Creon Butler
Okay, well, hello, everyone. My name is Creon Butler. I’m – and I’m the Director of the Global Economy and Finance Programme at Chatham House, and it’s my great pleasure to welcome you to our panel discussion today, which is going to be on the UK-Korea trade relationship. And this is a really important relationship for both countries, both the UK and Korea, and this is not just because of its size. I think it’s something like £15 billion of trade, exports and imports combined, each year, but also because of the nature of the products that are traded, very important to the UK economy and also a very substantial number of services, which I think also very important to the Korean economy. But it’s also, I think, potentially important beyond the immediate bilateral relationship insofar as the things that Korea and the UK are able to do together may be of importance in the broader world of trade negotiations, to the extent that the UK and Korea are able to innovate and develop new approaches, that will be an issue that can be taken further forward.
Now, we have a really excellent group of panellists today. Firstly, we’re very honoured to welcome Minister Han-Koo Yeo, who’s the Trade Minister at the Ministry of Trade, Industry and Energy in the Republic of Korea, and Minister Yeo is a highly distinguished official in the Korean public services. He’s previously worked as Deputy Minister for Trade Negotiations and he was also Minister Counsellor in the Korean Embassy in Washington, among other things.
And after Minister Yeo, we have online, Dr Minako Morita-Jaeger, who is a Senior Research Fellow in International Trade in the Department of Economics in the University of Sussex. She’s also a member of the UK Trade Policy Observatory, which is a joint initiative between Sussex University and Chatham House, and Minako has extensive experience working on international trade issues, including UNCTAD and the WTO in Geneva.
And last, but by certainly no means least, on the other side we have David Lawrence, who’s recently joined Chatham House as a Research Fellow and he’s working on our UK in the World Project and David previously worked for an NGO focused on trade policy, which in particular, looked at the UK post-Brexit trade agreements. He’s also worked in the UK Parliament, which gives him an interesting insight into the current issues here.
Now, each panellist will speak for up to ten minutes or so. I will then moderate a discussion among the panellists, and this will be followed by a Q&A, with questions both from the audience here and online. A few quick final points. Obviously, this is on the record. It’s not under Chatham House Rule and when it comes to questions, if you’re in the audience here, please put your hands up and I think, then, a mic will come and fine you. Equally, the ones online I’ll be able to see from here. So, with that, Minister, over to you.
Minister Han-Koo Yeo
Good evening, everyone. Thank you very much, Dr Creon Butler, for your kind introduction and it’s a great pleasure and honour to be here at Chatham House, one of the prestigious the think tanks and institution in the world. Actually, I’m humbled that my visit comes at the start of Her Majesty’s Platinum Jubilee year. Like many others, she is the only Queen that I know and of course, I understand that – her important unifying role the people of this country and the Commonwealth. On behalf of the Korean Government, I’d like to offer my sincere best wishes and congratulations to Her Majesty Queen Elizabeth II on the historic occasion of her Platinum Jubilee.
Now, you know, let me briefly set the scene for our discussion on this trade policy, the – in the global context, but also in the context of our bilateral – the UK-Korea trade relations. With dynamism and potential for economic growth, the Asia-Pacific region has been at the forefront of regional economic integration and home to new trading order, based on their shared confidence in the free trade and multilateralism. The CPTPP are deeper than all the other trade initiatives going on in the region, would be some of the good example, and Korea has been actively participating in this developing new rules and the trade – the architecture in the Asia-Pacific.
Korea has also launched our – the New Southern Policy in 2017, centred on three P: people, prosperity and peace, to intensify our regional co-operation with our, you know, South and South-Eastern Asian neighbours, in line with the regional efforts. The UK also shares the common interest now, as indicated by its recent policy direction, such as the Indo-Pacific Strategy and the, you know, plan to join the CPTPP and there’s, indeed, a great room for bilateral co-operation for our two countries, in various domains.
We need to boldly redefine and expand the role of trade to provide timely response on this changing environment. Trade plays an important role for emerging issues, such as supply chain, digital trade, imaging technologies, decarbonisation and vaccines and public health, in addition to its more traditional role relating to opening goods and services market, based on this type of FTA negotiation.
So far, for the traditional, but still important traditional economic co-operation, Korea and the UK already have the Korea-UK FTA as a good foundation, which also turns out to be the UK’s first FTA with an Asian nation after its Brexit decision in June 2016. In its first year since becoming effective, our bilateral FTA has become a solid foundation for Korea-UK co-operation, leading bilateral trade and investment in these challenging times. Last year, in particular, our bilateral trade volume increased by 33% and reached $11.8 billion or – and washed away concerns on possible decline of bilateral economic activities due to the Brexit and COVID-19, between our two countries. However, our FTA is largely based on, sort of, outdated the template, which is the Korea-EU FTA, we have concluded about more than ten years ago.
Recently, emerging trade issues have exposed its limitations. In this vein, just only this morning, my counterpart, Secretary of State Trevelyan, and I decided declare together the launch of upgrade negotiation for Korea-UK FTA at our first Bilateral Trade Committee meeting after enter into force of our FTA. We, therefore, hope to introduce new investment rules, especially in reflection of latest discussion on investor protection and we also look forward to discussing how our two countries can, together, identity and intensify co-operation for emerging trade issues that I laid out earlier.
