By Kim Young-gyo
HONG KONG, May 3 (Yonhap) -- A free trade agreement (FTA) with China would benefit South Korea's economy in the long term by helping boost the latter's export volume, a report said Thursday.
"South Korean exports to China fell sharply in the first four months of 2012, but a bilateral FTA should be very positive for the Korean economy in the long run," Kwon Young-sun, an economist for Nomura International, said in the report.
"It will take a long time to seal the deal, in our view, but we estimate a bilateral Korea-China FTA would increase Korea's gross domestic product by 3.7 percent in the long term, greater than a 1.6 percent lift from its FTA with the U.S. and the 1.5 percent from its FTA with the EU."
South Korea and China declared the start of free trade negotiations on Wednesday after seven years of preliminary talks.
China is South Korea's largest trading partner. Their bilateral trade is expected to reach US$300 billion by 2015.
For the first four months of 2012, however, South Korea saw its exports to China grow a mere 0.9 percent on-year, while its export growth to the U.S. surged 20.7 percent in the same period.
It was seen as unusual since the South Korea's exports to China have generally grown faster than the exports to the U.S., except in 1998.
Kwon attributed the weaker exports to China to slowing domestic demand there and China's sluggish re-exports to Europe.
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