea struggled to surpass the stronghold of the Group of Seven (G7) and Belgium, Hong Kong, and the Netherlands, all of which are powerhouses in intermediary trade. “There was a sense of crisis that entering the top 10 would be difficult if things continued this way,” said Cho Soo-jung, a professor at Korea University who worked in the Ministry of Foreign Affairs and Trade in 2003.
Following Chile, FTAs with Singapore and the European Free Trade Association (EFTA) came into effect in 2006, and amid the trend of hyper-globalization, FTAs were successfully enacted with ASEAN in 2007, India in 2010, the EU in 2011, the U.S. in 2012, and China in 2015. By 2017, South Korea had entered the top 10 in trade (ninth), exports (sixth), and imports (ninth), and had also surpassed the $30,000 mark in GDP per capita.
Starting with Chile, South Korea has secured 21 FTAs with 59 countries, covering 85% of the world’s GDP, making it a vast “economic playground.” It ranks second only to Singapore (87.3%), a key intermediary trade hub, and has surpassed Chile (third place), previously considered a leader in FTAs.
South Korea is the only country that has signed FTAs with all major economies including the G2 (the U.S. and China), the EU, and ASEAN. “FTA negotiations involve accepting some losses in specific areas while aiming for a win-win situation overall,” a trade expert said. “Despite strong opposition from the agricultural sector, we made significant concessions for the greater national interest.”
Even as protectionist policies are on the rise, FTAs continue to be a solid support for South Korea’s trade. The extensive network of FTAs serves as a conduit for trade, especially as the World Trade Organization (WTO) system is effectively breaking down. Even with barriers like the U.S. Inflation Reduction Act, having FTAs allows us to enjoy benefits as a trade partner. Jo Sang-hyeon, head of the Institute for International Trade under KITA, said, “The rapid expansion of FTAs in the past is now proving to be advantageous in this current phase of deglobalization.”