Let me discuss them in turn. First on supply chains. As likeminded countries with liberal, open market oriented economies, Korea and the UK are optimal partners for resilient sustainable supply chain that can maximise our respective strength in a complementary manner. In fact, this morning, Korea and UK signed on memorandum of understanding to accelerate strategy co-operation on supply chain, critical supply chains, on the sidelines of today’s Trade Committee meeting. We will leverage this MoU to pursue joint studies on identification and analysis of critical supply chains for our two countries and seek to build multilateral supply chains, including third countries, such as those from the Commonwealth.
Second, for emerging technologies, Korea and the UK have rich experience with industry and trade technology co-operation, especially relating to joint R&D of high technology and standard, which will support advances in development of new technologies, such as AI, hi-tech, fintech, 6G and so on, so forth. More concretely, Korea’s strong manufacturing base and the UK’s innovative technology, with its leading universities, together with wide network, such as the Commonwealth, will serve as solely foundation for our two countries to secure emerging new technologies for the future.
Third, there’s much potential for our co-operation in our global effort in respond to climate change and decarbonisation. I’d like to, first and foremost, note that the UK leadership shine very brightly last year during the COP26, in global efforts on global – the climate change. At COP26, Korea declare to raise our NDC target up to 40%, compared to 2018, which is very ambitious, considering the high share of energy intensive manufacturing, amounting one quarter of our GDP. We are also at a critical juncture and must ensure the various environmental measures on the part of individual countries to not become new trade barriers, but are implemented in a manner consistent with global trade rules. We need closer international co-operation than ever before and I look forward to seeing a close co-operation between our two countries, as we try to make sure various carbon pricing schemes are harmonised and we vote together for the progress on multilateral discussion relating to environmental measures.
Fourth, our potential for bilateral co-operation in digital trade space. In the wake of the pandemic, we have been witnessing the pace of the – explosive pace of the digital transformation for the accelerating as we adapt to a new lifestyle. Consequently, there’s a greater and greater demand calling for new rules on digital trade. Based on Korean strength in ICP, the Korean Government has been intensifying digital innovation across our in – you know, the economy. In this vein, we have been very actively new rulemaking of digital trade to support the – our business community. We concluded our first Digital Trade Agreement with Singapore last December. I believe UK and Singapore conclude around a similar time, as well, and we launched the accession negotiation to join the Digital Economy Partnership Agreement in January. We then said, “I hope our two countries will continue to collaborate closely as we upgrade our FTA and engage in e-commerce negotiation at the WTO.”
Last, but not least, I also believe Korea and the UK have much potential of col – for collaboration in vaccine and public health area. We did the second largest, world’s second largest, pharmaceutical manufacturing capacity in the world and with four types of vaccines are already being manufactured in Korea. We seek to contribute towards ending the pandemic by serving as a global vaccine production hub and cures, based on its pharmaceutical manufacturing capacity and experience of managing this COVID-19.
So, I believe our two countries can create much synergy with UK strength, such as its advanced pharmaceutical development capacity. In fact, UK-based global pharmaceuticals, such as GSK, AstraZeneca, are already collaborating closely with Korean company, through country manufacturing project for COVID cures. I very much hope that we will continue to see such collaboration to expand. I look forward to a productive insight today here at Chatham House to celebrate for international – independent thinking on international issues and I hope to benefit from your perspective on the Korea-UK trade co-operation going forward in this rapidly challenging – changing global trading environment. Thank you very much.
Creon Butler
Minster [applause], Minister, thank you very much for your remarks. I mean, that’s an enormous agenda and there are lots of questions I’m keen to come back to you on. But before I get the opportunity to do that, I’m really delighted to invite our next panellist, who’s going to join us, online. Thank you very much for coming and joining us online, Dr Morita-Jaeger. Would you like to give us your comments? Over to you.
Dr Minako Morita-Jaeger
Thank you very much, Creon. First of all, thank you very much for inviting me to this very extinguished, well, a very important event today and apology that I cannot be there in person, as my family member is COVID, so I think I might refrain from – actually refrain from public event. But I’m very happy that I can participate in this way and, also, I’m very much impressed what the Minister’s comprehensive presentation and I really share many points that he raised.
So, let me just – yeah, well, as the opening – my opening remark, I’d like to focus on the two issues. Firstly, it’s the area of the possible collaboration in the Korea-UK FTA renegotiation and secondly, it’s the Korea-UK bilateral collaboration beyond the bilateral framework. So, the – first of all, the – I fully agree with the Minister, in a sense that UK and Korea are likeminded countries, also have common values of trade, such as rule-based international trading system, democracy and open economy and that beyond, the very – what is very important is that both countries share the 21st Century trade values, such as sustainability and democracy. And what I would like to also emphasise is that the UK and Korea are both middle powers.
