South Korea is slated to hold a public hearing on Wednesday on a move for a free trade agreement with the UK in an effort to cushion risks posed to Korean firms doing business in the UK after Brexit. Official negotiations of the trade deal may start as early as next year if all trade procedures go smoothly.

Since Britons voted in a June 2016 referendum to leave the European Union, the Korean government has been making efforts to retain and develop relations with the UK in response to changes in the trade environment. 

In December 2016, the two nations set up a Joint Economic and Trade Committee to discuss building new trade relations. Under the committee, officials from the two nations had meetings twice last year, in February and December.

“As the UK is the second-largest trade and investment partner in the EU (following Germany), the potential trade pact with the nation is expected to retain trade relations after Brexit, and allow (Korean firms) to better advance into the UK market compared to other rival nations,” said Shin Ji-hyun, chief of the Trade Ministry’s FTA implementation division.

During the public hearing, government officials, parties of interest and academics will discuss economic effects of the trade deal between the two nations, and the need for the deal from the market’s perspective.

After the public hearing, the Trade Ministry will make a comprehensive plan to push for the trade deal with the UK with related ministries and propose the plan to the National Assembly, upon which official negotiations can begin.

“If all the procedures are completed fast, official negotiations may start as early as next year although we can’t confirm the schedule,” said Koh Jang-won, a government official from the Trade Ministry.

Since 2016, Brexit has created uncertainties for Korean companies doing business in the UK. It has made them consider either moving their units to other European countries or setting up additional units in other regions to reduce potential risks.

Over the last two years, the Industrial Bank of Korea set up a new unit in Poland, and Woori Bank opened a new arm in Germany, apparently to diversify their markets in response to Brexit.

There are also regional units of Samsung, Hyundai Motor, LG and SK in the UK, though they have not shown any moves to pull their businesses out of the nation.

Kang Sun-koo, a researcher at LG Economic Research Institute, said if Korea does not have a trade deal with the UK, the companies’ business may be hurt from the absence of tariff benefits from trade deals with the EU.

“Brexit may hurt Korean exports of automobiles, home appliances and daily supplies to the UK. The trade volume between the two nations may go below $10 billion from $11.7 billion in 2016 if the bilateral trade pact is not sealed,” Kang said.

Last month, Finance Minister Kim Dong-yeon met with Liam Fox, British secretary of state for international trade, in Seoul to discuss trade issues in response to Brexit. During his stay in Seoul, Fox also met with executives from Korean firms, including Samsung, LG and Hanwha.

In the same month, the leaders of the two nations met during the ASEM summit in Brussels and shared the view that the two nations should maintain relations in trade and investments after Brexit. 

By Shin Ji-hye(shinjh@heraldcorp.com)