Byung-il Choi: "We need to move on and experiment with something more innovative and creative to meet 21st century demands"
Korean trade negotiator and professor speaks to Salzburg Global about his country's role in Asian and global trade dynamics
Byung-il Choi leads group work during session 533 on trade.Byung-il Choi is a professor at the Graduate School of International Studies (GSIS) at Ewha Womans University, Seoul, Korea. Until recently, he served as the president of the Korea Economic Research Institute, a think tank representing the Korean business sector. Prior to joining the GSIS in 1997 as a founding faculty, Choi was a trade negotiator, representing the Korean government. He started his negotiating career at the Korea-US telecommunication talks (1990 to 1992). Choi was the Korean chief negotiator for the historic WTO basic telecom negotiations (1994 to 1997) and played a key role in making the agreement. Byung-il Choi, a participant at the Salzburg Global Seminar program
New Dynamics in Global Trade Architecture: WTO, G20 and Regional Agreements, talked to Salzburg Global about how trade has changed since the agreement and Korea’s role in a rapidly changing Asian trade space.
Salzburg Global: How did the big telecommunications agreements of the 90s help boost trade? Byung-il Choi: The negotiation was quite significant because of the role played by telecom. Telecom itself was an important and growing industry, with a tremendous potential for technological breakthrough. And telecom was also an important input for the final production. This salient dual aspect of telecom was given much attention, as the world was rapidly evolving into a knowledge society, where time and distance are collapsed for economic activities and social life. Back then, at the outset of negotiations in January 1995, we were not quite sure about how future technologies would evolve and which technologies would prevail; nobody could see smartphones in 15 years. But we could see that the future would be full of competing, diverse technologies. So, we adopted ‘technology neutral’ as negotiating principle. This meant that the telecom agreement we were about to make would not stand in the way of future technological advances and would not favour one particular form of technology against the other. Equally significant, we agreed upon promoting competition for the effective development of telecom industry. In the 1980s and especially 1990s, there was a global race going on for bringing competition into telecom sector, which had been enjoying monopoly. Our negotiating goal was to ensure the equal access to and use of the telecom facilities of the dominant player in each national market. Through opening up for foreign investment, introducing competition and promoting fair competition, the global telecom agreement secured opportunities for the expansion of trade and investment for the win-win.
SGS: Why did it take three years?BC: It was mainly because of the difference in the speed of introducing competition among countries and domestic regulatory situation. Bringing competition into a monopoly does not simply take place if you allow a new entrant into the market. First, you have to create the rule – which is transparent and equal to all the potential entrants – for selecting a new entrant or entrants. This work can be politically quite sensitive, because there were many hopeful candidates into the market. How to develop a process to come up with the rule is also a daunting challenge. Second, you have to create a new regulatory system. This is also a very complicated and time consuming process. The 1990s witnessed the global race where countries were undergoing this process. Obviously, the WTO telecom negotiations provided a critical impetus for accelerating this work, but there was is a limit due to domestic politics. Looking back, it is remarkable we could finish with only one extended timeframe; it could have been delayed much longer.
SGS: Does there need to be a similar deal for internet and data?BC: There’s some necessity especially in terms of the free and effective flow of information data, but there are concerns with privacy issues and so on and different countries obviously have different sensitivity. For instance, China and EU have different views. Practices are changing so fast, and with the WTO having 160 members, I believe it is difficult to reach an agreement unless some critical mass of countries have a predetermined mind set of what it is to become an element in this agreement. Despite the very high significance of creating the kind of global trading rule in this information era, there are questions as to how you can make it happen and to what degree and to what extent. Because of this gap, there is going to be fragmented approach in the EU and US and Asia and if that happens there is likely to be an obstacle in the free flow of information.
SGS: How does competition between countries help boost trade?BC: Trade has been the engine of growth for the East Asian countries; Japan was first to take advantage of this trade-oriented growth strategy, Korea was trying to emulate the success of Japan and succeeded, and finally China started doing something similar and has seen an enormous success. These countries are in the G7 in terms of trade. The importance of trade is getting larger and larger especially in the wake of the 2008 financial crisis. Having said that, there are some challenges. These three countries have a very strong manufacturing sector, but they don’t have that much of a competitive edge when it comes to service industries. The future for these countries lies in the promotion and growth of service sectors. Unfortunately, realization of this vision has been delayed for several reasons, including lack of political will. Another important point is that the intensity of economic cooperation among the three East Asian countries is falling short of expectations, when you compare to other regions like the EU or the NAFTA countries. In the case of EU, intra EU trade is about 65%, but amongst Korea, China and Japan the share just around 20%. The three countries have developed a regional supply chain, where investment comes from Japan and Korea into China, manufacturing parts come from Japan and Korea, then gets assembled in China and exports to other parts of the world. What is missing in this picture is the investment from China to Korea and China to Japan. The question is how these three countries can overcome global supply problems.
