My latest TCS Daily piece is up. It is on the proposed ROK-USA free trade agreement and why I think negotiations will ultimately fail.
I gave a lot of background (having decided to do a linkless post) and then got to this:
The political and economic calculus is inescapable. Roh’s engagement policy with North Korea is based upon increased economic integration between the Koreas. GIP is central to the success of that policy. Without access to the American market, GIP will most likely fail. So the US must accept GIP-produced products or the most important policy of Roh’s presidency will be dealt a crippling blow.
That reality at least in part explains Roh’s enthusiasm for a FTA with the US and sets the limit of the compromises he is willing to make in order to secure an agreement. The Koreans will show flexibility on most issues, but will not compromise on GIP. At a minimum, the Roh administration will insist that Korea be allowed to export GIP-made products into the USA with normal tariffs.
The Bush administration will not agree to include GIP in a FTA. Aside from setting a precedent for inclusion of products made a third country, including GIP flies in the face of the administration policy of pressuring North Korea with sanctions for its nuclear proliferation and counterfeiting of American currency. Even if the Bush administration did compromise on including GIP in a FTA, such an agreement would almost certainly fail to pass Congress. The vote is already expected to be close. Including GIP would raise enough objections from labor and conservative groups that it would make the proposed FTA dead on arrival.
I realize that saying something as complex as a free trade agreement will succeed or fail based on one issue is a little risky, but I feel pretty good about this prediction.
BTW, I did not chose the name of the article.
8 Comments
GIP? The city is spelled Kaesong. It is not a ROK-controlled bit of land (that’s the whole issue, idn’t it?), but DPRK, so the atrocious NAKL Romanization system (rendering it Gaeseong) does not apply.
Anyhoo, I disagree with your prediction because I think some of your premises do not necessarily hold water.
The FTA is more important to Roh’s legacy than KIP. In fact, he’s even talking about limiting or eliminating KIP if North Korea shoots off that missile.
You say that a Hanmi (ROK-US) FTA is essential for KIP to succeed. Assuming for the sake of argument that’s true (and I’m not saying it is, because while trade with the US is very high, ROK also relies on many other markets), then giving up the FTA because of KIP will be a failure on two fronts, with KIP still going down in flames.
KIP will be fought for loud and hard, but in the end it will be a bargaining chip for something else that is important for selling the FTA to those members of the public that fear it or remain skeptical — maybe another ten-year extension on the rice market or something along those lines.
Interesting analysis! I admit, I, for one, would be on the phone to my congressman in a New York second if products from N Korea were included in a FTA with S Korea. That pushes the envelope just a wee bit too far.
Interesting way to look at it. I always wondered why Uri with so many members being anti-market and anti-capitalist, would want any kind of FTA. Is it to push through other agendas such as the GIP?
if the roh gov’t has any chance of making the FTA fly, there is absolutely no way of tacking on DPRK products. none.
The problem is how you look at North Koreans. S.Koreans consider their counterpart in the North poor and impatient brother whom they have to land a helping hand because otherwise they will starve to death. So natually to the Korean sentiment, GIP is ‘MADE IN KOREA.’
IT IS A VERY TRICKY ISSUE.
It’s not a very tricky issue. S. Korea is operating an industrial park in N. Korea in an opaque manner. The working conditions of the N. Koreans are not monitored by the ILO or any other third party, and S. Korea simply expects the U.S. to take its word for it that labor standards are being met, which the U.S. uderstandably refuses to do. What we do know about Kaesong is that the N.K. workers recieve a small fraction of what their “brothers” in the South are paid, and the military dictatorship that runs N.K. gets paid off in “fees” to allow S.K. to exploit the workers. It’s an extremely self-serving way to “lend a helping hand,” so I hope the U.S. continues to press them on the issue.
I read an article from one of the local economic research units (SERI, supposedly a strong supporter of free trade and capitalism) basically blaming the US for all the problems with the probable failure of the FTA. Disgusting to see that even pro-capitalists in Korea find it easy to blame the US for problems with NK.
http://www.koreaeconomy.org/gw.....0606140001
roughly paraphrased,
” the South Korean drug market is unfairly restrictive to innovative and advanced drugs made in the US, thus hurting South Koreans from accessing the most innovative and advanced medicine in the world.”
spoken by a US rep to the South Korean media,
/ My input. Hmm. Many of these drugs are considered too expensive for US consumers with low income. Does the US want to bring some havoc on the South Korean healthcare system, which supposedly offers everyone government funded health care? It truly must be a Fair Trade Agreement. Oops, Free Trade Agreement. The poor in South Korea won’t get to afford what the poor in America can’t.