Analysis of Experiences in Trade and Investment between LAC and Korea: Lessons Learned in Development
Korea Institute for International Economic Policy
Trade and investment were unarguably the main drivers of Korea's outstanding economic development. Heavy government intervention together with the private sector's continuous efforts to innovate drove export-led growth during the second half of the 20th century. Trade and investment are still very important components of the Korean economy in the age of globalization. Even though the kinds of polices pursued previously are no longer viable, both the public and private sectors are taking various measures to further promote trade and investment and sustain the fruits of economic development. Various services provided by the Korea Trade-Investment Promotion Agency (KOTRA) are good examples of this. Measures such as the Branch Agent Service and Post-Investment Service provide financial as well as managerial support to firms that export and invest abroad. These measures and others like them have been highly successful in promoting Korean firms' trade and investment. Through this process more attention is being paid to relatively neglected economic actors such as SMEs. Rectifying this imbalance will help achieve more equal growth, something that was missing in past efforts. Trade and investment have been vital to the Korean economy. It is therefore critical to expand the opportunities of trade and investment to every corner of the world in a way that benefits everyone. Entering the 2000s, Korea-Latin America and the Caribbean (LAC) economic relations have developed in size but not substance. The LAC region's trade deficit with Korea has deepened. While Korea's FDI flows to LAC have increased rapidly, LAC countries' investments in Korea are still minimal. The Korea-Chile FTA has contributed significantly to expansion of trade volumes and diversification of trade items. In particular, it has made positive contributions to increases in SME exports. However, the effects of increases in mutual FDI have been moderate. One of the serious obstacles that Korean exporting firms face in the LAC market is non-tariff barriers. Considering the Korean experience, trade facilitation measures such as Single Window and Authorized Economic Operator (AEO) are crucial for reducing or eliminating non-tariff barriers to trade. Furthermore, trade facilitation is one of the more significant opportunities to reduce trade costs between Korea and LAC. Korea and LAC need to do the following to develop balanced and sustainable economic relations between Korea and LAC: Make more active efforts to expand new FTAs, including the Korea-Mexico FTA; upgrade existing FTAs; support LAC countries' participation in the global supply chain by transferring Korea's economic development experiences and technologies; foster interactive FDI; and boost cooperation in the area of trade facilitation through Single Window and the Authorized Economic Operator (AEO) program.