U.S.-Korea Free Trade Agreement

Infobox Korean name
hangul = 한·미 자유 무역 협정
hanja = 韓美自由貿易協定
rr = Han-Mi jayu muyeok hyeopjeong
mr = Han-Mi chayu muyŏk hyŏpchŏngThe U.S.-Korea Free Trade Agreement (also known as KORUS FTA) is a trade agreement between the United States and the Republic of Korea. Negotiations were announced on February 2, 2006 and were concluded on April 1, 2007. The successful completion of the agreement was announced on April 2, 2007 and the treaty was signed on June 30, 2007Cite web|url=http://ustr.gov/Document_Library/Press_Releases/2007/June/United_States_the_Republic_of_Korea_Sign_Lmark_Free_Trade_Agreement.html|title=United States and the Republic of Korea Sign Landmark Free Trade Agreement|accessdate=2008-06-18] , just before the deadline for President George Bush to use his fast-track authority on trade before it expires mid-year. The agreement followed ten months of hard bargaining, and will immediately lift some 85% of each nation's tariffs on industrial goods. As of October 2008, it has not been approved by the US Congress and the National Assembly of South Korea. It is the United States' first FTA with a major Asian economy, and its largest trade deal since the North American Free Trade Agreement (NAFTA) in 1993. For South Korea this is by far its largest FTA, dwarfing those signed in recent years with Chile, Singapore, the European Free Trade Area and the Association of Southeast Asian Nations (ASEAN) [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=SOUTH KOREA/US: FTA jumps major hurdles, faces others |url=http://www.iht.com/articles/2007/04/03/news/oxan.0403.php |accessdate=2007-09-20] .

Progress

Soon after being signed by the US President George W. Bush and his South Korean counterpart, Roh Moo-hyun, there were rumors of a possible re-negotiation of the text, citing possible opposition by the US Democrats. However, Kim Jong-Hoon, South Korea's chief negotiator for the 10-month talks that brought the present FTA, denied such rumors assuring journalists that "The deal has been done and that's it. There will be no renegotiations." Kim's comment came after his American counterpart, Wendy Cutler, the assistant US trade representative for Japan, Korea and APEC Affairs and chief negotiator of the KORUS FTA negotiations, indicated that the Democrats may demand amendments in the labor area [cite news |publisher=AFX News Limited |date=2007-04-13 |title=SKorea will not renegotiate FTA with US - top negotiator |url=http://www.forbes.com/markets/feeds/afx/2007/04/13/afx3608703.html |accessdate=2007-04-19] . On September the 16th 2008, U.S. Commerce Secretary Carlos Gutierrez asked the US Congress to ratify the Korea-U.S. free trade treaty as soon as possible, arguing that "trade creates more jobs and boosts economic growth". He called on the U.S. Congress to swiftly approve pending trade deals with Colombia and Panama [cite news |publisher=KBS |date=2008-09-16 |title=US Officials Call for FTA Ratification |url=http://english.kbs.co.kr/news/newsview_sub.php?menu=3&key=2008091610 |accessdate=2008-09-19] . The Grand National Party is currently weighing pros and cons in anticipation of the National Assembly’s ratification of the Free Trade Agreement between South Korea and the United States. At a meeting of its top council held October 2 at GNP headquarters in Yeouido, GNP leadership expressed divergent opinions. Party chairman Park Hee-tae and supreme council member Chung Mong-joon sided with the argument for circumspection. Park said that it was first necessary to establish a plan for farmers and fishermen negatively affected by the signing of the South Korea-U.S. FTA, and suggested discussing the issue of passing the FTA after looking at the government’s countermeasures. But leaders within the National Assembly of South Korea are arguing for an early resolution of the matter. Floor leader Hong Joon-pyo is reported to have said that the United States could propose renegotiations in the area of automobiles, which they feel is disadvantageous to themselves, following the election, and that it is necessary to finalize approval of the FTA ratification before the U.S. election and place pressure on the United States [cite news |publisher=Hankyoreh Media Company |date=2008-10-03 |title=GNP stands divided on free trade agreement |url=http://english.hani.co.kr/arti/english_edition/e_international/313791.html |accessdate=2008-10-03] . On October the 1st, a South Korean trade official declared that a free trade deal with the United States is unlikely to be ratified within the year given the political climate there [cite news |publisher=Yonhap |date=2008-10-01 |title=S Korea's Fta With U.S. Unlikely to be Ratified in 08: Official |url=http://asia.news.yahoo.com/081001/4/3ptw1.html |accessdate=2008-10-02] [cite news |publisher=KBS |date=2008-09-17 |title=Ratification of S. Korea-US FTA Unlikely This Year |url=http://english.kbs.co.kr/news/newsview_sub.php?menu=3&key=2008091707 |accessdate=2008-09-20] . On October the second, it was announced that the korean side "had completed all procedures for parliamentary ratification". The trade bill will be submitted to the National Assembly next week," Lee Hye-min, deputy minister for the FTA, told reporters [cite news |publisher=Balita News |date=2008-10-02 |title=South Korea to submit U.S. FTA bill for parliamentary approval next week |url=http://news.balita.ph/2008/10/02/south-korea-to-submit-us-fta-bill-for-parliamentary-approval-next-week/ |accessdate=2008-10-02] . The Korean ambassador to the United States, Lee Tae-shik has met with U.S. Congressmen more than 300 times to persuade them to ratify the FTA, which is facing objection from the Democrats, who have a majority in both the US House of Representatives and the US Senate [cite news |publisher=Digital Chosun Ilbo |date=2008-09-12 |title=Seoul's Envoy in PR Blitz for Korea-U.S. FTA |url=http://english.chosun.com/w21data/html/news/200809/200809120020.html |accessdate=2008-09-17] .