Now, let me just tell you this is now emerging role of middle power in the collaboration with international trade. So, since the UK – US, sorry, United States, is inward looking and this America First policy under the, well, the Biden administration, so we cannot expect its – US the leading role in international trade in the foreseeable future. So, the leadership of middle powers to enhance international trade order and promote a 21st Century trade system is becoming crucial and important than ever, I think.
So, certain middle powers cannot act alone. They have to form a group to promote their common interests. So, I think that the bilateral frameworks, such as the EU – sorry, the UK, Korea FTA and the polylateral framework, most likely the CPTPP, the UK and Korea join the CPTPP, become the important base for the UK and Korea to form a collective force to promote 21st Century trade. So, based on that understanding, I’d like to explain the areas of possible collaboration for the Korea-UK FTA negotiation and the beyond. So, the – as the Minister rather rightly said, while the UK-Korea FTA is outdated, I think there was a negotiating during the 2000 and signed in 2009. So since the UK-Korea FTA’s a continuity agreement, a replica of, sort of, the EU-Korea FTA, so the agreement needed to be modernised to reflect the current economic needs, especially technology and innovation and the socioeconomic needs that the world is facing.
So, there are two major issues to be think about. So, one is market access negotiation and the other is rulemaking. So, my point is, because I’m a trade policy expert, but I try not to be in detail, but I just like to just explaining, you know, the general terms. So, in terms of market access negotiation, from the UK’s point of view, I think the government will be interested in improving Korea’s commitment in services investment, but I observe it will be very difficult to negotiate services investment market access and so, I do not see any interest from the Korean side. Well, I would like to – I’m curious about the Minister’s opinion on this, so I – and my observation, this is mainly because Korea it’s, kind of, thinking about the relation with MFN clauses in FTAs with the EU, I mean, the current FTA with the EU and the US, for example, that UK provides better commitments to the US in its future bilateral FTA with US. So, these better commitments shall be automatically, according to Korea. So, there is no need to just renegotiate the market access through this negotiation process. So, that it – beside these legal stumbling block, maybe, kind of, political environments surrounding domestic politics in Korea that maybe is – there is, you know, kind of, well, ambition to do this further negotiation. And trading is already comprehensive, so I think that I don’t see any, you know, needs there. And to be realistic, so that I observed the priority of the renegotiate is, like, to be modernising rules, so, I think that digital trade and environment could become the highlight of this FTA.
So, first starting with digital trade. So, as for digital trade, there are opportunities and challenges, both. So, the opportunity is, of course, to promote free dataflow innovation technology, so that, as the Minister said, while the Korea-led concluding this partnership agreement with Singapore last December, likewise, the UK concluded agreement in principle of the UK-Singapore Digital Economy Agreement. And furthermore, the UK’s recent FTA with Australia, which was signed last December, includes a comprehensive and high standard digital trade provisions, with some additional economy partnership agreement.
So, that both Korea and UK are ready for including ambitious chapter on digital trade. However, the UK has been very careful for its own policy development. So, this is the kind of challenge, but I would like to just happy to explain more later, and next thing it’s environment protection and the sustainability. This area is really, you know, that very strong – I can see the strong British public interest and, you know, British public’s growing concern on environment and climate change must push the UK Government to create an innovative approach to improve the current trade/environment chapter in the UK-Korea FTA. So, for one example is promoting circle economy, including circular supply chains. So, in fact, the EU is active – is, in a sense very – EU is very much active in including the concept of a circular economy in its ongoing FTA negotiations. So, this is the kind of areas, you know, to be very flexible in imaginating to just include this circular economy approach into FTA is something, you know, that UK and Korea can work together and then make a, kind of, new area of the FTAs.
And also, I just think it’s very interesting that the Minister said about the agreed investment, new investment rule, where the UK Government – so, the investment chapter in the UK-Korea covers investment liberalisation, investment protection and part of the – and Korea’s investment regime, regulatory regime, in services – sorry, that Korea’s investment regulatory regime is more protective than its regulatory regime for goods, according to the OECD. So, it may be that in terms of market access, the UK is interested in the opening more in the, I mean, the investment commitment, but maybe that will be very difficult because of the MFN clauses, as I said before.
So, as for the investment protection, Korea and the UK has bilateral investment agreement, as the Minister said it, but this is very much old-fashioned – I mean, outdated, because it was in – it entered into force in 1976, a long time ago. So, in theory, renegotiation from FTA is good opportunity to revisit bilateral investment framework, together with, you know, BIT and in the – this existing FTA.
Then it comes to this hot topic of the investment dispute resolution mechanism. So, the – so far, as far as I observe, this is a very difficult issue, both legally and politically. Currently, the investment dispute resolution mechanism is on the process of a reform under the OECD [inaudible – 25:58] and the EU, but there is no clear consensus as to how to improve the investment dispute resolution mechanism. So, I mean, the, you know, the ISDS mechanism or investment coach system, which the EU is promoting. So, whether the UK wants to reform ISDS mechanism or taking further step to introduce alternative mechanisms, such as IC investment coach system, seems not really clear. So, at first, understand the UK has not included ISDS clause its new FTAs, including the UK-Japanese CEPA and the Australia-UK FTA. So, then, the costs and benefits have to be calculate – examined here.
