Citing a September 2005 Ministry of Foreign Affairs and Trade report, the Hankyoreh Shinmun is reporting that Korea turned down last year an FTA offer from China that, among other things, would have included Chinese concessions on the sensitive agricultural market.
Beijing made the offer in May of last year. In July of the same year, the Korean trade minister went to the United States to sound out U.S. opinion on the Chinese offer. According to the report, U.S. scholars expressed serious concern, with the IIE’s Marcus Noland saying it would be an “enormous mistake” for Seoul to press for an FTA with China before the United States, and Georgetown University SFS dean Robert Gallucci warning there would be “some unhappiness” from the U.S. government and public.
After reading the report, the government formulated two plans—one in which Seoul would push the Chinese FTA first, and one in which it would push the FTA with the United States first. On November 11, President Roh met with President Bush in Gyeongju and agreed to begin negotiations for an FTA. The government officially announced the start of FTA negotiations with the United States in February of this year.
A Democratic Labor Party lawmaker told the Hankyoreh that with the United States and China competing for leadership in East Asia, it appeared the United States moved to block China once China moved aggressively to promote an FTA with Seoul. He noted that while U.S. opposition to the Chinese offer, which he said bordered on pressure, was itself problematic, what he couldn’t understand was how the government could fail to use the Chinese offer as a bargaining chip with the United States. In fact, Seoul went as far as to cave into four key U.S. demands pertaining to the screen quote, U.S. beef imports, auto emissions and pharmaceuticals.
A Korean trade official admitted that the Chinese made an active offer last year, but explained that it was turned down because Korean negotiators thought that even with Chinese concessions on rice, losses in some 300 other agricultural items would be too great.
UPDATE: Korean Finance Minister Kwon O-kyu told reporters today that concluding an FTA with China was an issue of strategic choice and proper order. He said an FTA with China would be concluded after one has been concluded with the United States. He stressed that China’s level of technology was not as high as Korea’s, so an FTA would not bring hoped-for technological transfers or foreign investment. He also noted that an FTA with China would bring many difficulties to the Korean agricultural, manufacturing and small/mid-sized business sectors.
28 Comments
They’re here, they’re there, they’re everywhere. Is there any consistency to the Uri Dang’s policies at all!? Last year they wanted to get cozy with China by playing the “balancer role”; now it turns out that they decided to go in the opposite direction by rejecting free trade with China and opening talks with the US. Meanwhile, it seems the government wants to have its cake and eat it too over USFK.
The only way any of this makes sense is if the folks running MOFAT and/or the trade minister have not bought into the Uri Party ideology, and have enough sway despite their differing views to have some influence on government policy.
Korea made the right choice on the FTA, even if it was accidental and even if the one with the U.S. is DOA. China could easily kill Korea’s agricultural sector with lower-priced imports in every category.
“If import duties are eliminated and the quality of Chinese agricultural products can be improved to a level that satisfies health and customs regulations, its impact on Korea’s agricultural industry could be much more far-reaching than generally anticipated. A comparison of China’s export prices with Korea’s domestic prices reveals that, with the exception of onions and garlic, Korean prices are on average more than double the price levels of Chinese exports.”
http://www.koreafocus.or.kr/ma.....g_code=509
If Gallucci truly believes that the U.S. public even cares with which country Korea concludes an FTA, then he is too stupid to be dean of anything.
Or did I miss a groundswell of anger in the U.S. over the Korea-Chile FTA?
RJK: According to the report, U.S. scholars expressed serious concern, with the IIE’s Marcus Noland saying it would be an “enormous mistake” for Seoul to press for an FTA with China before the United States, and Georgetown University SFS dean Robert Gallucci warning there would be “some unhappiness” from the U.S. government and public.
I’m afraid this is yet another instance of Koreaphile scholars and Koreans engaging in groupthink to the effect that Korea is the center of the world. The fact is that the State Department represents Korea’s interests to Uncle Sam, and the average American couldn’t care less about Korea’s trade policies. If I recall correctly, there was a time period (which may be now, still) when Korean purchasers of American automobiles were targeted for tax audits. What was the American reaction?
I just read the Hani’s english version. One thing not brought out is that China never offered pratical steps for the talks. To quote from Hani’s English: “in order to notably expand China-South Korea economic and commercial cooperation, the two nations should sign a bilateral free trade agreement [FTA]. As South Korea has not clarified its position, we are waiting for South Korea’s clear response.”
It sounds like the Chinese wanted more a confirmation on the idea than the opening of actual trade talks. Two very diffrent things due to the preparations needed for the later.