Aspects of foreign relations

It is analyzed by some experts that president Roh Moo-hyun decided to launch the FTA with the US not just to boost the economy, but rather, to tighten a friendlier relationship with the US, which arguably had been impaired by a series of disagreements on, among others, how to deal with North Korean nuclear weapons.

United States reactions

There are both adherents and opponents to the FTA. Opponents argue that rice remains excluded, much to the chagrin of Korean rice exporters, and South Korea has been given ages to eliminate other agricultural tariffs such as that on beef. In return, however, Washington hopes to get sufficient preference in this market - and to keep out rival suppliers - to sell the deal to its farming lobby. The agreement also says little about services, a U.S. strength and its chief focus in many a bilateral negotiation. They also criticise that Koreans, which have long been accustomed to believe that they have an absolute right to sell their cars, computers and ships around the world while providing their high-cost farmers with levels of subsidy that make even the EU's farm payments seem mean [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=FTA is not the way |url=http://www.iht.com/articles/2007/04/03/opinion/edbowring.php |accessdate=2007-04-12] . During 2008, some U.S. lawmakers oppose the free trade deal with South Korea, citing an imbalance in auto trade. They also want more steel shipments to South Korea. On September 28, the U.S. Chamber of Commerce's Vice President of Asia and President of the U.S.-Korea Business Council Myron Brilliant highlighted how the current automobile trade imbalance between the United States and South Korea can be leveled by the US Congress passing the pending U.S.-Korea Free Trade Agreement (KORUS), adding that "it includes strong commitments by the Korean government to address virtually every tariff and non-tariff market access barrier to U.S. automobiles in Korea raised by the U.S. auto industry during the FTA negotiations." [cite news |publisher=The Financial |date=2008-09-25 |title=U.S. Chamber Testifies on Korea FTA's Boon to U.S. Automakers |url=http://finchannel.com/index.php?option=com_content&task=view&id=20537&Itemid=8 |accessdate=2008-09-28] . During the last half of 2008, U.S. officials have also expressed confidence that the trade deal will be approved once it is put to a vote during a lame duck session to be held after the Nov. 4 elections, which will help lawmakers avoid political risks during this sensitive election year [cite news |publisher=Yonhap |date=2008-10-01 |title=S Korea's Fta With U.S. Unlikely to be Ratified in 08: Official |url=http://asia.news.yahoo.com/081001/4/3ptw1.html |accessdate=2008-10-02] . There are Presidential elections too. Though both John McCain of the Republican Party and Barack Obama of the Democratic Party have expressed commitment to the U.S.-Korea alliance, the Democratic Party reflects anxieties about globalization and renewed doubts about trade liberalization, which could jeopardize the Korea-U.S. Free Trade Agreement that has yet to be ratified. John McCain highlights the fact that Seoul and Washington would benefit economically from lowering trade barriers, including a $20 billion increase in annual bilateral trade, citing the Korea-U.S. trade deal as an example of the rewards of free trade in an era of growing economic globalization. The Democratic candidate Barack Obama opposes the KORUS FTA as `badly flawed,' claiming it wouldn't do enough to increase U.S. auto sales. His criticism echoes the auto labor unions, which are fighting to defeat a trade bill that redresses the very problems they have complained of for years [cite news |publisher=The Korea Times |date=2008-09-28 |title=S. Korea-US Alliance Hinges on US Election: Experts |url=http://www.koreatimes.co.kr/www/news/nation/2008/09/205_31804.html |accessdate=2008-09-28] . Obama has said he would vote against the FTA if it comes up for a vote in the U.S. Senate and would send it back to Korea if elected president. However, there is some hope that his threats are just election year talk. Obama had expressed similarly strong negative feelings about the North American Free Trade Agreement between the U.S., Canada and Mexico, even going so far as to threaten to unilaterally "opt out" of the three-nation agreement during campaign stops in industrial states during February 2008. However, his senior economic advisor Austan Goolsbee assured Canadian officials in a private meeting on February 9 that Obama's rhetoric was "more reflective of political maneuvering than policy." [cite news |publisher=The korea Times |date=2008-09-08 |title=McCain, Obama and Korea |url=http://koreatimes.co.kr/www/news/opinon/2008/09/220_30739.html |accessdate=2008-09-12] ."

