April 1 marked the first anniversary of the free trade agreement between South Korea and Chile and both sides appear happy with the deal. The two countries rely heavily on external trade, but whereas Chile has now completed a handful of FTAs, and is engaging in further talks with China, Japan, and Singapore, South Korea has yet to complete any more deals, fearing the effect of trade liberalization on its agricultural sector.

South Korea started negotiations on the free-trade agreement with Chile in 1999 and concluded them in October 2002. It took until January 2004 for the agreement to be ratified by the National Assembly and it finally came into effect three months after that. According to the Korea Herald, the concerns about Chilean agricultural products dealing a serious blow to Korean farmers were grossly exaggerated. 

Data compiled by the Korean International Trade Association showed that farm-product imports from the South American nation, excluding wine, increased by only 2.6% during the 11 months from April 2004 to this February. Imports of Chilean wine, however, surged by 150% and were worth US$8.81m. Nevertheless some Korean farmers were hurt by the deal: 12,000 farmers gave up growing fruit fearing Chilean competition, but the damage suffered was estimated at 5.78bn won a year, less than 10% of the projected losses.

The aggregate imports from Chile reached US$1.75bn during the 11-month period, a 54.3% jump from the same period a year ago. The increase in the import bill was caused mainly by a surge in the international price of copper, which accounted for 75% of Korea's imports from Chile. Korea's exports to Chile increased by 58.7% during the same period to reach US$735m, with cars, mobile phones, colour TVs, and petrochemical products driving the expansion in trade.

At present South Korea is engaged in FTA negotiations with some 20 countries around the world. Its second FTA, with Singapore, is due to take effect in the first half of 2005. The Asian country is keen to diversify its export markets: last year China, the US, and Japan accounted for 45% of Korea's exports, the highest concentration ratio ever. The excessive concentration of exports in these countries makes South Korea particular vulnerable to external shocks. 

Chile

Meanwhile, Chile's FTA negotiations with China and Japan have kicked up a gear. Meeting in Santiago the Japanese and Chilean negotiators presented the results of their feasibility studies evaluating the impact of the FTA on their economies on 20 April; five days later a Chinese delegation arrived to recommence talks. This was the second round of discussions that began in January this year. The main products which Chile exports to Japan are copper and salmon; industry insiders expect the FTA to favour the diversification of Chilean exports to Japan. The Asian country's main shipments to Chile include cars, motorcycles, auto parts, and machinery.

In 2004 Japan was the second-largest destination for Chilean exports; they topped US$3.731bn, up 55.5% year-on-year. In March 2005, however, China outstripped Japan; Chile's exports there stood at US$474.5m, accounting for 13.3% of the total. The Chinese delegation headed to Santiago on 25 April. 

Chile has signed FTAs with South Korea, the US, the EU, Canada, Mexico, and Central America, as well as preferential trade agreements with Venezuela, Colombia, and Ecuador and an association agreement with Mercosur.