Something else: “In August 2005, Li Shaozun, China’s deputy commerce minister, sent the message to Seoul that Beijing would make a significant concession about farm products, saying that China would “show flexibility for sensitive items such as rice,” according to the data.”
Rice? BFD! Last I heard China actualy IMPORTS rice. Funny Hani/Sim (the leaker) does not mention if China offered any concessions on things like vegtables, garlic, seafood, and prepared foods. These are things more crtical to China in such talks than rice.
Also to split hairs, who knows what Li meant about “flexiblity”. Is it like the “flexibilty” shown to Korea on the WTO rice import rules? (You have to import it, but you can define terms). Even this “flexiblity” has been widely controvercial to Korean farmers.
I really think what happened here is China made a guesture, and Hani is overstating it. Then in turn they overstate, or selectively quote, the US reaction. I say this since I do not see the problem of a PRC ROK FTA. If anything if I were the USTR I would favor it ahead of time since it would give Korea a better idea what its like to negoitate a FTA with a diversified economy with many existing trade links. Experince that is now biting Korea in the ass it seems.
Finaly, something Hani forgets THERE IS A LIMITED TIME FOR A US FTA! The window is closing as the Presidents “fast track” authority runs out next year. In otherwords, Korea was given a “now or never” choice for FTA talks with the US. Given the limited resources of the Korean govrenment to deal with trade issues, it would be impossible to conduct two FTA’s at the same time. With China a FTA could be disucussed any time, so the guesture was tabled.
D: Rice? BFD! Last I heard China actualy IMPORTS rice.
Correct. Fact is that this Chinese “concession” isn’t anything to get excited about. Korean rice can’t compete with Thai (or just about every other non-Japanese) rice on price. And the Chinese diet really doesn’t involve very much of the sticky rice that is widely consumed in Japan and Korea. Now, if the Chinese were to offer duty-free imports of Korean auto parts, or entire cars, that would be a different matter. But they’re not going to do that - ensuring the soup-to-nuts manufacture of everything sold in the Chinese market in China itself is the very basis of China’s industrialization.
China imports rice? There was a story in the Joongang Ilbo two days ago detailing how imported Chinese rice is a bigger threat to the Korean market than rice imported from the U.S.
http://joongangdaily.joins.com.....09051.html
D: China imports rice?
Actually, China imports quite a few basic foods:
The Chinese government has announced its rice import quota for the year 2003, and hoped that Pakistani traders would also take benefit of it.
The local enterprises have been allowed to import 2.2525 million tons of long grain rice and 1.52905 million tons of short-grain rice during the year.
A Chinese official told APP that Pakistan, which is producing world’s top quality rice, would be welcomed to compete in the local market. The existing export of Pakistani rice to China is very nominal.
Thailand is the major exporter of rice to China. Its annual rice shipment has almost crossed the 7 million-ton mark in recent years.
Quality-wise Pakistani rice is the best and could be the most popular in China, said a Chinese trader Zhao Ziqian. She said Pakistan white rice Irri-6, Irri-9, Basmati-385, super basmati rice, silky polish basmati and super basmati rice could be very popular in China.
She expressed the hope that Chinese would prefer Pakistani rice, which is of top quality due to its extra long grain, natural aroma and delicious taste.
Rice is the staple food of Chinese.
China has set import quotas for agricultural products for local enterprises to take effect in 2003.
According to the State Development Planning (SDPC), the import quota includes 8.652 million tons of wheat, 6.325 million tons of corn, 2.618 million tons of bean oil, 2.5 million tons of palm oil, 918,600 tons of rapeseed oil, 1.1522 million tons of sugar and 356,250 tons of cotton.
The SDPC also maintained import quotas for food processing, including 400,000 tons of wheat, 200,000 tons of corn, 75,000 tons of long-grain rice, 75,000 tons of short-grain rice, 200,000 tons of bean oil,100,000 tons of palm oil, 100,000 tons of rape seed oil, 700,000 tons of sugar and 500,000 tons of cotton.
The SDPC said local enterprises will be able to apply for the 2003 import quota for food processing as well as the 2003 import tariff quota for wool beginning Jan 2, 2003.
In China the demand for imported rice has increased after its entry into WTO. The accession to the WTO will transform China into one of the world’s main buyers of rice. China’s obligations to the WTO would require it to allow entry of up to 4 million tons of rice annually.
Well, evidently that does not mean it does not export rice as well.
RJK: He stressed that China’s level of technology was not as high as Korea’s, so an FTA would not bring hoped-for technological transfers or foreign investment.
