FTA Utilization of Korean SMEs : Opportunities and Policy Tasks

Many Free Trade Agreements (FTAs) are taking place in almost every corner of the world, and Korea is no exception. Korea notified over 50 FTAs to the WTO and has taken significant steps to reduce trade barriers through free trade agreements with major trade partners such as the USA, EU, China, ASEAN, and EFTA, etc. Korea also concluded FTAs with small developing countries like Vietnam, Chile and Singapore.SMEs comprise 99% of Korean firms while large firms make up just 1% of the total number of Korean firms. The future of the Korean economy depends on global competitiveness of SMEs. Going global is inevitable for global firms. FTAs can provide SMEs with various opportunities for global business. New foreign markets and global partners are available to SMEs for their products, and they can potentially increase their output by using FTAs. The Korean government has tried to assist SMEs to penetrate the foreign market by utilizing FTA opportunities.Contrary to expectations, some evidence indicated that SMEs are not taking full advantage of FTA opportunities. Survey results indicated that the FTA utilization rate of SMEs was much lower than that of large firms as well. There are many reasons for the low usage of FTAs, but they have not been explained fully.Some researchers have explained that large corporations have enough resources to construct FTA utilization strategies, pointing out key reasons for non-use of FTAs by SMEs as a lack of information on the implications, poor understanding, and the absence of FTAs with major trading partners. But it is still hard to discern which reasons are the major factors for low utilization of FTAs in Korean SMEs.Though SME are known to be unfriendly to FTA policy, they are eager to become global firms through FTA utilization. The proper answer can be closed out by analyzing the FTA utilization structure and export properties of SMEs.This article aims to suggest implications to enhance FTA utilization of SMEs strategically by examining the structure of FTA utilization and export activities on Korean SMEs. It also investigates various FTA utilization issues and suggests policy implications for Korean SMEs