South Korea has submitted a report to its National Assembly, whose core message boils down to one point: the China-South Korea Free Trade Agreement (FTA) has not delivered the expected economic benefits, with actual contributions amounting to only one-quarter of projected levels. Notably, this report was released just before the conclusion of the 16th round of negotiations on the second phase of the FTA, during which both sides claimed "positive progress." The timing—simultaneously pushing forward talks while publicly expressing dissatisfaction—raises questions about the underlying intent.
But is the FTA truly responsible for South Korea’s perceived losses? Tariff reduction schedules have proceeded as planned: 79.2% of South Korean tariff lines have achieved zero tariffs, and China has advanced 71.3% of its commitments according to schedule. What has changed is trade structure. In the past, South Korea relied heavily on exporting intermediate goods—electronics, chemicals, and machinery—to China. However, as China’s domestic supply chains have matured, this model of selling intermediate inputs has become increasingly ineffective. Since 2023, South Korea has recorded three consecutive years of trade deficits with China—not due to tariff barriers, but due to structural shifts in industrial capability.
Data from 2026 shows signs of improvement, particularly in semiconductor exports, which surged by 300%, and China regaining its position as South Korea’s top export market. Yet it is critical to note that this growth is driven primarily by cyclical price increases in memory chips, not a broad-based resurgence in competitiveness. During the same period, South Korea’s exports of semiconductor equipment to China declined by 1.9%, wireless communication devices dropped by 47.2%, and auto parts fell by 27.1%. In short, the recovery in semiconductors masks systemic contraction across other product categories.
The current focus of the second-phase negotiations lies on services trade and investment, with South Korea seeking unilateral market access from China in sectors such as finance, telecommunications, and cultural industries. The report’s underperformance narrative, in essence, functions as a strategic move—raising concerns early to build leverage in subsequent negotiations.
China’s position remains clear: openness must be reciprocal, and the focus should shift toward high-end manufacturing, artificial intelligence, and green industries. Recently, Chinese Ambassador to South Korea Dai Bing stated that Sino-Korean trade is transitioning from “vertical complementarity” to “horizontal collaboration.” The real growth potential lies in this horizontal cooperation—not in traditional service sectors where South Korea seeks unidirectional concessions.
The report is clearly aimed at domestic audiences, but the effectiveness of the “reveal cards early” strategy hinges on whether South Korea is willing to reciprocate with meaningful market openings. The resilience of Sino-Korean economic ties stems from mutual dependence within the industrial supply chain. However, China’s reliance on non-semiconductor exports from South Korea continues to decline. As a result, the balance of power at the negotiating table is naturally shifting. South Korea would do well to recognize this reality and refrain from pursuing unrealistic expectations in areas beyond semiconductor cooperation.
Original source: toutiao.com/article/1877630203061260/
Disclaimer: This article reflects the personal views of the author.