In a strategic move to fortify global supply chain resilience, South Korea and the United Kingdom are currently in the process of renegotiating their Free Trade Agreement (FTA). This initiative, geared towards bolstering semiconductor production and optimizing supply chain dynamics, aligns seamlessly with the worldwide push for an alternative global supply chain, as advocated by U.S. President Joe Biden. The overarching goal is to diminish reliance on Chinese inputs and create a more diversified and secure global trade landscape.
Commencing in Seoul, the negotiations involve approximately 50 representatives from each side and are focused on upgrading the existing FTA. The revamped agreement seeks to incorporate new trade norms, emphasizing digitalization, supply chain advancements, clean energy, and bioeconomy, according to statements from South Korea’s Ministry of Trade, Industry, and Energy.
The original FTA, signed in 2019 and effective since January 2021, was a landmark deal as the UK’s first with an Asian country amid the challenges posed by Brexit. However, it primarily addressed market access for goods and services, overlooking emerging global trade norms and economic-security concerns, particularly in the areas of digital trade and supply chains.
Highlighting the necessity for collaboration in the face of evolving global trade dynamics, South Korea’s Trade Minister Jeong In-gyo remarked, “The global trade order is undergoing rapid changes, with the spread of protectionism worldwide and the swift restructuring of global supply chains.”
The ongoing talks aim to solidify a comprehensive and forward-looking strategic trade relationship by incorporating new trade norms across various fields, responding to both domestic and international uncertainties.
The strategic move to reduce dependence on Chinese components aligns with a broader effort by businesses to derisk operations due to Beijing’s intertwining of politics and economics. Concerns over China’s control of crucial resources, such as rare earth materials, have prompted South Korea to actively engage with democratic nations like the U.S., UK, Netherlands, Indonesia, India, and Japan to diversify resource supply chains.
The recent reorganization of South Korea’s National Security Office to prioritize “economic security” underscores the global trend of combining economic and political strategies to optimize diplomatic interests.
Building upon the agreements made between South Korea’s President Yoon Suk Yeol and UK Prime Minister Rishi Sunak during their November summit, the nations are committed to strengthening economic and technological cooperation. This includes semiconductors to space technology, as evidenced by a Memorandum of Understanding signed at the time.
South Korea’s proactive efforts to diversify supply chains emphasize concerns over potential economic disruptions, particularly in critical industries like semiconductors and electric vehicles. This highlights the crucial role of international collaboration in navigating supply chain challenges and ensuring resilience on a global scale.