And so, the – quickly…
Creon Butler
Minako, I wonder if – I think you have some brilliant questions there. I wonder if you could just reach your conclusion and we’ll be able to come back to the Minister…
Dr Minako Morita-Jaeger
Alright.
Creon Butler
…in plenty…
Dr Minako Morita-Jaeger
Yeah.
Creon Butler
…of time. So, no, no, please, please conclude…
Dr Minako Morita-Jaeger
Okay.
Creon Butler
…your points, but…
Dr Minako Morita-Jaeger
But – so, then, the last point about the Korea-UK co-operation between the bilateral framework, so there – that it’s mainly the CPTPP and the WTO. And the economic significance of the CPTPP for the UK-Korea’s collaboration terms is at the moment, many existing bilateral FTAs are causing the spaghetti bowl situation of diverged rules, such as Rule of Origin in the Asia-Pacific. So, business, especially SMEs, with limited human resources, are facing a, you know, difficulty, to which FDA should I colla – you know, use? And then, very technical and that they don’t understand how to do it. So, the great advantage of the CPTPP is providing the unified role to a business. So, the UK and Korea can do business in the Asia-Pacific region and that the CPTPP’s unified role, this is a great advantage.
So, the policy value is, by UK’s joining the CPTPP, the nature of CEPA and CPTPP will change from the mere regional trading club to the likeminded middle power club, beyond the region. So, if Korea joins after the UK, the nature middle power club that promotes often and rules-based trading system will be farther strengthened. So, then, the UK and Korea could also use the CPTPP as a base forum to get substantial, you know, intellectual policy input for the U – WTO.
So, then, when it comes to WTO, that you know, WTO have the three important pillars: dispute settlement, implementation and a monitoring mechanism. So, these are not under the [inaudible – 28:49] reforms. So, as for upgrading rules, currently, what it’s called the Joint Statement Initiatives, which is based on that polylateral initiatives going on in some policy areas, such as recently, included service domestic regulations, ecommerce, investment facilitation and the making small and medium enterprises. The country which…
Creon Butler
Minako…
Dr Minako Morita-Jaeger
…have common interest…
Creon Butler
…perhaps I could ask…
Dr Minako Morita-Jaeger
…are one…
Creon Butler
…if you’d like to conclude there, ‘cause there’s a fantastic range of issues…
Dr Minako Morita-Jaeger
Oh, okay.
Creon Butler
…that you’ve put forward, but then, I do want to give the Minister a chance to come back. So…
Dr Minako Morita-Jaeger
Alright.
Creon Butler
…thank you very much for those points and we’ll come back and continue that.
Dr Minako Morita-Jaeger
Yeah.
Creon Butler
And what I want to do now, actually, if I may, is go to our final panellist. David, if you would like to kick off with your points, thank you.
David Lawrence
Thanks very much, Creon, and many thanks to Minister Yeo for his speech and to Dr Morita-Jaeger. It’s great to be on this panel and to celebrate one year of the UK-South Korea FTA. I’m going to speak a bit about the UK’s broader pivot towards the Asia-Pacific region and I think this is important because we shouldn’t really separate this trade agreement from the other ways in which the UK and Korea have collaborated, particularly in the last year, such as joint military exercises with the South Korean Navy last year and the UK’s invitation to Korea to join the G7 conference in Cornwall and, indeed, as has been mentioned, both countries’ bids to join the Trans-Pacific Partnership.
Last year, the UK Government published its Integrated Review of Foreign and Defence Policy and at the heart of this was an ambition for the UK to become, and I quote, “the European partner with the broadest and most integrated presence in the Indo-Pacific, committed for the long-term.” And I think the UK had, arguably, already begun an eastward tilt under the Cameron Government, which actively courted new trade and investment relationships with Gulf countries, Japan, India and most notably, China. But since then, a number of things have changed and the most obvious is, of course, Brexit, which has given renewed impetus to the desire to forge new partnerships. But I think a similarly important change has been the increasing assertiveness and hostility of China, the Hong-Kong crackdown. In particular, I think, had repercussions here, given Britain’s legal and historical commitments to the city. And the other big change was in the US, which, under Trump, became less – a less reliable, less predictable, partner for European countries, including the UK, so a UK-US trade agreement never materialised and is unlikely to happen under Biden.
So, all of this means that you have a Britain, which has set up trade barriers with its largest trading partner, the EU, won’t get a deal with the US, for political reasons, which is its second largest trading partner, and is politically unable to forge deeper relationships with its third largest trading partner, China. So, in this context, the Indo-Pacific, or at least the non-Chinese bits of it, suddenly become a lot more interesting and a lot more important. So, when I first read the Integrated Review, I thought that the tilt was more slogan than substance, but I think since then, we’ve seen a couple of more tangible components. So, one is, as has been mentioned a lot, the UK joining the CPTPP and the other is AUKUS, which is the UK-US-Australia joint defence technology agreement. And I think CPTPP is important.