SGS: Could that trigger regional conflict?BC: There has been so much investment from Korea and Japan into China and Chinese markets are growing. As I said before, all three countries have developed similar full-scale manufacturing sectors, of which sustainability rests on the relentless innovation and success in the global market. Expert opinion is that there is a lag between the countries, but the gap is rapidly closing in. Then, how to turn the competition among the three countries into a positive sum game is the key to avoid any undesirable conflict. The on-going Korea-China-Japan FTA negotiations provides one venue to address this coordination problem. What is more urgent and depressing is the under-exploitation of potential from the closer economic cooperation due to the rise of economic nationalism.
SGS: How is Korea dealing with future planning and sustainable growth?BC: Korea spent most of the 20th century in catch-up and narrowing the gap with advanced countries. Strategic development of the telecom sector was a key part of this. The Korean government aggressively drove the establishment of the information superhighway, connecting all the households, schools, companies and government agencies seamlessly. The Korean people have easy, cheap, and speedy access to the internet. Korea has become one of the most wired nations in the world. Yet, after years of economic growth Korea is now seeing lower growth returns, of 3% and 4%. How can you ignite a new engine of growth? The services big bang is going to be very important: Governments try to have very ambitious and sweeping reforms so more opportunity will be given to the young to test ideas and to have commercial success. Also, on the global front, Korea is conscious of the global gap between countries. There is importance in human capital and how we share our experience with other countries. The Korean government is aware of the importance of climate change and the negative impact it can have for economic growth so they created the
Global Green Growth Institute and the idea is how you can have future economic growth focused on environmental protections.
SGS: How are the Trans-Pacific Partnership (TPP) and other regional trade agreements (RTAs) changing Korea’s international relations?BC: In the past decade Korea has gone from a country without any free trade agreements (FTAs) to the one most active in FTA. In this Korean journey, the monumental decision was to negotiate an FTA with the US. Through the entire process of negotiations and the ratification process, the whole society was divided and exchanged sharp blows. Because of these negotiations with the US, Korea could obtain strategic edge compared to Japan and China, not to mention the reform of trade policy. The Korea-US FTA enabled the Korean government to pursue a FTA with the EU, which was successfully completed. However, the situation changed last year when Japan decided to join the TPP talks and also to discuss FTAs with the EU. If these two talks are completed, then the strategic advantage enjoyed by Korea will come to an end. For this reason, Korea should look for an alternative to address this strategic complexity. Some argue that Korea should complete its FTA talks with China first and then join the TPP. Some assert that Korea should join TPP talks sooner and induce competition with a Korea-China FTA in order to achieve a more comprehensive and high-level FTA. I urged the Korean government to take up the TPP seriously from the moment Japan jumped on it. The officials hesitated and wasted time.
SGS: What other factors are important in the region?BC: Single undertaking: It has been the negotiating principle for multilateral trade negotiations throughout its existence. Single undertaking was considered to be a very balanced approach, but it was wisdom of the 20th century. It is time to give a second thought to the single undertaking. Countries are finding other avenues that do not involve the WTO. Countries are relying less and less on WTO for market access. If you try to stick to the idea of single undertaking, you are going to have less and less possibility of having deals done. We need to move on and we need to experiment with something much more innovative and creative which can meet the demands of the 21st century. Otherwise, there is a danger of being left behind the global economic realities, which will further impair the credibility of the WTO, and makes a vicious circle. There are so many important areas where making a global trading rule is urgent: Competition, investment, digital commerce, energy, environment, and so on. I think the global citizens deserve a better and creative approach to resolve our common concerns and improve their lives.
Byung-il Choi was was a session speaker at the Salzburg Global program New Dynamics in Global Trade Architecture: WTO, G20 and Regional Agreements, which was supported by the KDI School of Public Policy and Management. More information on the session can be found here: www.salzburgglobal.org/go/533
