[Market Pulse] As FTAs Fade, It's Time to Launch the FSA (Free Startup Agreement)

Innovation Economy Will Shape Future National Competitiveness
Leading the FSA Movement to Become an Economic Powerhouse

U.S. President Donald Trump's "America First" policy (MAGA) is shaking the foundations of free trade agreements (FTAs) that have supported the global economic order for decades. As protectionism intensifies, the established trade order is losing its strength.

With the framework of the industrial economy collapsing, a new international order is needed. One possible alternative is the Free Startup Agreement (FSA). Although this concept does not yet exist, now is an opportune moment for Korea to take the initiative in proposing it. If FTAs were the norm for the industrial economy, FSAs would be the norm for the innovation economy. In an era where national competitiveness is determined not by the size of resources but by imagination and innovative capabilities, we must step forward as architects of the global order.

The FSA aims to establish a startup liberalization system where technology, capital, and talent can flow freely across borders by clearly defining five principles: mutual recognition of startup visas, sharing of patents and intellectual property (IP), automatic approval of capital inflows, liberalization of corporate registration, and mutual certification of regulatory sandboxes. Real-world examples from around the globe support this vision.

Israel, universally recognized as a "startup nation," is a country of deserts and rugged wilderness, yet it has emerged as a global innovation powerhouse through entrepreneurship. Young people who have completed military service dive into startups with a spirit of "chutzpah" (indomitable drive), connecting with overseas capital and technology. As a result, Israel has produced world-class unicorns (privately held startups valued at over 1 trillion won), following the United States and China.

The Netherlands, with an area comparable to Gyeongsang Province, has become the world's second-largest agricultural exporter after the United States, thanks to advanced agricultural technology. By elevating agriculture to life science and driving innovation through gene-editing technologies and logistics, the Netherlands serves as a hub of the innovation economy. As the 2024 Nobel Prize in Economics suggests, it is not physical resources but institutions and imagination that shape national competitiveness.

Estonia, a small country with a population of 1.3 million, has enabled people worldwide to establish companies online by offering e-Residency to foreign talent. To date, over 100,000 innovators from more than 100 countries have participated in the global economy through Estonia. The combination of digital administration and startup liberalization has proven that even a small nation can wield global influence.

Finland also adopted a national strategy to transform its startup ecosystem after the fall of Nokia. "Slush," a startup event created through collaboration among the government, universities, and the private sector, has become a global platform attracting entrepreneurs and investors from around the world. This is a case where institutional imagination turned a crisis into an opportunity.

For the past 60 years, Korea has grown through hard power industries such as steel, shipbuilding, automobiles, and semiconductors. However, with China's rise, intensifying protectionism, and the advent of the data and AI era, it is difficult to achieve sustainable growth with past models alone. Korea must now transform into a soft power nation that turns imagination into innovation. The new administration should be the first to sign an FSA with innovative countries such as Israel, the Netherlands, Estonia, and Finland, and then expand it multilaterally.

If FTAs symbolized the era of the industrial economy, FSAs can become the new order representing the era of the innovation economy. Now is the perfect opportunity for Korea to lead the global norms of the innovation economy. The era of FTAs is fading. If we take the lead in this trend at international stages such as the 2026 Davos Forum, Korea can rise again as "Soft Power Korea," surpassing "Hard Power Korea," and write a new chapter in the history of the world economy.

Yoon Jongrok (Adjunct Professor at KAIST, Former Vice Minister of the Ministry of Science, ICT and Future Planning)