I think the UK, my best guess will be will join it this year. The UK would be the second largest economy in the pact and the pact itself is likely to grow. Of course, South Korea could be a member soon, as well. So, even though the UK is geographically far from the Asia-Pacific, it could be an important trading and diplomatic relationship. And I’m also wondering whether the US might be tempted to re-join the deal, despite the countervailing domestic pressures, and I’d be interested to hear Minako and others’ views on that, as well.
AUKUS is very different. So, AUKUS doesn’t involve any Asian countries, it’s defence focused and it – but it’s not a defence pact, and I think what’s most important about it is what it signals for the future. So, could it be the start of a broad Western coalition providing military support to Taiwan in the event of an invasion, or will it be used for the US, UK and Australia, plus potential other Five Eyes countries, to develop AI weapons capacity? And I think AUKUS and CPTPP, which are these two, sort of, set pieces that we have for the Indo-Pacific tilt, I think they highlight a bit of a tension, in terms of what the UK wants to achieve through this tilt and that is, is this tilt more to do with trade or is it more to do with changing geopolitics? So, is the tilt a moral crusade to defend liberal democracies from China’s hostilities, or is it old school mercantilism? In a speech given here at Chatham House just before Christmas, the UK Foreign Secretary, Liz Truss, said that she would be unashamedly commercial in her foreign policy, but she also talked about a “network of liberty to counter China.”
And I think this is different – it’s difficult for Britain, because different partners want different things. So, lots of countries in the region are obviously worried about China, but also, China is consistently the largest trading partner of pretty much all of these countries, so abandoning China for a network of liberty isn’t – just simply isn’t a pragmatic option for lots of these countries. And furthermore, some of these network and liberty countries have their own issues when it comes to human rights, such as India. They don’t necessarily adopt Western style political freedoms, such as in Singapore. So, Liz Truss sees this as the main fault line in Asia, as being between liberal democracies and China, but I think, in reality, things are a bit more complicated. Take Japan and Korea’s relationship, for instance, or India and Pakistan’s, or Australia’s close trading relationship with China, and the Minister is better placed to comment on this than I am, but my sense is that in the eyes of most Asia-Pacific countries, there isn’t this simple binary between the Free World and China, but a more complex web of tensions and partnerships based on history and migration and values and pragmatism.
That all being said, I think there are ways in which trade and geopolitics can work together. So, a big problem over the last two years has been with supply chains, partly caused by COVID, but also by tensions between China and the US, and so, in America, you have this increasing interest in reshoring supply chains, particularly for critical inputs and I don’t think that’s an option here in the UK, given our size. But I think diversification will be important for the UK and South Korea is a wonderful partner on this front, because it’s a technological and manufacturing powerhouse, particularly when it comes to semiconductors. It already plays a critical role in these supply chains which are, as we know, increasingly politicised. So, I think it’s really prudent for middle powers, like the UK and South Korea, to work together, to forge deep political and economic partnerships and then, I think today’s agreement on supply chains, which is the first of its kind that the UK has with a country has after Brexit, it’s really a good example of that.
And in terms of what the UK has to offer in return, I think it’s a bit more complicated. So, historically, Chinese, Japanese, Korean and other Asian companies have chosen the UK as its – as their gateway into Europe. The UK offers a friendly business environment, the advantages of the English language, while also being integrated into the European markets, but obviously, this has changed since Brexit. So, Samsung picked Berlin over London for their European headquarters. LG, a Korean company, moved its headquarters away from London, to Germany. Kia and Hyundai are also both based in Germany. So, there are some tricky things there and I think what the UK has to offer is different from what it was ten years ago. But despite this, I think the UK already still has some comparative advantages and Minako touched on some of these, but finance, digital, science and education, luxury goods and, as well as being a military power, which is increasingly pivoting towards the Asia-Pacific region. So, I’m interested in the discussion to explore some more of those comparative advantages that the UK might have to offer, but I will leave it there for now.
Creon Butler
David, well, thank you very much. So, I think there’s an enormously rich range of issues that we could get into, and I just wonder if I could start off, actually, ‘cause all three of you have spoken about, if you like, the potential of the bilateral relationship to develop ideas and approaches, which are then relevant to the broader picture, but there is a kind of, choice. I mean, technology is a very good example, because you could do stuff through a bilateral free trade agreement. Alternatively, you could say, actually, the priority is to try and fix some of the global governance issues first. And so, my question, really, Minister, is, and reflecting the points that Minako and David have made, I mean, how do you see that trade-off between what you do bilaterally versus what you do, hopefully together with the UK, in that mila – in multilateral context?
Minister Han-Koo Yeo
Thank you for these excellent comments by two distinguished panellists and our moderator, as well. I think it’s the common theme through these two panellists and, you, sir, as well, was these middle power countries. I think that is a really core the theme that we really need to explore, because, you know, without this clear leadership, you know, around the world, especially in this – the rapidly changing global trade environment, I think it is the middle power country, which could play a very pivotal role in developing these new rules of the trade or these – all these newly emerging trade issues. And if you look at the major trade initiative, which emerged for the last, you know, couple of decade, I think some of the major ones emerge from these middle power countries. For example, this – the CPTPP started from this P4, the small four countries in the Asia-Pacific and they really expanded to comprehensive – a comprehensive the trade pact of the – containing these 11 countries right now.
