The purpose of this study is to examine the founding background of the North American Free Trade Agreement (NAFTA) and the relationship of the three countries in the North American continent – United States, Canada and Mexico. Eventually, it seeks to conduct a thorough observation on the impacts of NAFTA on Korean local industries.
In response to the sudden changes in the world market since the 70s, many efforts based on liberal principles have been exerted. Despite the efforts, problems in the market’s internal structure were intensified during the 80s, while the US overused import regulation measures including anti-dumping. At the same time, many problems began to surface as the Uruguay Round was aggressively pushed ahead and the Korean and Japanese markets were pressured to liberalize their markets. Along with the formation of world bloc economies after the middle 80s, the US started to push forward the North American Free Trade Agreement with Mexico and Canada. The advantage of NAFTA for the US was that it could combine Mexico’s low-cost workforce and Canada’s technology to produce quality products cheaper. It was also an instrument for the US to use in going against the world’s trend of creating world bloc economies while going through sophistication of the economy with its partners. Despite having signed the agreement, the US still showed signs of American-centered measures by taking anti-dumping measures against Mexican commodities. After a series of negotiations, Mexico agreed to sign the Free Trade Agreement (FTA) with the US in February 1991 after a series of negotiations. On the other hand, Canada started taking active measures in case the US-Mexico FTA turned out to be unfavorable for them. They not only showed strong disagreement on the FTA, but also started to take part in the negotiation process for the signing of the NAFTA.
The advantages of the three countries’ competitiveness regarding NAFTA can be summarized into three: first, First, Canada can directly face a disadvantageous condition for competition with Mexico in case Mexico draws out a favorable negotiation compared to the Canada-US FTA. This will lead to Canadian companies’ price and non-price competitiveness becoming unstable. Second, Canada’s labor-intensive market may fall behind even more than developing countries competing with the US in case the US-Mexico FTA makes Mexico more labor-intensive. It is expected that Canada will take measures to reduce such risk by taking an active part in FTA. Finally, there is a possibility for Canada to receive the handicaps should they be excluded from specific provisions such as safeguard measures against the liberalization of the automobile industry.
Based on these advantages, the impacts on the Korean market and measures for improvement can be summarized as the following; the Korean market generally has a stronger industrial competitiveness over Canada, while Mexico is forecast to reinforce its competitiveness similar to Korea’s in the next 5 years. Thus, there is a need to take preparatory actions on the export competition market in the US against the two countries. In particular, the relevance between industries for special commodities, such as semiconductors must be reinforced, while current technological skills must be sophisticated and its competitiveness boosted so as to stabilize the existing and develop new markets. In addition, the computer industry, expected to receive the biggest impact, must do away with its standard manufacturing methods, reinforce its production process at the initial stage, maintain a balanced development of relevant sectors and diversify its products at the same time. And for the sake of competition in the American market, Korean industries must strengthen their competitiveness by building partnerships with developed foreign companies. The country must also be prepared to face Mexico’s low-cost components and Canada’s current competitiveness by increasing R&D investment and building up competitiveness for component industries. Finally, a feasible approach in addressing the increased demand in Mexican apparel in the American market is to focus on apparel items that are highly competitive and share a high export share. It is by these measures that the negative impacts of the ongoing NAFTA on Korea can be minimized. In order to secure a stable way to access the American market and secure competitiveness, the government must not only exert efforts in building bilateral ties, but also increase its endeavors in multilateral trade diplomacy.
북미자유무역협정 체결이 우리 산업에 미치는 영향(The impact of the North American Free Trade Agreement on Korean domestic industries)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||산업연구원; KDI 국제정책대학원|