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Maximize FTA’s benefits

Posted December. 06, 2010 11:26,   


On April 2, 2007, the then Roh Moo-hyun administration of South Korea signed a free trade agreement with the Bush administration of the U.S. In an editorial the next day, The Dong-A Ilbo praised Roh’s leadership by saying, “President Roh Moo-hyun, who kept his conviction that the free trade agreement is another growth strategy to take the (South) Korean economy to the next level, played a critical role in concluding the deal.” Dong-A also commended Seoul’s negotiation team led by then Trade Minister Kim Hyun-jong and chief negotiator Kim Jong-hoon.

The incumbent Lee Myung-bak administration and the U.S. Obama administration finalized the deal Friday, three years and eight months after the deal’s signing. Leaders of the two countries deserve praise for doing their best to ratify the deal, which had been stuck in limbo since its conclusion in April 2007 and signing that June due to opposition from U.S. groups. Seoul’s negotiation team led by Trade Minister Kim Jong-hoon also deserves commendation for more than four years of efforts.

In the additional negotiations, Seoul accepted part of Washington’s demands to delay the elimination of U.S. tariffs on South Korean cars in return for a delay on the lifting of South Korean tariffs on American pork, extension of visas for South Korean workers in the U.S., and delay of the mandatory implementation of selling generic U.S. medicine in South Korea. The full opening of the South Korean market to U.S. beef, which was pursued by Washington along with cars, was not included in the deal, however. So the final agreement can be said to have struck a balance of interests to a large extent by keeping the spirit of the negotiations and principles set in 2007.

Business organizations such as the Federation of Korean Industries and the Korea International Trade Association welcomed the conclusion of the deal and urged parliaments of both countries to promptly ratify the agreement. “The sealing of the additional agreement will increase exports to the U.S. by eliminating uncertainty in the U.S. market,” they said. A committee on countermeasures to the deal comprising 42 private organizations also welcomed the breakthrough. The Korea Automobile Manufacturers Association said, “The deal will expand the sale of Korean cars in the U.S. market, which is expected to reach 950,000 units this year, enhance the competitiveness of Korean cars, and raise exports of car parts produced by Korean small and mid-size companies to the U.S.”

South Korea has emerged as a free trade powerhouse by concluding deals with major economic blocs such as the U.S., the European Union, India and the Association of Southeast Asian Nations over the past several years. Expanding free trade is a desirable policy for a country to forge a new way forward by choosing trade as a major means to develop the economy and the national good. Other countries are worried over the deal’s impact on their exports. Japanese companies, which produce many goods that directly compete overseas with South Korea’s, are particularly jittery over the deal and urge Tokyo to speed up negotiations on free trade deals.

Not everyone is happy over the conclusion of the free trade deal. In South Korea, opposition parties and left-leaning and pro-North Korea forces are criticizing the agreement. Main opposition Democratic Party Chairman Sohn Hak-kyu urged immediate abolition of the agreement Sunday with a farfetched claim that Seoul deceived the people and gave up national interests by taking advantage of the North’s shelling of Yeonpyeong Island. Party floor leader Park Jie-won called the agreement "humiliation," saying, "We were hit by North Korea’s artillery and stricken by a U.S. economic offensive." But do Sohn and Park have the ability to calculate the gains and losses of the negotiation results?

The two have each served as governor of Gyeonggi Province and presidential chief of staff in the past, so they know how the 50 million people in the country feed themselves. Pro-North Korea forces have kept mum since the Yeonpyeong attack but are attempting to deceive the public and throw the country into chaos by blasting the deal as they did in the 2008 candlelight protests against the resumption of U.S. beef imports. They criticized nothing about free trade deals with the EU or India but show a sensitive response to that with the U.S. The opposition of pro-North Korea and left-leaning forces to the deal is tantamount to opposition to South Korea gaining the upper hand against the North by strengthening not only the national security alliance but also economic cooperation with the U.S. If implementation of the agreement is derailed due to the distorted propaganda of such forces, this is like giving up the means to feed the people.

Those who oppose the deal as “humiliation” say Seoul gave up too much in the auto sector, but the South Korean auto industry welcomes the additional negotiation results. Talks between countries involve mutual concessions. Seoul made concessions in the auto sector but Washington did the same in the livestock and medical industries. This cannot be viewed as a humiliating or closed-door agreement. No negotiations between countries are completely open. It is also puzzling why left-leaning forces that blindly oppose the U.S. and large Korean companies care for the interests of the South Korean automotive industry. Their objection to the deal is nothing less than an attempt to launch the same old political and ideological offensive by finding fault with the government.

Eleven Korean think tanks say the agreement will increase South Korea’s GDP as much as 80 trillion won (72 billion U.S. dollars) and create 340,000 jobs 10 years after implementation. The deal will also strengthen the bilateral alliance in a multifaceted way by further cementing the bilateral economic and security alliance. For a small-size country with few national resources and a large population, the expansion of free trade is necessary for sustainable economic growth and prosperity. Over the past five decades, South Korea has achieved eye-opening economic development called the “miracle of the Han River” through trade-oriented strategies. Those who oppose the agreement have ironically also greatly benefited from such strategies.

Last year, trade with China accounted for 26 percent of South Korea’s overall trade, more than twice the U.S. share of 12 percent. Expanding trade with China is also creating a positive impact on South Korean industries and the livelihood of the South Korean people. Excessive dependence on China, however, can make it difficult to respond to changes in the global economy or China’s foreign policy. Seoul should also prepare for a hard landing of the Chinese economy. In this sense, South Korea needs to promote trade with and investment in many countries and regions. The free trade agreements with the U.S. and the EU have significant meaning in this respect.

Given China’s response in the wake of North Korea’s sinking of the South Korean naval vessel of Cheonan and shelling of Yeonpyeong, the importance of the U.S. in South Korea’s national security and economy has grown further. The free trade deal is an effective device to reduce risks stemming from excessive dependence on China and to absorb political and diplomatic shocks.

The U.S. Congress is expected to pass the bill to ratify the agreement next month without separate discussion. Politicians in South Korea must also help promptly ratify the accord and maximize its purported benefits. Opposition parties can oppose ratification but should not resort again to using physical force to block it. The government should do its best to promote public understanding of the agreement’s benefits to not only politicians but also the people and rebut false arguments by those opposed for political interests. Seoul must also revise legal and institutional systems to make the accord as effective as possible and help industries expected to suffer from the agreement.