So, I think, you know, UK and Korea, I think we share a lot in common. I mean, basically, we are the value-driven, likeminded country, which share democracy, Rule of Law, the market capitalism, this multilateralism, free and open trade, etc., and that’s why I think Korea was the first country in Asia to conclude this Korea-UK FTA in this uncertain period leading up to this – the Brexit at that time. And I think now that the UK left the European Union, I think there’s a still ongoing project and constant debate. But I think now the strength of UK is, sort of, very nimble, agile, the nature of the UK to really experiment with new ideas, with all these emerging new trade issue. So, in that sense, I think Korea is also, you know, the very nimble, agile trading nation in Asia-Pacific. We have this 18 FTA, with 58 countries so far, covering about 85% of global GDP. So, I think the place of Korea in Asia and the place of UK in this Europe, I think we have a lot in common. So, we can start from this bilateral negotiation and then we really, you know, expand to work together for this common public good, for this more broader or multilateral co-operation. So, I think that’s, you know, my take on…
Creon Butler
That’s very…
Minister Han-Koo Yeo
…the first questions.
Creon Butler
…interesting and I mean, a very, I think, a very sound response. I mean, one of the things that was notable, if we’re looking at two big, really big blocs, when the US and the EU resolved their – or at least stood back from their current dispute over national security in steel, they talked about, basically, border carbon adjustment mechanisms and Climate Club and so on. And if you look at the German agenda for their G7, they have a big emphasis on the whole question of, you know, creating groups of countries that will lead the way in climate change.
So, the middle powers, these agile middle powers, the UK and Korea, are going to have to deal with, potentially, big powers, saying, “Okay, we’re going to go in this direction.” So, what is your – what is Korea’s view on the whole question of border carbon adjustment mechanisms, climate clubs and that approach to dealing with the question of, you know, how we integrate climate change with trade?
Minister Han-Koo Yeo
Yes, thank you very much for the question. I think that is one of the core agenda that your trade policy is facing, how can this trade policy step up to reflect its new mainstream agenda that every business and every country are facing, which is decarbonisation? So, in that sense, I think we can, you know, through our – this upgrade negotiation, we can explore how we can address or motivate, you know, it is our business sector, to really step up for this decarbonisation. I think, as Dr mentioned, this – the circular, you know, economy, I mean, how we could incorporate the concept. I think we are very openminded and we are ready to explore new ideas and new approach with – you know, through our upgrade negotiation.
This carbon CBAM, I think that is, you know, one of the new areas that emerging with – in some of the, you know, the interests and, also, concern, as well. Basically, I – you know, we advocate on the need to prevent these carbon leakage issues from happening, I think. You know, we don’t want our industries to, you know, escape these stronger measures on this climate change to, kind of, lose, you know, countries.
So – but the question that we all have to, you know, tackle, is how can we also prevent these new trade barriers from popping up here and there if country A, B and C begin to introduce its own system of this carbon, you know, CBAM type of new measures? I think that could be another, so, spaghetti ball, you know, effect that we have been talking about for a long time in this rules of origin, I mean, the traditional trade policies. So, how can we develop some sort of a more co-ordinated multilateral approach to prevent these carbon leakage issues from happening, but sort of, introduce a more co-ordinated, you know, this global carbon, you know, pricing mechanism, to really encourage our broader business community, to really incorporate this into their strategic business decision-making? So, I think we in Korea, has been advocating on, you know, WTO, OECD, all these – the international organisations, to work on this multilevel approach to really capture this new carbon pricing issue now.
Creon Butler
I want to come to some questions in the audience here and we also have some questions online already, but I just wanted – first of all, Minako went through a very good analysis of all the issues, I think, that you are probably contemplating, in relation to the upgrading of the FTA. And I wondered if there were any – she, sort of, put forward a number of propositions, if there are any of those that you would like specifically to respond to? I mean, I was quite struck by what she was saying about services and, you know, this is an area, I think, at the moment the UK has a major surplus in services vis-à-vis Korea. You know, is that an area and – but the UK is always interested in expanding services trade, because it’s…
Minister Han-Koo Yeo
Correct.
Creon Butler
…one of our core comparative advantages.
Minister Han-Koo Yeo
Hmmm hmm.
Creon Butler
Korea also has a very powerful cultural sector and…
Minister Han-Koo Yeo
Hmmm hmm.
Creon Butler
…you know, this may well be an area that you would want to develop, as well.
Minister Han-Koo Yeo
Yeah, yeah.
Creon Butler
So, either on that issue or any of the other points that Minako raised, are there – did you want to respond to…
Minister Han-Koo Yeo
Yes.
Creon Butler
…some of them?