Restrictions

To date, agreements have been reached on the restriction of trade based upon intellectual property rights, particularly for auto and pharmaceuticals. Issues up for discussion include the importation of U.S. beef, standards in the automotive industry and automotive emissions, and movie screen quotas.

Effects

* The clearest gain concerns automobiles, hitherto a major US grievance and a large component of the bilateral trade deficit: during 2006, only about 4,000 US cars were sold in South Korea while South Korea's exports to the United States exceeded 800,000 [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=SOUTH KOREA/US: FTA jumps major hurdles, faces others |url=http://www.iht.com/articles/2007/04/03/news/oxan.0403.php |accessdate=2007-09-20] . South Korean automakers sold 730,863 vehicles in the United States in 2005, while American auto companies sold only 5,795 in South Korea, according to Commerce Department figures [cite news |publisher=Washington Post |date=2007-04-02 |title=U.S., South Korea Reach Free Trade Deal |url=http://www.washingtonpost.com/wp-dyn/content/article/2007/04/02/AR2007040200273_pf.html |accessdate=2007-05-14] . The FTA will abolish taxes in South Korea on large cars produced in the United States, which US auto makers have long called an impediment to market access in Korea [cite news |publisher=Asia Times |date=2007-04-04 |title=US readies for Korean business |url=http://www.atimes.com/atimes/Korea/ID04Dg01.html |accessdate=2007-04-07] .
* Rice is excluded, at Seoul's insistence. In return, South Korea will reduce its 40% tariff on US beef over 15 years [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=SOUTH KOREA/US: FTA jumps major hurdles, faces others |url=http://www.iht.com/articles/2007/04/03/news/oxan.0403.php |accessdate=2007-09-20] .
* Market opening already underway in law and accounting will widen, but major service sectors such as education and healthcare were excluded. Labour productivity in the South Korean service sector is just 56% of that in manufacturing, far below OECD's average of 93% [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=SOUTH KOREA/US: FTA jumps major hurdles, faces others |url=http://www.iht.com/articles/2007/04/03/news/oxan.0403.php |accessdate=2007-09-20] .
* Seoul wanted products made by South Korean companies in the Kaesong Industrial Region in North Korea included in the deal; Washington did not. The disagreement is unresolved but was not allowed to scupper the deal, which allows for further talks on the subject [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=SOUTH KOREA/US: FTA jumps major hurdles, faces others |url=http://www.iht.com/articles/2007/04/03/news/oxan.0403.php |accessdate=2007-09-20] .
* Agriculture in South Korea is expected to be adversely affected, and $119 billion in aid to South Korean farmers has been announced over the next ten years to offset the effects of the finalized agreement [ cite web |url= http://www.agweb.com/news_printer.aspx?articleID=135245 |title= The U.S. and South Korea reach agreement on a trade deal |publisher= AgWeb.com |date= 4/2/2007] .
* The free trade agreement is expected to increase the growth rate of the South Korean GDP by 0.6% per year for the next 10 years. The South Korean government also cite increased foreign direct investment in Korea and heightened competition.
* More than $1 billion worth of US farm exports to South Korea will become duty-free immediately. Most remaining tariffs and quotas will be phased out over the first 10 years the agreement is in force. KORUS FTA would remove tariffs on 95% of consumer and industrial products between the countries within three years. South Korean industrial tariffs average 6.5% - and many are 8% - making market access a very important issue for US industries [cite news |publisher=Asia Times |date=2007-04-04 |title=US readies for Korean business |url=http://www.atimes.com/atimes/Korea/ID04Dg01.html |accessdate=2007-04-07] .
* The free trade accord, if ratified, will knock down tariff and non-tariff barriers between the world's largest and 11th-largest economies, which did US$74 billion in two-way trade in 2006 [cite news |publisher=Yonhap |date=2008-10-01 |title=S Korea's Fta With U.S. Unlikely to be Ratified in 08: Official |url=http://asia.news.yahoo.com/081001/4/3ptw1.html |accessdate=2008-10-02] .
* The agreement does require both countries to enforce their own labor and environmental laws, and ensures access to legal mechanisms to ensure enforcement [cite news |publisher=Asia Times |date=2007-04-04 |title=US readies for Korean business |url=http://www.atimes.com/atimes/Korea/ID04Dg01.html |accessdate=2007-04-07] .

