Upgrading the ‘software’: The EU–Korea Free Trade Agreement and sociocultural barriers to trade and investment

Abstract

In October 2010, the European Union (EU) and the Republic of Korea signed a free trade agreement that went into effect in July 2011 and aims to increase levels of bilateral trade and investment by dismantling existing tariff and non-tariff barriers. In this article, we highlight the importance of a third class of barriers: social, cultural and institutional barriers to trade with and investment in Korea that cannot be legislated for under the new agreement but that can serve as ‘hidden stumbling blocks’ to its implementation and effectiveness. We argue that the phenomenon of ‘mismatched globalization’ (in which economic globalization outpaces cultural globalization) is still apparent in Korea, as evidenced by the continuing existence of these ‘soft’ barriers which include, inter alia, the gap between policy and implementation; the lack of predictability, consistency and transparency in the regulatory environment (including IPR protection); education systems; labour militancy; and attitudes towards globalization. These findings resonate with Dent's (2006) argument that ‘deficient capacity’ in terms of technocracy, industry and/or institutional arrangements can pose problems for developing countries seeking to negotiate and implement bilateral trade agreements with more developed countries. In the case of Korea, the long-term ‘soft’ social, cultural and institutional barriers identified and discussed in this article act as a constraint on the country's institutional capacity functions and thus have the potential to hinder the full and effective implementation of the EU–Korea Free Trade Agreement and reduce the economic benefits that the signatory parties hope to gain from it.