A group representing the South Korean business community said Monday it "welcomes" the country's bilateral free trade agreement (FTA) with top trade partner China, but industry watchers forecast the tentatively reached deal may still face opposition from sectors deemed to suffer losses from the latest partnership.
"The FTA with China, the No. 1 country in terms of trade volume and the second-largest economy in the world, is expected to provide a new driving force of growth for our industries and economy in general," the group said through a press release. The consultative group, which had been set up to represent local interests in the trade negotiations, is made up of 42 South Korean economic institutions and research centers.
The free trade deal talks came to a de facto conclusion earlier in the day after nearly 30 months of negotiations following South Korean President Park Geun-hye's talks with her Chinese counterpart, Xi Jinping, on the sidelines of an annual summit of Asia-Pacific leaders.
The agreement is anticipated to give a further boost to the already dynamic trade partnership between the two countries. South Korea's overall exports to China were more than twice that of those to the United States in 2013, according to customs data, despite its having signed a bilateral FTA with the U.S. in early 2012.
Industry watchers say the China FTA is likely to be profitable especially for oil refiners and chemical firms, both of which rely mostly on their shipments to China. Some 18 percent and 45 percent of locally produced oil products and petrochemical goods are exported to the neighboring country, respectively.
Airline companies are also expected to benefit from the bilateral trade deal, as an expansion in trade volume between the two countries is likely to push up demand for cargo transportation.
"South Korean businesses will be able to utilize the FTA to help secure our competitiveness in the (Chinese) market of 1.4 billion people," the consultative group said.
The landmark accord, however, is also likely to stir up protest from businesses that may see their profits suffer as a result of the FTA.
The inclusion of agriculture and fisheries, the two most sensitive sectors for South Korea during the FTA negotiations, may still cause public uproar despite the trade deal's relatively low level of market liberalization for the two industries.
South Korea will get rid of import tariffs on 40 percent of incoming agriculture and fishery products from China, in terms of value. The figure for the country's FTAs with the U.S. and Australia, in contrast, was more than twofold at 92.5 percent and 98.4 percent, respectively, according to the trade ministry.
Even with the most sensitive products, including rice, pepper, pork and beef having been excluded from the Seoul-Beijing trade agreement, the deal is expected to face an uphill battle of protests from local civic groups, who have already voiced concerns and urged a full review of the deal before finalizing it.
"Rice, for now, is said to have been excluded from the FTA, but farmers here can't help worrying that the agricultural market has become liberalized," the head of a local farmers' federation said.
"There are complaints the government proceeded with the FTA too quickly without concrete plans (for our problems)."
For small- and medium-sized enterprises (SMEs), those whose main source of income is from domestic sales may find the latest deal unfavorable for business, considering Chinese companies' upper hand in manufacturing goods for a cheaper price.
"Now, China is gaining ground not only in terms of price but also in technology," a researcher from the Korea Small Business Institute said. "Chinese firms have been catching up in technological aspects while the FTA was being delayed."
Trade barriers for the automotive industry, meanwhile, maintained their status quo, as both countries say the FTA may do more harm than good for their respective carmakers.
The car industry was the most sensitive industry in need of protection by the Chinese government, while for South Korean automakers, the deal was seen as a potential threat as popular foreign cars produced in China, including those from BMW and Audi, may eventually be imported into the country in large numbers on the back of lowered tariffs.
"With cars off the negotiation table, the local automotive firms will strengthen South Korea's campaigns in the Chinese market through localization of South Korean products for the time being," said an official from the Korea Automobile Manufacturers Association.
The latest FTA, the 13th of its kind for South Korea, will be the largest ever to be signed by Asia's fourth-largest economy, and once it goes into effect, it is expected to expand the country's trade territory from the current 61 percent to 73 percent, the second-highest after Chile's 78 percent.
South Korea and China are expected to initial the agreement after resolving technical issues, including a legal review, also known as "legal scrubbing," that could take up to three months, according to government officials.
The FTA needs to be formally signed before it can be sent to the countries' respective legislatures for ratification. (Yonhap)
