Korean and U.S. officials announced yesterday that talks would begin to establish a free trade agreement (FTA) between the two countries by June of 2007. Talks are expected to begin in May, in accordance with U.S. law. The potential benefits to both sides are enormous, reports the Chosun Ilbo:
Free access to the U.S. market, the biggest in the world, will have an enormous impact on Korea’s economy, society and culture. The government predicts that real GDP will grow 1.99 percent and 104,000 new jobs will be created, especially in the manufacturing sector, three years after the FTA comes into effect. Exports to the U.S. rise by US$7.1 billion but imports from America will increase by W12.2 billion, a $5.1 billion blow to the trade surplus. Domestic agricultural production will decline by as much as W1.97 trillion as cheap U.S. produce floods the market. Moves allowing Koreans to visit the U.S. without a visa are underway, giving Korean companies and people easier access to the country. The free trade pact would also make it easier for Americans to do business in Korea.
U.S. cars will get 9-10 percent cheaper when the current 8 percent tariff is scrapped. Korean consumers favor Japanese or European cars, but the U.S. auto industry is expected to see sales here improve when prices become more competitive. Cheap American clothing and beverages will also force domestic companies to cut prices. Korean consumers are also tipped to get access to better medical and education services as local providers must compete with their U.S. counterparts. The Foreign Ministry expects that the number of Koreans going to the U.S. for study or medical treatment will decline.
For the Koreans, the key talking points are likely to be Korea’s inclusion on the U.S. Visa Waiver Program.
Press reaction was pretty much what you’d expect. The right-wing JoongAng Ilbo, for instance, liked the idea, while the left-wing Hankyoreh was iffy on it.
The farmers, of course, aren’t waiting to protest. A public hearing on the FTA negotiations fell apart when angry farmers staged a demonstration (see also here). This is probably only a beginning, but to be fair, I’m sure there are groups in the United States militating against any potential deal, or at least soon will be. And at any rate, the farmers aren’t against “free trade,” per se–just against free trade in sectors the U.S. has a competitive advantage in.
Interestingly, if an FTA is reached, it would be the third such agreement the U.S. has reached in Asia/Oceania, behind Singapore and Australia.
The Heritage Foundation’s Anthony B. Kim and Daniella Markheim, BTW, discussed a couple of days back why Washington should put a Korea-U.S. FTA on the fast track:
Given the significant levels of trade and foreign investment between the U.S. and South Korea, a bilateral trade agreement is a natural and logical step to further strengthen economic relations between the two countries. Even without the benefits of an FTA, bilateral trade in such goods as electronics, machinery, chemicals, transportation equipment, and agricultural products already exceeds $70 billion. According to a study by the U.S. International Trade Commission, an FTA could increase U.S. shipments to South Korea by $20 billion.[3] A trade pact would generate significant economic gains and would be the second largest free trade area for the United States, in terms of dollar value, after NAFTA.
In addition to expanding trade, an FTA with South Korea would demonstrate that the U.S. has not abandoned its strong commitment to freeing trade. Trade negotiations between America and South Korea could spur the stalled World Trade Organization process by developing solutions to various trade barriers that could then be applied on a worldwide scale.
By formalizing bilateral economic ties through an FTA, the Administration can also achieve the strategic aims of solidifying its ties to Northeast Asia through international trade and providing a counterbalance to China’s growing economic influence in the region. For South Korea, steadily growing economic ties have become one of the most important pillars supporting its dynamic and comprehensive alliance with the U.S.
Read the rest on your own.
11 Comments
And at any rate, the farmers aren?? against ??ree trade,??per say??ust against free trade in sectors the U.S. has a competitive advantage in.
Being in favor free trade only in cases where you are going to come out on top is NOT being in favor of free trade.
Anyway, this was a good overview. I think overall this would be a good thing for both countries. The far-left complains of American goods overwhelming Korea, but that is just one segment of Korean society; most of the rest stand to benefit considerably.
Kushibo correctly observed that:
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Which, given that this is the Korean approach, generally, not just that of the farmers, is why there ain’t going to be a ROK-US FTA, unless the US gets remarkably stupid or caves into the interests of a very, very few large US industries (e.g., autos, pharmaceuticals)at the expense of all others. The sticking point is not going to be on terms of cross-border trade in goods and services so much as on terms of FDI.
As was the case when I wrote the post to which that was linked, I was being sarcastic. But you knew that already, I suppose.
