Research Reports
Negotiation Strategies of FTA Counterpart Countries: China
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AuthorEor, Myongkeun
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Publication Date2010.10.01
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Original
Korea already finished FTA negotiations with 45 countries including the U.S., EU, ASEAN and India. Korea also try to make a conclusion in some other FTA negotiations with Canada, Mexico, Colombia, Australia, New Zealand, and Turkey. Therefor remaining major economies scheduled to negotiate will be China, Japan, Russia, and Brazil. In the short run FTA negotiations with China and Japan will be started or resumed. FTA negotiations with Turkey started from 2010.
Some country's outcome of FTA negotiations may affect to following negotiations and it is important to analyse negotiation partners' previous cases. Major objectives of this study are to analyse China's outcome of previous FTA and provide information for Korea·China FTA negotiations.
China provided trade opportunities to ASEAN and Taiwan under the consideration of regional political and security measures. However, China tried to protect some agricultural commodities related to food security and rural economy including grains, sugar, oilseed, and tobacco. On the other hand, China kept a defensive position in the negotiation with Chile and New Zealand. China has exception lists in China·Chile agreements for some agricultural commodities related to food security and rural economy including sugar and animal and vegetable oil while Chile conceded almost all items. China also has exception lists in China·New Zealand negotiations.
Rules of origin are key factors to achieve preferential trade agreements such as FTAs. Qualifications of originating goods can be divided into two categories; one is wholly obtained and the other is not wholly obtained, i.e. goods produced with imported materials. In the case of China, vegetable goods harvested in one country are treated as wholly obtained. Animal products and live animal are accepted to be wholly obtained when both born and raised or when raised. In the case of China·Taiwan and China·ASEAN FTA born and raised criterion is applied. Raised criterion is accepted in the case of China·Chile and China·New zealand FTA. Changes in tariff classification criterion and value added criterion are in general applied for the goods produced with non-originating materials. For the criterion of changes in tariff classification, HS 2 digit level(chapter) is widely applied and HS 4 or 6 digit level is used as supplements. Regional value added of 40 to 50 percent is a minimum for the acceptance as originating goods. De minimis of 8 to 10 percent and bilateral cumulation are accepted in China's FTA.
Korea needs to maximize exceptions of market opening for sensitive agricultural products for the negotiation with China. China's early harvest program can be a benchmark for Korea to present an active position and preserve sensitivities. Various supplementary measures against possible negative impacts from coming FTA negotiations need to be introduced in the agreements. Cooperation programs in agricultural and rural areas can be positively considered one of FTA policy strategies.
Korea needs to keep a strict rules of origin for fresh agricultural products. Standards of planted and harvest for vegetable products and born and raised for animal products are strongly requested to be maintained as Korea's position. For the changes in tariff classification, HS 2 digit level will be better to protect fresh products while HS 4 to 6 digit level can be positively considered for processed food. Exceptions of de minimis application need to be introduced for agricultural products. Due restrictions on non tariff measures including embargo and subsidies also need to be included in FTA. Special treatments for agricultural products are requested in government procurement agreements.
Researchers: Myong-Keun Eor, Sei-Kyun Choi, Hyoung-Jin Jeon,Dae-Hee Chung
E-mail Address: myongeor@krei.re.kr
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