Timing of FTA ratification
Korea Times, Seoul
Timing of FTA Ratification
By Tong Kim
30 November 2008
The Lee government seems to have come to realize, albeit belatedly, that its attempted push for early enforcement of the Korea-U.S. Free Trade Agreement (KORUS FTA) was a non-starter from the beginning. The FTA was a top priority for President Lee Myung-bak, who believed it would help turn around the nation’s declining economy.
President Lee has pushed hard, unsuccessfully thus far, for a preemptive ratification" by the National Assembly since he took office ―preemptive" in the sense that ratification by Korea first would prevent a possible reopening of the trade agreement. Proponents of this approach hoped that Korea’s ratification would have a positive impact on the U.S. Congress, which has traditionally approved free trade agreements only after other parties have ratified them.
Even if Seoul had ratified the FTA, the U.S. Congress, under the control of Democrats, skeptical of U.S. benefits from the deal, would not have been ready to approve the bill during the election year of 2008. Neither Lee’s investment in winning President Bush’s friendship, nor the Bush administration’s repeated pressure on Congress, was able to change the politics of FTA ratification. President-elect Obama had said he would vote against the FTA if it came to a vote.
The U.S.-Korea trade agreement ― while not free of criticism in both countries ― was initially hailed as a landmark accomplishment in the right direction of free trade that would benefit both economies. After entry by force, Korea’s exports to the U.S. market would increase by 12 to 15 percent each. Under the agreement, Korea will benefit from exporting automobiles, textiles and electronics, while the United States will immediately have expanded market access to Korea’s agricultural products and other goods and services.
In the face of the greatest financial crisis since the Great Depression ― for which some blame excessive deregulation in blind pursuit of neo-liberalism, Obama and his newly announced economic team are focusing on coming up with measures to prevent the economy from falling further into recession and deflation. In addition to bailouts for the failing financial industry, the Obama team is retooling stimulus packages and working on plans to create jobs, while getting ready to hit the ground running from day one after the transition.
The auto industry’s doomsday scenario ― that all three big automakers would go bankrupt if the government did not help them ― was the latest red light for the passage of the FTA. Huge disparities in the sales volumes of automobile trade, a ratio of 160 to 1 in Korea’s favor, is mind-boggling to Americans, although there are other areas that are more beneficial to the United States. Increased import of Korean cars would mean more job losses for American autoworkers.
In contrast to Korean proponents of the FTA, few in Washington think the FTA is an effective remedy to arrest the economic downturn. If Korea approves the FTA first, it may send the wrong signal to the Congress that the trade agreement would in fact benefit Korea more than the United States, which may very well be the case on a short term basis.
President Lee, who had been pressing hard for the FTA, said that Korea’s ratification before the end of this year would be in the national interest of South Korea" and that Obama's opposition waselection campaign talk," suggesting that once in office, President Obama would support the FTA, as the United States cannot backslide into protectionism against free trade in an age of a global economy.
Returning last week from the G-20 meeting in Washington and the APEC conference in Lima, President Lee said, We should give President Obama time to settle in the White House and to review his campaign pledges and relations with allies." He noted the common problems facing industrial nations in terms of their governments' limited ability to restore the confidence of consumers in the market.
Given the current mood in Washington, the next administration may take as long as a year or more before it sends the FTA to Congress for vote. One Washington insider predicted it would pass in 2010, provided that the free trade agreement would be supplemented at least by some adjustments in the form of an addendum or a supplement, even if it would not require renegotiation. The agreement was signed in June 2007 after 14 months of tough negotiation. There is no indication that an advanced Korean ratification would help U.S. approval of the FTA at this point.
In Seoul, public opinion has consistently favored the FTA, despite significant opposition from the agricultural sector and activist civic organizations. The legislature is divided over the timing of FTA ratification along the party lines between the ruling Grand National Party and the opposition parties, including the Democratic Party and Democratic Labor Party.
The opposition insists that supplementary measures to support farmers who would be likely victims of the FTA should be taken in advance of ratification. Recently, an increasingly growing portion of the public indicated its preference for a slower process of ratification, watching developments in Washington.
President-elect Obama's position on ratification is similar to that of Korea's opposition parties; first, come up with protective support measures for the sectors that would be hurt by the enforcement of the free trade agreement. Obama cannot afford to see more job losses that may result from the FTA. He is interested infair trade," not just open trade."
As Lee said, Obama needs time ― in order to develop a balanced approach to the FTA. And that would not be an isolated solution, but it will be part of an overall economic and trade policy to rebuild the U.S. economy, while protecting U.S. interest in the global trade system. So don't hold your breath. You will know when it happens.
During the KORUS FTA negotiation, the question ofcountry of origin" for goods produced by the Gaeseong Industrial Complex, a joint inter-Korean economic project, was one of the important issues for Korea, which wanted goods from Gaeseong to be treated equally as other goods from Korea. This issue was put aside from negotiation and was not included in the agreement.
We should remember that the FTA was negotiated and signed by the Roh Moo-hyun government and the Bush administration. The Gaeseong project seemed to keep growing without friction with North Korea then. Now, the Minister of Unification says the South should be ready for the complete closing of the Gaeseong Industrial complex.
As South Korea’s economy would suffer more from foreign and domestic factors that will decrease Korea’s growth next year to 2 percent, according to the latest IMF projection, the last thing South Korea needs is increased security threats from the North that might negatively affect Korea’s national risk rating. What’s your take?
Tong Kim is a research professor with the Ilmin Institute of International Relations at Korea University and an adjunct professor at Johns Hopkins University SAIS.