Public reaction within South Korea

The opinion of Koreans towards the FTA is divided, at least by sector. The Korea Institute for International Economic Policy estimates that exports to the United States will rise by 12% per year, or 5.4 billion dollars, and grow by 15% in the longer run. However, the Korea Rural Economic Institute predicts that US agricultural exports to South Korea, currently 2.8 billion dollars, could double after the FTA, causing the loss of up to 130,000 jobs [cite news |publisher=International Herald Tribune |date=2007-04-03 |title=SOUTH KOREA/US: FTA jumps major hurdles, faces others |url=http://www.iht.com/articles/2007/04/03/news/oxan.0403.php |accessdate=2007-09-20] . Proponents of the FTA cite that it will create more jobs that the ones destroyed, and will be, on the long term, beneficial for the country [cite news |publisher=Digital Chosun Ilbo |date=2007-04-03 |title=The Korea-U.S. FTA Will Bring More Gain Than Pain |url=http://english.chosun.com/w21data/html/news/200704/200704030008.html |accessdate=2007-05-13] . Business groups welcomed the news that South Korea concluded the free trade agreement with the U.S. Business leaders stressed the importance of smoothly implementing the next steps, including ratifying the agreement in the National Assembly of South Korea. Lee Hee-beom, the chairman of the Korea International Trade Association (KITA) declared that "This is our country's first step in its endeavor to join the group of advanced economies," adding taht "the government should work out measures to compensate those who might suffer from the market opening and continue the restructuring process. The National Assembly should ratify the FTA as soon as possible so that the negotiations will show results quickly." Similar statements were made by the Federation of Korean Industries: "with the successful conclusion of the FTA talks with the U.S. as momentum, this agreement will upgrade the traditional alliance with the U.S. to a higher level, and greatly help our enterprises advance into the US". The Korea Chamber of Commerce and Industry said, "we should view the FTA from the broad standpoint of promoting national interests rather than the interests of specific industries or groups" [cite news |publisher=Digital Chosun Ilbo |date=2007-04-03 |title=Business Groups React Positively to FTA Deal |url=http://english.chosun.com/w21data/html/news/200704/200704030007.html |accessdate=2007-05-21] . Citizens' groups worried about transparency, the environment and labor standards say the deal was deficient as it was agreed on behind closed doors. The South Korean government, for example, has not allowed open, public debate about the FTA's impact on the nation's economy and sovereignty. The Korean Advertising Broadcasting Agency blocked the running of an advertisement produced by farmers protesting the deal [cite news |publisher=Asia Times |date=2007-04-04 |title=US readies for Korean business |url=http://www.atimes.com/atimes/Korea/ID04Dg01.html |accessdate=2007-04-07] . "Should the FTA become law after an undemocratic process and in spite of mass popular opposition, the FTA will drive the perception in South Korea that America's democratic rhetoric is merely a cover for profit-seeking behavior," Korean Americans for Fair Trade said in a statement [cite news |publisher=Asia Times |date=2007-04-04 |title=US readies for Korean business |url=http://www.atimes.com/atimes/Korea/ID04Dg01.html |accessdate=2007-04-07] . There have been several massive protests against the FTA in the country. A nation-wide protest on November 22, 2006 was reported to have drawn 65,000 to 80,000 people, with 9,000 to 20,000 of them gathering at the city hall in Seoul. A protester named Heo Se-uk set himself on fire Sunday shouting "Stop the Korea-U.S. FTA" outside the hotel where negotiators were meeting [cite news |publisher=Washington Post |date=2007-04-02 |title=U.S., South Korea Reach Free Trade Deal |url=http://www.washingtonpost.com/wp-dyn/content/article/2007/04/02/AR2007040200273_pf.html |accessdate=2007-05-14] . He was being treated for third-degree burns, police said. The overall opinion of the population has fluctuated over time and is difficult to gauge. One poll in April 2007 indicated support for the Free Trade Agreement at 58.5% [ cite news |url= http://english.chosun.com/w21data/html/news/200704/200704040025.html |title= Three in Five Koreans Support FTA: Poll |publisher= The Chosun Ilbo |date= Apr. 4, 2007] . Other polls indicated a majority opposed to the agreement, including an 83% no confidence rating in the government's ability to negotiate the agreement [cite news |publisher= The San Diego Union-Tribune |date= April 3, 2007 |title= Democracy loses in Korea trade pact |url=http://www.signonsandiego.com/uniontrib/20070403/news_mz1e3kim.html |accessdate=2007-04-04] . The Lee Myung-bak administration has taken considerable political heat for its part in advancing the FTA, as did the previous Roh Moo-hyun administration. President Lee had to endure months of protests over the decision to reopen American beef imports, a decision that was made primarily with an eye towards securing American support for the FTA [cite news |publisher=The korea Times |date=2008-09-08 |title=McCain, Obama and Korea |url=http://koreatimes.co.kr/www/news/opinon/2008/09/220_30739.html |accessdate=2008-09-12] .

