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.
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