"Brexit in the UK Has Minimal Impact on the Korean Economy"

KIEP Report 'Brexit Initiation: Implications and Issues'

[Asia Economy Reporter Kim Hyunjung] As the United Kingdom moves forward with its withdrawal from the European Union (EU), known as 'Brexit,' an analysis has emerged suggesting that the impact on the South Korean economy will be minimal. It is explained that, according to the Free Trade Agreement (FTA) signed with the UK, there will be no sudden changes in trade with the UK in the short term.

On the 1st, Cho Donghee, head of the Europe team at the Advanced Economies Office of the World Regional Studies Center at the Korea Institute for International Economic Policy, stated in the report "Brexit Initiation: Meaning and Issues" that "South Korea is the first Asian country to sign an FTA with the UK, and the Korea-UK FTA will come into effect simultaneously with the UK's withdrawal from the EU."

Cho said, "According to empirical analysis (Kim Heungjong et al., 2016), compared to the scenario where the UK remained in the EU, the negative impact of Brexit on the EU and UK economies cannot be avoided," but "the impact on third countries, including South Korea, is expected to be minimal." He also forecasted that "especially the Korea-UK FTA will mitigate the impact of Brexit on the South Korean economy."

Furthermore, he anticipated positive effects in terms of reducing uncertainty. He explained, "With the initiation of Brexit and the transition period according to the agreement, the economic uncertainty caused by the Brexit phase has been significantly alleviated," adding, "During the transition period, the situation is similar to the UK remaining in the EU, and since the EU and the UK are likely to pursue sector-by-sector negotiations and phased agreements, the possibility of unexpected sudden changes is low."

Looking ahead, issues such as the extension of the transition period between the EU and the UK, the level of agreements, and relations with third countries are expected to become key points. Cho said, "Due to Prime Minister Johnson's hardline stance, the possibility of extending the transition period has decreased, so unlike initial expectations of the Brexit negotiations or the EU's previous position, a basic agreement will be concluded targeting only some priority negotiation areas," and forecasted, "The EU's previously signed FTAs, which include the most-favored-nation clause in the services sector, and the separate ongoing US-UK free trade agreement negotiations will also influence the future relationship negotiations between the EU and the UK."

Meanwhile, in the Brexit referendum, the withdrawal from the EU received 51.9% of the vote, and since the referendum in June 2016, the UK officially left the EU after 3 years and 7 months. The UK and the EU plan to conduct negotiations on their bilateral relationship after the transition period, which lasts until the end of this year.

This content was produced with the assistance of AI translation services.