International Studies Review Vol. 14 No.1

The Tiger Meets the Dragon:
The Political Economy of Korea-China FTA

YOON HEO

Korea and China are currently at the center of trade talks with
the on-going Korea-China FTA negotiations. However, both
countries’ approach to negotiations is somewhat divergent in
that the former chooses comprehensive and deep FTAs including
non-traditional issues, while the latter focuses on a limited
scope with a gradual and phased approach to negotiations.
This paper tries to present five asymmetries that need to be
tackled: (1) the internal consensus cultivating process; (2) the
pay-off matrix in the time horizon to realize FTA gains; (3)
the preferred negotiation approach; (4) the depth and scope of
FTA; and (5) the existence of NTBs. The abovementioned
asymmetries with the growing bilateral trade pattern between
the two countries call for a sensible approach to the FTA
negotiations. Based on the SWOT analysis, we find that a serious
industrial restructuring especially in politically sensitive
sectors such as agriculture, fisheries, electronics, and general
machinery is inevitable in Korea. Moreover, Korean government
should not veer away from its single undertaking strategy
as it has been proven effective from its previous FTAs
with the US and EU. This strategy allows for a more realistic
and practical approach covering goods, services, investments
and other complex areas that may be out of the scope of the
WTO, thus, resulting in more concessions across areas making
big deals possible with the elimination of tariffs and nontariff
barriers alike. Nonetheless, opposition from losing sectors
should not hold back both governments in pursuing substantial
liberalization.
Keywords: Korea-China FTA, FTA Strategies, Role of
Government, Asymmetries, TPP, TAA