That’s odd. My impression is that a free trade agreement with the US would involve more exports to Korea from the US and *less* technological transfers, not more. Tech transfers are typically driven by the insistence of foreign governments that anything sold within their boundaries be made in-country. Same with foreign direct investment - why build a plant in Korea and deal with all the red tape and anti-foreign regulations when you can export directly from the US (typically for high value added products where theft of trade secrets is a risk).
Zhang> Normaly when they talk about “technology transfers” they are talking it more ecnomic terms and bigger than just a say software or a hot new manufacturing method. The transfers are generaly of two types, transfers to reach equilibrium production and from there growth (the later a bit more shaky theoreticaly speaking).
In the case of the former, let us say we live on a desert island and we fish for a living. However we only work for ourselves, and we need to catch 10 fish a day. Lets say you are a natural fisherman, and can imedatly spot the best places to fish. So much so all you do is reacch your hands in the water and pick fish like fruit from a tree and it takes you about 15 mintures a day. I do not have that skill, so I make a net, and barely catch my 10 fish a day.
Now if we decide to trade and do what we are more efficent in (use your imagination as to what I provide). At first with your knowelege of fishing you catch 50 fish a day to trade with me, and not only do we eat to live but we eat until we are full. Now lets say I give you the net (a technology transfer), that combined with your knowelge leads to 100 fish a day, enough for both of us to live fat and happy!
In addition, the technology transfers becuase of the gains of efficency and sharing of knowelege lead to even greater advances in technology (again a little shaky but stick with me). We have more time, so we start to find out how to make fire so we are not eating sushi all the time. Or since you have been exposed to “the net” you get the idea that the same thing would be a great way to keep the island mosquitos off you. You get the idea.
I don’t know if it’s true, but a commentor on chosun’s internet edition says Japan does not have a FTA agreement with the US.
Why should South Korea have one, then?
FTA can be good, but it will also hurt South Korea in key aspects. If the negatives are more than the positives, South Korea shouldn’t sign anything. What’s wrong with bargaining to get a good deal for South Koreans? That’s the duty of the South Korean government. Duty. If they can’t do that, people deserve to elect some party even more left than Uri. Min No Dang? I hope that doesn’t happen.
For poor people, US healthcare sucks. With FTA with the US, healthcare in South Korea will get more expensive because US drug companies are saying that they want higher prices accepted for their products. This will only hurt the poor people in South Korea. No good. Good for the ticker symbol in the US, not good for South Korean poor folk.
I believe an FTA would be good for South Korea, if the country truly wants to enjoy the benefits of globalization. Remaining isolated means limiting the country’s prospects for growth. An FTA does open the economy to more risks, but if it’s growth that Korea wants, it’s not going to get it without expanding opportunities and the US market offers tremendous opportunities to Korean business.
Of course the government should aim for the best deal possible, but Koreans in general are very shrewd negotiators (except when it comes to their brothers in the North), so I would hardly expect Korea to come out of it with a poor deal. If anything, the Americans should watch out to make sure they are getting a good deal (a good example of this is the military support the US has given over the years, whereby the US has paid huge amounts of cash to stay in country, allowing Korea to receive cheap militarly support, and all the while, Korean governments telling the people that they are getting a bad deal, which is opposite the reality). I suspect the same in this situation. It’s probably actually a good deal, but politically, it’s made out to be a bad one, so as to gain leverage, or to cause it to fail (I’m not sure Roh wants an FTA cause it doesn’t fit into his idea of ‘independence’ from the US. It doesn’t matter that it would probably benefit Korea, only that it fits his socialist agenda).
Things like healthcare have to be negotiated, maybe with more give and take in other areas to make up for it. There was a huge hew and cry in the 80s here in Canada when we were first negotiating an FTA with the US, and then again with NAFTA in the early 90s. The conventional wisdom was that Canada would be going to heck in a handbasket. As it turns out, the country has actually become wealthier and the economy healthier overall with free trade. (There have still been economic ups and downs, but as unfortunate as the down stretches are, they are consequences of the business cycle and would have happened with or without free trade.)
I really meant to write, “If things like healthcare are not negotiable, then maybe there can be more give and take in other areas to make up for it.”
“US market offers tremendous opportunities to Korean business.”
Not that I’m against the ideal of free trade wherever they maybe, but I have to ask this question. What would be the gain for Korea that they’re not enjoying in the US market already?
You are exactly right. Korea already enjoys a very favorable trading relationship with the U.S.
What needs to happen is for proper tariffs to be placed on Korean goods sold in the U.S. in the event the FTA negotiations fail.
Again, the pharma question is not charinging more, its the fact the Korean govrenment is trying to refuse reimbursement on foreign drugs purchased which….oh nevemind believe what you want.
