Tailored strategies needed to maximize effects of FTA with US

Tailored strategies needed to maximize effects of FTA with US. February. 23, 2012 07:44. january@donga.com constant25@donga.co.

The free trade agreement with the U.S., which will take effect March 15, is no guarantee that Korea will grow into a powerful trade country if improperly implemented.

Experts unanimously say the private sector and the government should join forces and devise plans, such as reform of distribution structures, to maximize the effects of the accord.

○ Benefiting consumers instead of importers

The Fair Trade Commission has begun an investigation into expensive imported cars from Europe such as Mercedes-Benz, BMW and Volkswagen. This is because the prices of European cars have stayed the same or even risen despite the effectuation of the Korea-EU free trade agreement eight months ago.

As soon as the Korea-EU accord took effect, tariffs on European cars fell from 8 percent to 5.6 percent but their prices have grown by as much as thousands of dollars.

Chilean wines have grown popular in Korea due to the Korea-Chile free trade agreement, but Montes Alpha, a popular Chilean red wine that sells for less than 10,000 won (8.90 U.S. dollars) in the South American country, is priced at more than 40,000 won (36 dollars) in Korea.

The main goal of a free trade agreement is price cuts through elimination of tariffs. So if this goal is not met, the existence of such an accord comes into question.

Jeong In-gyo, an economics professor at Inha University in Seoul, said, “Under outmoded distribution structures, chances are high that a few imports will benefit (from free trade agreements) and consumer prices will remain the same,” adding, “To benefit consumers, the government should strive to improve distribution structures.”

○ Customs office to conduct mock audits on places of origin

The verification of places of origin is the biggest reason Korean companies have failed to make the most of free trade. Since a free trade accord seeks to give preferential treatment to both parties of the agreement, Korean companies are advised to pay more attention to managing the label “Made in Korea” attached to their products.

The U.S. and the E.U., which have been suffering huge trade deficits with Asia, have been on alert against products made in China and Southeast Asia turning into Korean-made ones throughout the process of free trade negotiations.

Both Seoul and Washington ask that companies of either country voluntarily issue place of origin certificates. Since Korean customs conduct no prior investigations, U.S. customs can carry out direct probes should problems with country of origin arise.

Park Hwan-joo, a deputy director at the Korea Customs Service, said, “Companies should make thorough preparations for the verification of places of origin, but we will also strive to raise public awareness of the matter through mock inspections and counseling.”

○ Customized strategies based on trends in the U.S. market needed

Agriculture, food and pharmaceuticals sectors, which will likely suffer losses due to the Korea-U.S. free trade agreement, should read market trends and bolster their strengths to take over the U.S. market, according to experts. The U.S. is dominating these sectors, but Korean companies can increase exports to the world’s largest market if they come up with customized strategies.

A case in point is the agri-food industry. American media have included Korean food in the top 10 promising food industry trends for 2012. Foods that showcase Korea’s unique spicy taste, salt and seasoned laver are particularly popular in the U.S. The Korea Trade-Investment Promotion Agency said, “Korea’s spicy taste is different from those of China, Japan and Thailand and drawing attention from American consumers,” adding, “Korean seasoned laver is also popular as a children`s snack.”

In light of growing interest in Oriental medicine and new drugs made of natural substances in the U.S., the Korean pharmaceutical sector should utilize traditional medicinal herbs and natural ingredients, said experts.

A source from the Korea Pharmaceutical Manufacturers Association said, “To raise prospects of new drugs derived from natural sources, domestic deregulation should come first,” adding, “Efforts to raise Korea’s national profile should be made together to raise the trust of American consumers in Korean medicine.”