Minister Han-Koo Yeo
Thank you, Dr Minako, for your excellent, you know, comments. I think you, you know, point out very, you know, specifically on many of these key issues. I think digital, environmental, sustainability, it’s two key areas, as you pointed out. Investment chapter, I think this is what we are lacking. I mean, you know, Korean businesses right now are very, you know, active in, you know, exploring investment opportunities outside Korea and in Europe, the Former European Union, the UK was second largest investment destination for Korean companies, after Netherlands. But unfortunately, when we negotiated this Korea-EU FTA, like I think, you know, more than ten years ago, the Commission didn’t have this competency in these investment rules. That’s why, you know, it was left for, you know, the blank in the negotiations. But as I said, in light of this very active two-way investment flow between our two countries, and this BIT, business – you know, and this Bilateral Investment Treaty, is really out of dated now. So, I think, you know, it’s one of the very original business needs coming from this – the investment chapter.
I think for detail, the modality, I think we are openminded to explore and, also, services, I mean, I agree that the trading goods, it’s – we have already this ten-year-old, this previous FTA, that – you know, our Korean-UK FTA, you know, been replicated, so more than 95% of our trading goods are already zero tariff. So, not much to add, but you know, this upgrading these rules in services and digital chapter, we have only two provisions in this e-commerce chapter in our current FTA, in this rapidly changing digital, you know, trade arena.
So, I think those are the really key areas for focus, and we are open mind to, you know, experience me – with new ideas and innovative, the approach. As I mentioned, you know, this traditional scope of trade policies changing, it’s not just about trading goods or services, or you know, rules of origin. I think we need to find ways in which we could deal with, and grapple with, this supply chain, vigilance, emerging technologies and that’s why I think European Union and United State forge this new Trade and Technology Council approach.
And then, I think it – to your comment, David, you know, the – I think many countries in the Asia-Pacific want US to come back to CPTPP, but I was in D.C. last week, but you know, it’s – the US political circumstance is not really, you know, likely to come back any time soon. Instead, I think the US Government is developing this new Indo-Pacific economic framework and then, we have to see what detail the frame of that contains. But, you know, in that – the framework, also, you know, try to deal with all these new issues of technology, supply chain, infrastructure, you know, the decarbonisation, etc. So, I think through our – this bilateral upgrade negotiation, we need to explore this new creative and innovative approach on how we could really, you know, grapple with this new trade agenda, yes.
Creon Butler
Well, thank you very much for that. What I’d like to do now is just see if there are any questions here in the audience, if you have a question. Yeah, there’s the gentleman over there and if you stay where you are, the mic will descend on you, and go ahead, please.
Christian
Slightly intimidating.
Creon Butler
Yeah.
Christian
Thank you very much, Minister, for your – and, also, the other panellists for your…
Creon Butler
Could you – sorry, I should’ve said, if you just say who you are, first of all, yeah.
Christian
Oh, of course. So, I’m – my name’s Christian. I’m a student at the Loughborough, London, at the Institute of Government and Local Governments.
Creon Butler
Brilliant, thank you.
Christian
My question was regarding the new Korean-UK FTA and how you foresaw that developing, ‘cause of course, increasingly, in our modern trading environment, new streams of trade are emerging, as you right – quite rightly mentioned. How do you see you being able to modernise that agreement and maintain that reliability in the future and prevent it from becoming outdated almost as swiftly as it’s signed?
Creon Butler
Maybe see if there’s any other questions in the audience. So, yes, sir, if you – there’s a mic just heading to you, we’ll take two questions. Thank you.
Bernard Herman
Yes, thank you very much for your excellent talk, Minister. Korea is certainly a country of the future.
Creon Butler
If you just say who you are.
Bernard Herman
My name’s Bernard Herman. I’m a member of Chatham House. How do you see relations with North Korea developing economically over the next few years, in that there were a number of bilateral trade agreements and partnerships with North Korea? Thank you.
Creon Butler
Well, would you like to take those two, sort of, how do you…
Minister Han-Koo Yeo
Yeah.
Creon Butler
…keep the FTA up-to-date with fast changing technology, and then question about relationship with North Korea?
Minister Han-Koo Yeo
Yes, I think – thank you for these question. I think these are great question. I think I, kind of, touched on, you know – in my previous remark, but actually, you know, I was a Chief Negotiator in 2019, when we negotiated this Korea-UK FTA and I found that UK Trade Negotiators were, you know, very competent and very creative and also, you know, very flexible to find new solutions to the problem that we are facing. So, today, with Secretary Trevelyan, I mentioned that we need to really move fast to really find new solution to these emerging new issues. So, I think, you know, with, kind of, discipline, the negotiation process and hopefully, some specific deadline that we set for our negotiation, I think, you know, we can achieve these common objectives of, you know, the experimenting and, sort of a – as a testbed for new approach, we could fully utilise our bilateral trade, the FTA negotiation.
The second question is on North – you mentioned North Korea, you know. I have no idea about the – what’s going to happen in the next few years with North Korea. It’s, unfortunately, it’s very, you know, unpredictable, the nation and when it comes to trade, I haven’t heard of any new trade agreement that North Korea has forged with any other country. So, I don’t know, if you have better information, please enlighten us, but unfortunately, North Korea is one of the most closed and isolated country and which will not really integrate into this global trading system, yeah? They are not a member of WTO, nor World Bank or IMF, so I think we hope that North Korea could really, you know, come out to the world, you know, integrate into this global trading system. Thank you.