References

See also

* Kim Hyun-jong
* Lee Myung-bak
* GNP
* NAFTA
* South Korea-United States relations
* Free trade area
* Free trade
* Heo Se-uk

External links

* [http://www.ustr.gov/Trade_Agreements/Bilateral/Republic_of_Korea_FTA/Final_Text/Section_Index.html United States - Korea FTA Full Legal Text]
* [http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2007/asset_upload_file939_11034.pdf Summary of the KORUS FTA]
* [http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2006/asset_upload_file582_8880.pdf Korea Will be Largest FTA Partner in 15 Years]
* [http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2007/asset_upload_file525_12707.pdf KORUS FTA: Opportunities for Agriculture]
* [http://www.ustr.gov/assets/Document_Library/Transcripts/2006/February/asset_upload_file804_8935.pdf Launch of U.S.-Korea Free Trade Agreement] - Office of the U.S. Trade Representative, February 2, 2006
* [http://www.iht.com/articles/ap/2006/11/22/business/AS_FIN_SKorea_US_Protest.php Workers hold protests against U.S.-South Korea free-trade talks] - International Herald Tribune, November 22, 2006
* [http://usinfo.state.gov/xarchives/display.html?p=washfile-english&y=2007&m=April&x=20070402154022AKllennoCcM0.2038538 United States, South Korea Conclude Free-Trade Agreement] , USINFO, April 2, 2007
* [http://www.ustr.gov/Document_Library/Press_Releases/2007/April/United_States_Korea_Conclude_Historic_Trade_Agreement.html United States and Korea Conclude Historic Trade Agreement] , Office of the U.S. Trade Representative, April 2, 2007
* [http://www.state.gov/e/eeb/rls/rm/2008/110361.htm The Administration's Focus on Promoting Free Trade and Enhancing U.S. Trade and Export Opportunities] US Department of State, September 26, 2008
* [http://www.atimes.com/atimes/Korea/ID04Dg01.html US readies for Korean business] Asia Times Online
* [http://www.kaft.org/ Korean Americans for Fair Trade Official Website]