FTA is a trade agreement between certain countries granting their members an exclusive favor and is a common type of regional trade agreements .

FTA violates the MFN (most-favored-nation) principle of multilateral trading system but the WTO regulations accept when the following requirements are satisfied.

FTA shows very different aspects depending on the involved countries. An FTA made between a developed country and a developing country focuses on free trade of goods or reduction of tariffs. However, FTA covers a larger number of sectors since 1995. It covers services, investment incentives, copyrights, government procurements, competition policies, trade relieves as well as lifting of tariffs. Reduced tariffs by trade agreements made among multilateral parties provide a larger coverage of sectors.

Regionalism represented by FTA is a main trend of international economies and is being expanded since the birth of the WTO. 124 regional trade agreements were reported to GATT for 47 years and 176 notified for the first 9 years of the WTO. It is anticipated that the ratio of regional trade agreements to world trades will reach up to 55%. Why, then, are regional trade agreements expanding?

The WTO regulations are not clear enough regarding regional trade agreements so it is currently difficult to find out whether regional trade agreements meet the WTO regulations. The Committee on Regional Trade Agreements of the WTO and other organizations are trying to supplement the WTO regulations but the progress seems not good enough.

Regional trade agreements including FTA show visible and direct effects but they are not sufficiently monitored. However, regional trade agreements are still being expanded worldwide.

Since Korea has been away from FTA trend, the Korean Government is now trying to take up the progress to make free trade agreements in order for Korean corporations to compete with their foreign rivals who are already in free trade agreements in major global markets. The Government is making an effort for ¡® multilateral trade agreement strategy ' in order to reduce trade deficits by <making trade agreements that trade benefits and deficits are respectively anticipated?> . The Government ' s strategy for free trade agreements covers merchandises, services, investments, government procurements, copyrights, technical standards, etc.

The opening of markets is an important policy to improve the level of economy and productivity but it could cause pain on the social level and not be supported by people.

The Government has established ¡® Procedures for Free Trade Agreement (Presidential Instructions) ' on May 2004 to collect public opinions and make progress for free trade agreements. The goal of these procedures is to secure procedural transparency by reflecting civilian and professional opinions.

The Procedures have 3 phases of agreement , i.e., ¡® before ' , ¡® during ' and ¡® after negotiation ' . Three organizations are set up , namely FTA Practical Affair Committee, Promotion Committee and Economic Ministers ' Conference. At each phase, new information on FTA promotion is open to the public to collect opinions. Prior to commencement of FTA negotiation, a public hearing is to be held.

At the same time, the Trade Division of the Ministry organizes site visits, conferences by sector and incorporates opinions into phases of negotiation. The Government is making an effort to have FTA with the existing major markets and developing markets such as BRICs that could have positive effects on the Korean economy.

Korea's economy has been developed by effectively applying multilateral free trade system under WTO/GATT to the real economy situation and by driving exports of strategic industries as well. Continuous removal of tariff- or non-tariff barrier s under a multilateral free trade system has provided Korean enterprises larger markets and is helping them strengthen competitive power by opening the markets .

The system has been dramatically changing these days. Why is Korea, who has benefited from multilateral free trade, now promoting FTA with major economic partners simultaneously?

Firstly, multilateral free trade system is not sufficient to adapt to a dramatically changing global economic environment. More than 50% of the international trade is done under FTA. Korea's major partner countries, such as Japan, China and ASEAN are adopting FTA as one of their main policies. Also, under the situation that regionalis has been strengthened after the commencement of WTO system, if Korea only holds on to multilateral free trade, Korea could lose market share to other countries under FTA. On the other hand, if Korea enters into FTA with major trading partners earlier than rivals, Korea could gain a headstart in those markets. Market growth under FTA can be accomplished by reducing tariffs, while FTA itself makes a good impression on to the public and provides a positive effect.

Secondly, higher levels of market openness under FTA could lead to further economic diversification and development. Additional openness for goods and services could be an additional burden to local enterprises, but if it is carefully implemented Korean enterprises and service sectors could strengthen their competitiveness by importing cheaper quality raw materials. Also, FTA agreements with developed countries like the USA could motivate Korea's professionals and systems in copyrights, competitiveness and transparency to upgrade to international levels.

Thirdly , FTA contributes to the social welfare and reliability of the people of Korea. People can purchase goods with lower prices when tariffs are reduced or removed thanks to FTA, so that their real income could be increased. FTA provides reliability on development of economy and continuous opening so credit or competitive power could be better evaluated.

Finally, not only economic issues such as trade volume or GDP but also political and diplomatic issues are major reasons to sign FTA. Partner countries could be selected according to political and diplomatic needs.

Also, economic unity could lead to political and diplomatic unity too. Korea has been promoting FTA in terms of economic benefits. In the event that bilateral FTA with USA, China, Japan, etc. are signed separately, political and diplomatic issues could be major motivations to select FTA partners and priorities.

FTA has merits that multilateral trade negotiations lack in. In that sense, FTA is a ¡®custom tailor' as multilateral trade negotiation is a ¡®ready-to-wear'. Under FTA, a country is able to choose another country as its negotiation partner and accomplish it objectives. For example FTA is more advantageous in case of negotiations on removal of non-tariff barriers or quotas for marine products.

It is considered that FTA provides benefits to the concerned countries in negotiations and its level of success depends on how it is implemented. Multilateral trade negotiation is still a major trade policy in Korea while FTA makes up for the weak points in multilateral trade negotiations .