South Korea and the UK agree to sign free trade deal ahead of Brexit
South Korea’s trade ministry has announced an agreement in principle between the two countries to sign a separate free trade deal ahead of Britain’s exit from the EU on October 31.
Data from the Korea International Trade Association indicate South Korean exports to Britain totaled about US$6.4 billion in 2018, amounting to 1.05% of the country’s total exports.
The deal includes maintaining zero-tariffs on South Korean exports such as auto parts and automobiles, and will help the Asian nation to minimize trade uncertainty and maintain trade with Britain based on South Korea’s existing free trade agreement with the EU.
If Britain has not agreed and ratified a deal with the EU by October 31, the UK government faces the choice of leaving without a deal, seeking more time, or cancelling Brexit altogether.
The South Korean Ministry of Trade, Industry, and Energy said in a statement that it will prepare responses to the possibility of a “no-deal” Brexit, plus other possible scenarios.
“For years, economists have been nearly unanimous in their support for free trade,” writes Raymond Robertson for IZA World of Labor. “Although it has been known since at least 1941 that trade brings winners and losers … for the most part, the assumption that the gains outweighed the losses dominated both economic and political thought.” However, recently that support for trade liberalization has been falling, “as nationalism has risen in both the US and Europe.”
Robertson continues: “it is apparent that certain population groups have suffered from integration and that their losses have been ignored for too long. Communities in developed countries hit by import competition from low-wage countries and communities in developing countries who lost protection due to liberalization suffered similar fates: dislocation, rising unemployment, and the difficult choice of either having to stay in their hometowns and endure dim job prospects or incur the costs of changing industry or location.”
He concludes that, “[r]educing adjustment costs would be a more effective policy to boost employment than trying to restrict trade.”
South Korea will seek approval from its parliament and ratify the agreed trade pact with Britain before October 31.
Read more IZA World of Labor article on trade.