The symbiosis of Korea, China, Japan and ASEAN through Free Trade Agreement!

1. The symbiosis of Korea,China, Japan and ASEANthrough Free Trade Agreement! May 28, 2002 ITOCHU Textile Institute, Inc.

2. Taegue • Milano Project.From just a town of fabric export to a town of fashion.“Chimeric”. • Foundation of the “Textile and Fashion College”. • Korea: the more beautiful ladies than in other Asian countriesTaegue: larger number of Miss Korea than other cities.

3. Trade Amount of the World in the year 2000.

4. The Trend of Bilateal Trade betweenKorea-Japan, Korea-China and China-Japan. • Share in the total trade(export-import total) 1990 2000 China Korea 0.6％ 5.7％Japan 14.4％ 15.1％ Japan China 3.5％ 7.1％Korea 5.6％ 9.9％ Korea Japan 23.1％ 16.4％ Mutual dependency has become very big in 10 years.

5. Exports （2001.1～12） Korea *256（6％） 125（5％） 165（11％） 182（12％） 450（17％） China Japan *313（8％） Unit： 100 Million US＄ （％）： Share in total Export of each country * Conversion rate ：\120.-/US$1.-

6. Export total-Importance of North-East Asia • Strong ties with each other. • In porticular, export from Japan to Korea, Korea to China, and China to Japan. • Geographically close location,Growth in the intra-industry trade in 1990s. • the less importance of the trade on comparative advantage.

7. Change of trade structure • Complementary effect : diminishing. • Japan-China : vertical division of labor. • Korea-JapanKorea-China • Japan-ChinaKorea-ChinaFor example,Japan China: Processing trade intra-industry and intra-firm tradeKorea China: Expansion of intra-industry trade. Textile trade, the same pattern. : Horizontal division of Labor : getting more similar.

8. Comparative advantage • Among the three countries horizontal division of labor is being estabeished, but each country still has their own comparative advantiges, … • China: Labor intensive products, such as … • Japan: Machinery, basic, materials • Korea: Chemical products, mineral manufacture, metal plastic / rubber etc,

9. Textile Exports （2001.1~12） Korea 13（8％） HKG 24（15％） 11（7％） 27（5％） 5（7％）* 137（26％） China Japan 29（38％）* 9（12％）* HKG Unit： 100 Million US＄ （％）： Share in Textile Export * Conversion rate ：\120.-/US$1.-

10. Free Trade Agreement (1) • the Purpose of FTA. • the difference ofCustoms Union and Free Trade Agreement. • bloc-economy in 1930s. • the great Depression andthe World War Ⅱ.

11. Free Trade Agreement (2) • Many Countries were not positive for FTA except EU. • After the conclusion of NAFTA, FTA started to draw world’s attention. • FTAs was beginning to be considered to facilitate the world’s trade. • Korea, China, Taiwan and Japan until last year do not belong to any of the FTAs.

12. Free Trade Agreement (3) Movement of US • 1985 With Israel. • 1994 NAFTA = North America Free Trade agreement. With Canada & Mexico. • 2000 Vietnam (Bilateral Trade Agreement) • 2000 With Jordan • 2000 Negotiating with Singapore and Chile. • Conception of the FTAA. (Free Trade Area the Americas)

13. Free Trade Agreement (4) US – Other movement. • African Growth and Opportunity Act (AGOA). • Caribbean Basin Trade Partnership Act (CBTPA).

14. Free Trade Agreement (5) • Movement of European Countries. • EU15. • Deepening & Expansion. • Deepening : from a customs Union through common currency EURO to the integrated Europe. • Expansion : EU15 to EU27. the Historical fate of Western Europe.

15. Free Trade Agreement (6) FTAs in other regions. • Association of South-East Asian Nations (ASEAN. 10countries). • Gwf Cooperation Council (GCC. 1981) • South Asian Association for Regional Co-operation (SAARC. 4countries). • Thailand with India, Myanmar,Bangladesh and Sri Lanka.

16. Free Trade Agreement (7) • Japan : With Singapore. 2002, Jan. • Japan : With ASEAN for conception of general co-operation. With Korea, Mexico and Chile for FTA. • China : With ASEAN for FTA. • Singapore : With Japan. 2002, Jan. With New Zealand. 2002, Jan. Negotiating Australia, US, Mexico and Canada. • Thailand : With Australia, New Zealand, Japan & China, started study for FTA. • Hong Kong : Negotiating for FTA with New Zealand.

17. ASEAN + Korea, China and Japan (1) • Three countries are studying the possibility of FTA with ASEAN, but it may take some time. • Not FTA, but the Economic Cooperation. • China-ASEAN for FTA. • The ASEAN Industrial Cooperation Scheme (AICO). FTA. • Formation of a regional economic zone by Korea, China, Japan and ASEAN. the stability of Asia.

18. ASEAN + Korea, China and Japan (2) • China-ASEAN 10 years later. • What China wants to do before that:To form a free trade zone by four Chinese communities : Hong Kong, Taiwan, Macao and mainland China. • Purposes • To let in their kin (Hong Kong firms) during the grace period. • To stimulate the economic growth of China. • To address to the agricultural problem.

19. Possibility of cooperation by three countries (1) • Korean and Japanese firms:need to cooperate as partners. • In the area of textile industry, which is typical labor-intensive industry. • Now: Japan exports fabric to china Imports garments manufactured in China to Japan. • In the future: Japan places orders for fabrics made in Korea make garments at Korean-owned China-based firms imports to Japan.

20. Possibility of cooperation by three countries (2) • Joint marketing for Asian and global market by leading Companies in Korea and Japan. • Strength of Japan : accumulation of capital, brand power, technological capability, size of market. • Strength of Korea : highly productive, large-scale and the most advance machinery equipment they hold.

21. Possibility of cooperation by three countries (3) • In the future, Entry of powerful state-owned businesses of China and Emerging of joint ventures formed by European and US companies and Chinese Companies Intensifies the competition with Korean and Japanese businesses. • A full-scale war : • Necessity of joint works from the every stages. Korean firms Japanese Firms Chinese Companies VS

22. Korea-Japan Agreement on Investmentand Korea-Japan Free Trade Agreement. • Agreement on Investment : Government level negotiations under way. • FTA :Agreed in general, but opposed in parts. • Necessity for Korea and Japan to conclude FTA.

23. Situation in Korea. The points I want to say most. • Importance of the trade relationship among Korea, China and Japan. • the degree of mutual dependence among three countries will be higher. • Korea and Japan : Out of the existing network of free trade agreement. • Strong fear of isolation from the rest of the world.

24. Taegu – The Town of Textile • From a town of synthetic fibre fabric to a fashion town. • To characterize textile business, • It’s global, before anything.International work. • Changing and Challenging. • demanding. tremendous effort. • competitive. • team play but individual ability strongly required. achieve a goal glow of satisfaction.

25. Conclusion. • There must be something you don’t like in every business. • Increase of uncertainty is unavoidable and endure the situation. • What you think is right today or today’s common sense, is not necessarily right tomorrow or common sense tomorrow either.