In a new session of the EUKIT talks, framed in the ESCI-UPF Jean Monnet Module on “Knowledge and Innovation for the European Trade Challenges” program, Ramon Pacheco Pardo was invited to talk about the economic evolution of the Republic of Korea and its relationship with the EU.
Ramon Pacheco Pardo holds the KF-VUB Korea Chair at Brussels School of Governance and is Reader in International Relations at King’s College London. Pacheco Pardo has conducted several research projects about the reality of the Korean peninsula and the relationship between East Asia and the EU. He also has served as a policy advisor and policy commentator for some institutions, such as the European Parliament.
At the beginning of the session, the lecturer underlined three key factors that explain the Republic of Korea economic evolution since the end of the Korean War in 1953. Pacheco Pardo said that the government’s economic “intervention” was one of these elements. From the 1960s onwards, the Korean governments have been very involved in economic policymaking, focusing on macroeconomic components of policymaking but also on microeconomics when necessary. Since then, the state and the private sector have worked very closely to develop and grow the South Korean economy.
The second factor is that South Korean society has always been very entrepreneurial. Some of the big Korean conglomerates that exist today –Samsung, LG, Hyundai, SK, etc.– started as a family business, and little by little, they started growing. From the 1960s, these familiar enterprises received state support and since the late 1990s and the Asian financial crisis in 1997, support for entrepreneurship has become even more prominent in the Republic of Korea.
The last reason that Pacheco Pardo expounded to explain the economic development of South Korea is the strong coalition and cooperation between the different economic actors: the government, the companies, the employees and even the banking sector. Surrounding these three key factors, he also mentioned the importance of orienting the economy towards exportation.
Later on, Pacheco Pardo explained what chaebols are and how they work. The chaebols are big industrial and financial conglomerates that expand to some different types of sectors. They are the main economic actors in South Korea –dominate around 50-60% of the exports– and were crucial in the country’s economic development. Without chaebols, it would have been very difficult for South Korean companies to compete against foreign investors and corporations. As the professor explained, chaebols work similarly to the Japanese keiretsu, and the fundamental difference is that keiretsu also own banks, which chaebols do not.
Afterwards, Pacheco Pardo went deeper into the diplomatic and economic relations between the Republic of Korea and the European Union. These two actors signed its first Trade and Cooperation Agreement back in 1996, but only one year later, South Korea was dramatically impacted by the outbreak of the 1997 crisis. As he explained, Europe was also affected by the financial crisis because South Korea was becoming an increasingly important market for European goods, the second biggest in Asia back then. The EU was among the institutions that provided economic support to South Korea to recover quickly from the crisis, a fact that strengthened the political and economic relationship.
At the end of the talk, the lecturer spoke about the Free Trade Agreement signed between South Korea and the EU in 2011. This agreement is considered to be the first new-generation FTA since it goes far beyond trade issues and has been a model for the following deals signed between the EU and other countries. Lastly, Pacheco Pardo pointed out some of the sectors and countries most benefited from the FTA. From the European side: the automotive industry, the food industry and the services sector, and countries like Germany, Spain, Italy or France. From the Korean perspective, high-tech companies and cultural products have benefited from the FTA, and South Korean companies have been able to open factories at the heart of the EU.