Focusing China’s Service Market
A follow-up negotiation for the Korea-China free trade agreement (FTA) began to tear down barriers against South Korea’s entry into China's service market and prevent retaliation against South Korea for the deployment of the THAAD System on the Korean Peninsula. A lot of attention is being paid to the scope of China’s opening of its service market to South Korean companies as China also showed willingness to deregulate including the liberalization of trade and investment.
The Ministry of Trade, Industry and Energy (MOTIE) entered into the first follow-up negotiations on service and investment in the Korea-China FTA at Lotte Hotel in Seoul for two days from March 22 to 23. The negotiation took place in two years since December 2015 when the Korea-China FTA took effect. At that time, South Korea and China agreed to open up the service and investment market in a limited (positive) way and hold follow-up negotiations with the goal of liberalization at a high level within two years. It is forecast that if South Korea signs a comprehensive service and investment agreement with China in a negative way, the level of mutual service market opening will be raised and the practical protection of South Korean companies will be further enhanced.
The negotiation was held between Kim Young-sang, the head of the Trade and Investment Department of the Ministry of Trade, Industry and Energy of South Korea and Wang Shouwen (third from right), vice-minister of the Ministry of Commerce of China. "This marked the first time that China held an FTA negotiation in a negative way, which shows China's strong commitment to pursue comprehensive and deepened regulatory reforms to open up the market," Wang said.
In the first negotiation, the two countries will zero in on the basic principles of future negotiations, the scope of application, the structure and timing of the negotiations and exchange views on areas of mutual interest. The next negotiations will focus on expanding the bilateral service and investment market and protecting investors in earnest.
It is said that the Korean government will focus on securing countermeasures against second retaliation against South Korea for its THAAD deployment, opening up the service market in China additionally, creating a stable investment environment and creating jobs by expanding service exports through the negotiation.
The total volume of China's service trade is big, the second largest in the world, but it was not possible for Korean companies to enter the Chinese market due to various regulations. In particular, China is actively promoting the service industry to shift investment-led growth to domestic consumption. On the other hand, Korean companies are investing mainly in the Chinese manufacturing industry.
Accordingly, the MOTIE promotes the expansion of market opening mainly in areas where Korean companies have strong competitiveness such as tourism and culture. The MOTIE will also prepare safeguards for Korean companies’ investment in China. Its plan is to realize comprehensive investment liberalization and the protection of Korean investors by securing Korean companies’ rights equal to those of Chinese companies in order to protect Korean companies in investment stages before setting up their corporations in China.