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     Apr 4, 2007
US readies for Korean business
By Emad Mekay

WASHINGTON - The US and South Korea have reached a free-trade deal that its proponents say will create economic opportunities, but which critics charge could lead to the further impoverishment of Korean farmers, violate labor standards, and follow the failed model of other free-trade agreements.

"This is a historic moment for our two countries. The United States-Korea Free Trade Agreement [KORUS FTA] will provide US farmers, ranchers, manufacturers and service providers with

exciting new market opportunities in a growing, dynamic country. It will contribute to Korea's successful transformation into a 21st-century economic power," said US Trade Representative Susan Schwab in a statement.

The new FTA, which will remove trade barriers to goods and services between the two countries, is the biggest deal since the 1993 North American Free Trade Agreement binding the US, Canada and Mexico. NAFTA has since been the template for most US free-trade agreements.

"The KORUS-FTA represents the United States' most commercially significant FTA in over a decade," said the Office of the United States Trade Representative in a statement.

South Korea is the world's 10th-largest economy, with a gross domestic product of nearly US$1 trillion. The country is already the United States' seventh-largest goods trading partner, with two-way trade in 2006 valued at about $72 billion.

The deal includes provisions that ensure that US investors in South Korea will have the same rights and enjoy equal footing with Korean investors. Reached on Monday (Korean time), the agreement will expand market access and investment opportunities for businesses in a number of service sectors, including telecommunications and e-commerce.

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.

In the highly competitive automotive industry, 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.

With the inclusion of the "yarn forward" rule of origin, the FTA will give apparel products from South Korea preferential access to the US market while supporting US fabric and yarn exports and jobs.

The deal includes some staples of pacts like NAFTA, such as the expansion of market opportunities for US audio-visual products as well as the enforcement of intellectual-property rights, including trademarks, copyrights and patents, consistent with US standards.

Koreans are worried that this will mean more expensive drugs in the pharmaceutical industry, as US companies could refuse Korean producers the right to make generic drugs and choose to sell their products at higher prices.

Thousands of people in South Korea have been protesting the FTA for nearly a year, fearing that it will harm livelihoods and reduce their access to medicine and their right to food security.

Anuradha Mittal, executive director of the Oakland Institute, who has followed the deal from the start, said the "deal on the FTA is a blow to democracy and demonstrates what free trade is really based upon: a few decide what's best for everyone".

"This deal ignores the wishes of the 70% of the Korean population that is against the FTA. It ignores valid concerns around livelihoods and access to medicines of tens of thousands who have protested over the last 10 months despite criminalization of dissent," Mittal said.

The agreement does require both countries to enforce their own labor and environmental laws, and ensures access to legal mechanisms to ensure enforcement. Labor groups and senior Democrats in the US Congress have called for international standards to be applied in such deals.

US President George W Bush notified Congress on Monday that he approved the deal. This comes 90 days before his special fast-track Trade Promotion Authority expires on July 1. But some in Congress complained that the agreement didn't go far enough.

Senator Chuck Grassley, the ranking Republican member of the US Senate Committee on Finance, which oversees trade agreements, gave a mixed reaction. He complimented the significant benefits to US pork and soybean producers, but lamented the fact that rice was excluded.

"On principle, I oppose taking agricultural products off the table in trade negotiations. It just facilitates the continuation of protectionism," he said.

The committee's chairman, Senator Max Baucus, said the deal was hugely problematic because it lacked an agreement to remove South Korea's ban on US beef, which Seoul introduced after reports of a case of mad-cow disease (bovine spongiform encephalopathy) in the US surfaced in December 2003. Before the ban, South Korea was the third-largest US beef export market.

"This is an entirely unacceptable outcome," said Baucus. "I will oppose the Korea free-trade agreement, and in fact I will not allow it to move through the Senate, unless and until Korea completely lifts its ban on US beef."

US business groups have largely given a positive reception to the deal. While South Korea is a $300 billion import market, US exporters currently have only 11% of that market.

"From what we understand, this is a good agreement that will go a long way toward opening the world's 10th-largest economy to US exports and bring substantial benefits for American manufacturers, farmers and service providers," said Thomas J Donohue, president of the US Chamber of Commerce.

Still, 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.

"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.

"We must call on Congress to start a fresh dialogue for a US trade policy that respects international norms that uphold the human right to food, housing, health, education and dignity. Without these goals as a centerpiece of our trade and development agenda, we will not secure more peace and security in the world," the statement said.

(Inter Press Service)

All fired up over Korea-US free trade (Apr 3, '07)


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