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Korea-US FTA: Cool-headed approach needed to maximize actual benefits

The Korea Times


Korea-US FTA: Cool-Headed Approach Needed to Maximize Actual Benefits

9 January 2006

Korea has been belatedly awakened to the global trend of bilateral free trade agreements, and is struggling to catch up. The government will begin negotiations with India next month to conclude an FTA in two years. The atmosphere is also ripe for starting talks with the United States for a tariff-free trade scheme, which, if realized, may change this country’s overall industrial picture as never before. But an FTA with giant, advanced economies, like America’s, requires a very careful approach.

Trade officials here appear to understand this, given their prudent responses to media reports on the impending start of bargaining. Actually, the two sides have yet to sign a bilateral investment treaty (BIT), as warm-up to an FTA, due to some pending issues. The biggest stumbling block is Seoul’s screen quota system, which protects the local movie industry from the onslaught of Hollywood blockbusters. But even some government officials are now calling for its removal in return for bigger gains elsewhere.

Problem is, the benefits are often vague and slow to come, while damages are more specific and immediate. The U.S. Trade Commission estimated a bilateral FTA would increase U.S. exports to Korea by 54 percent, more than double the 21-percent gains in Korea’s shipments to America. Local civic activists say it could also slash Korea’s agricultural production by between $2 billion and $8 billion. Film producers claim any premature cease of mandatory screening would destroy the hard-won industrial boom.

There are more than 180 bilateral FTAs in the world, but Korea has only three. Still the late start should be no reason for excessive haste, particularly in negotiating with larger and more sophisticated economies, which also include Japan. Rather, Seoul needs to speed up talks with countries, which have great markets but are less industrialized than it as a whole, such as China and India. Even in this case, officials ought to take extreme care to minimize damages to farmers.

Foreign trade itself is of course a two-way business, but an FTA should not necessarily be a goal in itself for both theoretical and practical reasons. If joining the global FTA fervor is inevitable, the nation ought to first set up a comprehensive strategy with different tempos for different partners according to priority. The U.S., with its world-leading service industries and tenacious intellectual property rights demands, is too tough a customer to top the list. Japan could also wait a little longer.

America is the world’s largest market and Korea’s most important ally, but removing all trade barriers requires a more realistic calculation. Korea needs to focus on the talks with the ASEAN and move toward China, and then Japan. Negotiations with Washington will also depend much on Seoul’s role in integrating the East Asian market,

 source: Korea Times