The possibility of a Free Trade Agreement (FTA) between South Korea and Japan has been studied by state-run economic research institutes of the neighboring countries since last year. The Korea Institute for International Economic Policy and Japan's Institute of Developing Economies which took part in the joint research, released a report recently on the wide ranging impact the agreement could have for both nations.
The institutes are known to have recommended that the two governments start negotiations for signing an FTA, saying that the agreement would have a positive impact on the overall economies of both nations from a long-term point of view. However, the first thing that comes to our mind in connection with the proposal is that the FTA would worsen our trade deficit toward Japan.
The report made it clear that the FTA, if realized, would hike Korea's trade deficit toward Japan to as much as $6.1 billion a year while increasing the Japanese trade surplus by that amount and increasing Japanese Gross Domestic Product (GDP) by 0.04 percent.
Despite the favorable estimation for the FTA by the two institutes from a long-term point of view, many economic analysts here are not positive toward the matter, saying it is still premature to sign such an agreement between the two nations at this juncture. Considering the wide gap in economies and the level of technology between the two countries, it would be quite natural that Japanese commodities including electronic goods, especially relished by Korean consumers, would ransack the Korean market when and if the agreement comes into force.
The tidal wave of Japanese goods has already started to surge onto Korean market since the government lifted import restrictions on 16 Japanese commodities last year. The import of some Japanese goods in the first four months of this year registered as much as 200 to 400 percent increase over that of last year. South Korea's GDP is only one tenth of Japan's and our total trade volume stands at only 40 percent of that of Japan in addition to the technological disparity. The amounts of exports and imports to and from Japan stood respectively at $15.8 billion and $24.1 billion last year, marking an $8.3 billion deficit.
The FTA, if adopted, is sure to drastically aggravate Korea's trade deficit against Japan, having an unimaginably bad impact on overall national economy. That is our main concern for …