Bernard Herman
Okay.
Creon Butler
Thank you very much. What I would also like to do now, we have a couple of questions online I’d like to put to you, Minister. The first is from Derek Lowe and his question is really whether the “bilateral free trade agreements are too subservient to regional pacts”, so, I think which he means too subservient to regional pacts and as a result, they get influenced by the geopolitical dynamics of the region in question. So, it’s about that relationship between bilateral FTAs and regional agreements.
And then, a further question from Michael Baker, and his question is, “Do you consider that the current high costs of international shipping can be overcome in the medium-term to facilitate a wider, more constructive trade arrangement and, also, to avoid supply chain disruption?” So, I think this is probably one of the issues you discussed with our own Secretary of State today.
Minister Han-Koo Yeo
Uh-huh, yes.
Creon Butler
So, if you’d like to take those two questions.
Minister Han-Koo Yeo
I think bilateral versus regional, I think it’s not, you know, which is better or worse. I think each has very distinct project in common. For example, of course, the regional – this trade deal, I think regional trade deal is all about supply chain. You know, if you just integrate one big region, inside that big region, businesses are free to explore, you know, develop a new supply chain inside the boundary of that regional bloc, which could really plus, you know? But you know, the concluding – negotiating and concluding, for example, RCEP, it took eight years and, you know, to come to conclusion and that eight years in this kind of environment and – you know, it’s – you know, when – it’s, you know, really remarkable how much, you know, changes are happening over the course of that year.
So – but the bilateral is much more faster and much more sweeter and it could be much more accommodating to the specific need of these bilateral partners. For example, Korea, we put forward our New Southern Policy in 2017 and RCEP, comprising 15 countries, obviously so one of the biggest is to trade the initiative we succeeded in concluding. But because we try to find the common denominators among these 15 countries, sometimes we have to accept this lower level of the market opening in some of the specific areas of our interest. Then what we did was, also, we forged this bilateral FTA with some of these, you know, new – you know, the ASEAN countries, for example Indonesia and the Philippine, Cambodia. We also concluded this bilateral FTA with those countries. And through that bilateral trade, the FTA negotiation, we specifically accommodated, you know, specific interest between two party. So, I think there is a pros and cons. It’s not about which is better or worse, yeah.
So, second question, shipping. I think I had a very interesting meeting with IMO, the Secretary-General of IMO, and they were working on this, actually, environmental – this – the measures to put in place for all this shipping industry and maritime industry. And ironically, that could, you know – this – because if you strengthen these environmental measures in the shipping industry, there’s a – you know, there are new regulation on the speed over shipping and then, that could also, maybe it could negatively affect this ongoing – this logistics problem, stemming from shortage of shopping – sorry, shipping and so on, so forth. So, I think there is different policy objectives we have to achieve, how to deal with the supply chain disruption and, also, how to contribute this decarbonisation, how to – you know, this – find the right balance between these two.
So, I think these are the big questions that we are grappling with right now and I think, you know, we need to find ways in which the new trade policy could do something about this supply chain disruption and how to bring this resilience back to the supply chain.
Creon Butler
Well, thank you, Minister. Unfortunately, we are almost out of time, but I want to just take the chance of squeezing in one final 30 second question, which is when we were talking earlier, I was struck by the fact you were saying that in the Korean context for the FTA, you were in the process of working through Parliamentary agreements, but your sense was that the UK was, kind of, ready to go. Now, do you have any advice for our Secretary of State about, you know, getting the country aligned behind your trade negotiating strategy before you head off into a negotiation?
Minister Han-Koo Yeo
Actually, I had a very productive meeting with the Honourable Members of Parliament, especially the International Trade Committee and then, I strongly urged them to be fully co-operative in this, you know, launching our bilateral FTA. So, I believe they will be co-operative. But I think, basically, the Korea and the UK are very complementary to each other. We are not really, you know, competing, you know, neck and neck in many of the overlapping areas. So, we find a lot of this synergy effect to be created through our FTA. So, I think probably this could be one of the fast moving, you know, new approach that we can take.
Creon Butler
Thank you very much. Well, I’m afraid that’s all we have time for. Absolutely fascinating discussion and I think we could’ve gone on for quite a lot longer. But what I would like to do, first of all, is thank you, Minister Yeo, for being with us today and for your comments, to thank our two other panellists, Dr Minako Morita-Jaeger, who’s been with us online. Thank you very much for…
Dr Minako Morita-Jaeger
Thank you.
Creon Butler
…your questions and your presentation. And, also, my colleague, David Lawrence, thank you, also, for your comments, and, also, to thank our audience, both online and here in the room, for your questions. I think this has been a really fascinating discussion and, hopefully, we’ll have the chance for you to come back again at some point and say how things are going.
Minister Han-Koo Yeo
Thank you.
Creon Butler
So, Minister, thank you very much.
Minister Han-Koo Yeo
Thank you very much [applause].