Might I ask something, Kushibo? Is there a particular reason you prefer to cite things using bold print rather than blockquoting them? I mean, use whatever you prefer, but I was just curious as to why.
As was the case when I wrote the post to which that was linked, I was being sarcastic. But you knew that already, I suppose.
I suspected you were being sarcastic, but it seems there are a lot of supposed “free-trade advocates” who believe some such thing… We want country X and country Y to open up their car markets, but we’re going to slap tariffs on their steel.
Might I ask something, Kushibo? Is there a particular reason you prefer to cite things using bold print rather than blockquoting them? I mean, use whatever you prefer, but I was just curious as to why.
Blogspot has no blockquoting function for comments, so I just got in the habit of using bold instead, I guess. It’s also easier to write out the b tags than the blockquote tags. I type fast and often trip over the q’s.
As a general rule, I try to use blockquoting when quoting a “source” rather than another commenter’s comments, but I have changed my style from time to time when a blog’s layout has changed, sometimes mimicking other commenters’ quoting style when I think it has more aesthetic appeal. I think blocked-quotes looked better in your old format than this one, for example.
I forgot to mention that if for some reason it’s better for you (e.g., for the next time you decide to uproot your blog and move it across town again) if I use block-quotes, I’ll try to accomodate.
this all sounds like good news but i wonder how it’s going to affect the Roh administration’s free economic zone/free trade zone/free international city/ect. initiatvites which have sprouted up throughout the country.
granted, there is still a huge european, south american, mid-eastern and asian market to benefit from such things, but with rumors about an FTA being completed between Korea and Japan and now this announcement regarding FTAs with the US, there go two big, huge markets right there.
if anything, it’s going to be a blow to these free trade zone initiatives for instead of rushing into the country now, i bet most of the foreign companies coming from the US and Japan (which are probably some of Korea’s biggest investors) are just going to wait it out until the FTAs are complete and take advantage of the FTAs and lose interest in these free zones.
i don’t really understand it i guess. i mean, these FTAs sound good for both sides, but in a way, isn’t korea just shooting intself in the foot since it’s gone through all this work and heavy government investment to make all these “zones” appeal to foreign investors/businesses with a heavy reliance on the U.S. and Japan in particular?
or am i being too pessimistic here?
Yeah, you’re being too pessimistic. First of all, ROKGOV hasn;t spent much at all on the “FEGs” - foreign economic ghettoes. Second, for the reason you mention, they may not get much action in the short-run - actually they haven’t been getting much anyway, but in the long-run, when the FTAs with the US and Japan don’t materialize, they will stay have some traction - although perhaps not much more than now if, as I believe, the failure of Korea to complete any FTAs with any of the big boys presages its becoming again the backwater of NE Asia (even as some individual Korean companies themselves escape by effectively globalizing).
i see except you are wrong on one point. the government has spent a TON of money on these zones, especially on infrastructure and stuff like new roads, bridges, etc. for example, the government has and continues to invest tons of money on a new, massive sea port in busan which just opened last month after years of construction prior to this (and the project isn’t even finished yet!)
granted, the port is not entirely based on government funds but more than say, Vancouver can afford to invest in its port, i have been told…which is what makes me think in the end, pursuing these FTAs just kind of wipes out the point of these things in a way.
i wonder if there are more benefits for foreign companies under an FTA agreement vs. the incentives offered by these free zones which would make waiting it out worth it…
Well, as you say there’s an awful lot of private investment in the port projects and they are not FEZ specific - neither are the infrastructure exenditures for FEZs either for that matter: they generate jobs and profits purely for the Korean private sector and, if worse comes to worse, more subsidized space for Korean private businesses.
It’s good to see that free trade negotiations are proceeding at all, given how much disagreement and mistrust has arisen between the two countries on other matters (namely, how to deal with the North).
Will an agreement actually materialize out of such negotiations? Well, that remains to be seen….
And Marmot: it’s “per se,” not “per-say.”
Australia got reamed 2 years ago on this US stunt. All our officials (non-partisan full time public servants) advised against it - major effect was to make US intellectual property law prevail in Australia.
We still have them/Septics lobbying to lift drug prices and wash hands of their own agricultural protectionism - naturally “cheap”, by virtue of climate, Australian sugar is still banned from US.
Go figure - it is all one big scam wherein “a little Aussie battler”, Rupert Murdoch, now has the outsourced role as Goebbels for Bush Administration!
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