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Kim Hyun-chong

As China’s economic retaliation for the deployment of the THAAD missile defense system in South Korea fuels a trade dispute between the two countries, the South Korean government plans to negotiate more liberalization of the Chinese services market and free trade agreements between major cities in the two countries. The plan is to treat the THAAD crisis as an opportunity for opening up the Chinese market and expanding bilateral trade.

Trade Minister Kim Hyun-chong, who leads the Office of Trade Negotiations at the Ministry of Trade, Industry and Energy, held a press conference at the main government office in Sejong City on Sept. 13. “South Korea’s FTA with China did not liberalize very much. After the Chinese Communist Party’s National Congress is held on Oct. 18, we will watch for a chance to organize bilateral deliberations to bring about more liberalization of China’s services market,” Kim said during the press conference. This suggests that additional negotiations will be held about the service sector in the South Korea-China FTA, which has now been in force for one year and 10 months.

“Manufacturing accounts for 40% of Chinese industry, and the service sector for 60%, so opening up China’s services market is important [for South Korean corporations]. The preferences of Chinese consumers are quickly changing as China undergoes rapid urbanization – there are over 60 cities in China that are the size of Bundang, and China will have to build at least two more metropolises around the size of New York. The South Korean government, corporations, and the academy need to have an accurate understanding of these changes,” Kim said. The implication is that Seoul will arrange additional negotiations to push for increased liberalization of the services market in the South Korea-China FTA, which is currently oriented on opening up the market in the manufacturing sector.

In regard to China’s rapid urbanization, Kim said, “What we need right now are new trade policies in addition to the FTA. China’s major cities and South Korean cities could try setting up ‘urban free trade zones’ that could rival an FTA, focused on areas of the service sector such as finance and insurance.” The official said that Seoul would be working to organize bilateral negotiations to revise laws and systems with the goal of setting up free trade zones in urban areas in the two countries where both the Korean won and the Chinese yuan could be freely used in commodity transactions. Kim added that South Korea needed to use THAAD to gain the strength to convert a crisis into an opportunity in the two countries’ trade relations.

“South Korea has nearly finished signing FTAs with the major maritime powers [such as the US and the EU], and now it is in the final stage of turning toward continental powers to the north [such as China and Russia],” Kim went on to say. “It’s no longer valid to rehash the same FTAs and commercial policies again and again. We’ll be working carefully and meticulously on creating new systems and frameworks for future trade with the continental powers.”

Kim also touched on the question of whether Seoul would officially lodge a complaint with the World Trade Organization over China’s economic retaliation for THAAD. “We always have the option of lodging a complaint, but we’ll decide whether to do so after thoroughly reviewing its actual effectiveness. In a trade dispute, once you’ve played a card, it’s not a card anymore,” he said.

Another topic that Kim addressed was the US decision to shelve talk about withdrawing from the South Korea-US Free Trade Agreement (KORUS FTA), an idea recently mentioned by US President Donald Trump. “My understanding is that the talk of withdrawing from the agreement was stopped because strong opposition was voiced inside the US. We’re still waiting for the US to respond to the proposal we made during a special session of the KORUS FTA joint committee on Aug. 22 to carry out a joint investigation of the causes of the US’s trade deficit with South Korea before deciding whether to launch negotiations aimed at revising the agreement,” Kim said.

“Both sides need some time to figure out the other side’s needs. Our approach in the negotiations is focusing on the decline in the US trade deficit with South Korea, which this year is down about 30% from last year. During the negotiations with the US, we will be looking for ways to meet US needs that can boost South Korea’s national interest by combining the areas of industry, energy and trade investment,” he added.

By Cho Kye-wan, staff reporter

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