Dram_man, if you force the South Korean government to reimburse for those drugs, that effectively raises the cost of the national health care plan, which either results in passing costs to the citizens via taxes or lower quality of service. Anyway, it hurts the poor man. Tell Wall Street to improve its earnings elsewhere.
Nobody is forcing doc’s to perscribe those drugs first of all. This is a barrier to trade, that simple. If nobody wants to high priced drugs, then so do not buy them. However it is rather unfair to have the govrenment say “No drugs for you”.
Second it forces many to buy generics and counterfeits which may or may not have the same interal QA tests, or truly meet the same rigourous KFDA standards. Part of this issue, which is rarely brought up is a public health one.
wjk, why do 90 capsules of Milk Thistle cost 84,000 won in Seoul and only $15.99 in the U.S.? No doubt an FTA would lower the Korean price.
You guys are missing the point here: Robert Gallucci, the great negotiator of the agreed framework, has spoken. Whatever he says has gotta be true, because we all know how great that agreed framework turned out. Sure, the U.S. public would have been extremely unhappy if the SKs had done a China FTA first. WTF?
dogbertt, I can also think of South Korean made drugs that are cheaper in South Korea, which functions the same way as US drugs, which cost more in the US.
Dram_man, I don’t think South Korea is having a public health crisis, because the poor aren’t using US drugs. Poor people buy generics, even if they have a choice to buy the real deal. I didn’t say the docs are forced to prescribe them, you said that.
I think it’s bullshit to complain about US healthcare system for the poor being bad in the US, and push some other country to accept it abroad. After all, even in the US, poor people use generics whenever they can, and they buy from Canada, if possible. Canadian US drugs which are artificially priced lower because Canadian tax revenue is used to lower the price on those drugs. Don’t screw over the health of the poor folk in South Korea, is all I’m saying.
It’s not like a country backs off from a signed FTA, easily. Let South Korea bargain and protect the interests of its people, as vigirously, as it dutifully should.
WJK> I used “issue” not “crisis” please read closer.
Speaking of reading closer, are you actualy reading what is at debate in the FTA? Nobody is forcing Korea to purchase US made drugs. The US side only wants to make sure that US drugs are AVALIBLE under govrenment insurance plans. I have yet to hear the US side make subsintative statements that would show a postion to ending Korea’s generics industry.
Dram_man, what you’re saying is the same thing as the government covering the cost for US drugs, if used. There’s no way that’s not gonna raise the cost of South Korean healthcare. It’s an additional expense, no matter which way you look at it, and it stresses the current South Korean national health insurance program, which is probably running on debt anyway, because it covers all South Korean citizens. Leave the South Korean healtcare system alone, it’s not like the US drug co’s are entering because they really care about the heatlh of the poor in South Korea. I don’t see South Korea pulling a Canada and subsidizing drugs, so they’re actually cheaper than the US. Historically, it’s not a kind country to poor folk. ”
Where’s Social Security in South Korea?” asked some naive US citizen 2nd generation Korean…
WJK> Again, nobody is forcing the purchase of US drugs, simply the US wants to make sure that US drugs are avalvible to Doc’s who want perscribe them. Again, the problem with the “postive list system” is that it de jure (possibly) forbids the use of US drugs since they will find if very difficult to find them for purchase.
Can you please explain to me how you feel allowing Koreans/Korea Doc’s to select US drugs will raise Korean Health Care costs? I fail to see how increasing market access, or rather her stopping a market limiting action, increases prices.
http://www.heart-intl.net/HEAR.....outhea.pdf
Dram_man, go read this, page 3, lower right.
Read it, because I went thru the trouble of not only reading it myself, but also to convince you with an academic piece of work. You seem to be going straight by some economic theory, but there are more factors than that.
The US is trying to protect its pharmaceutical industry, after all, if everyone uses generics, the originators of these drugs will eventually go out of business. Who will create new drugs, if this happens? I can see the Korean side wanting to save money, while the American side wants to protect its interests, which in the long run, provides new medical advances.
This sounds somewhat similar to the illegal copying of entertainment products (though generics are completely legal). Ultimately, cheap copies could undermine and damage the primary industries making these things, and yet, countries wish to offer drugs to people of all income levels without breaking their own budgets. In the long run, generics hurt the industry and retard development, but there is a need to respond to real problems in the world (such as AIDS in Africa).
It seems there could be room for compromise here. Why not pay a limited amount for drugs, no matter the source, with the extra cost bourne by the patient? Many patients might prefer the original American product, even if they had to pay a bit more. Instead of restricting the buying of patented drugs, the government would put a ceiling on how much it will pay. If the patient wants to fork over more for the ‘real deal’ they will be free to do so.
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