Truths & myths about proposed Korea-US FTA
Korea Times 06-06-2006
Truths & myths about proposed Korea-US FTA
Confusion is clouding the start of negotiations between Korea and the U.S. in Washington for the establishment of a bilateral free trade agreement (FTA). The nation is divided into those for and those against the FTA with the world’s largest trading country, but the interests of the respective parties clash and intertwine with each other over the details of the proposed trade pact. Here are some of points that need to be cleared up about the FTA on the basis of our staff’s investigations and research on the government’s claims, news reports and other sources. ㅡ ED.
By Yoon Ja-young
Staff Reporter
Will the FTA Enslave Korea to US?
People often wonder whether Korea’s small economy could play fairly with the U.S.
Supporters of the FTA say opponents underestimate the Korean economy, the 10th largest in the world. Korea’s trade surplus with the U.S. amounted to $ 16.1 billion last year.
The government also emphasized that Korean firms are competitive, claiming most of the worries about opening the market are groundless.
``They said Korean firms were doomed when foreign discount stores advanced into the market in 1990s. As you look at the market now, however, local discount stores such as E-Mart have won by improving their competitiveness,’’ Deputy Prime Minister Han Duck-soo said at a forum. He often cites Korean culture and confectionery as examples of sectors that successfully survived after the opening of their markets.
Was NAFTA Bad News for Mexico’s Economy?
Those who oppose an FTA with the U.S. often cite Mexico as an example. They say the Mexican economy deteriorated after the signing of the North American Free Trade Agreement (NAFTA). Mexico showed a somewhat poor performance after NAFTA, but it was not the FTA but the Peso Crisis in 1995 and the lack of economic restructuring that hampered the economy, according to the government.
Political unrest, a rigid exchange rate policy and interest rate hikes in the U.S. had a synergistic effect causing an economic crisis, while a delay in restructuring of government finances, energy and the labor market impaired growth potential.
Mexico turned a $ 2 billion deficit in 1993 to a $64 billion surplus in trade with the U.S., and the inbound foreign direct investment almost quadrupled to $15.2 billion from $4 billion. The government emphasizes that the signing of NAFTA helped Mexico overcome its economic crisis faster by increasing exports and foreign direct investment, and promoting U.S. support for Mexico.
Will Big Corporations Be the Only Winners?
Contrary to popular belief, most small and medium-sized enterprises support the Korea-U.S. FTA. The government emphasizes that it is not an agreement that benefits only a few corporations. It gives more opportunity to the country and increases consumer benefits.
According to recent survey by the Korea Federation of Small and Medium Business, 80 percent of firms exporting to the U.S. support the FTA. Most of the products that will get easier market access with the signing of the FTA, such as textiles, leather, rubber and shoes are mainly produced by small and medium businesses.
Will China Sulk?
With neighboring China emerging as a new superpower, some have raised concerns that signing an FTA with the U.S. would hurt ties between Korea and China.
The relationship between Korea and the U.S. is certain to be stronger with the signing of the agreement, but it does not mean it will influence a third country, the government says. Moreover, Korea is also considering FTAs with Japan and China.
Korea and China already started joint research on an FTA last July. The two countries have a close relationship, smoothly settling issues of commerce and trade over the past few years, according to the government.
Will Public Service Collapse?
An FTA does not mean the countries will open up all sectors. For example, when the U.S. signed an FTA with Australia, it designated sugar as an exception in scrapping tariffs. The U.S. also made exceptions with basic public services such as health, medical care and education in FTAs with Australia and Singapore.
In the case of education, neither Korea nor the U.S. plans to open up elementary or secondary education. The government has emphasized that it will not impair public services such as electricity, gas and water supplies. It is also trying to leave room in the agriculture and fishery sectors.
Is a New Year Deadline Fixed?
Korea and the U.S. have agreed to conclude all the procedures before July next year, when the Trade Promotion Authority (TPA) granted to U.S. President George W. Bush by the U.S. Congress expires. Since it takes about three months for passage in the U.S. Congress, negotiations should be concluded by the end of next March to avoid pressure by various interest groups.
However, this does not mean the Korean National Assembly also has to pass it by then. For example, it took a year and four months for the Korea-Chile FTA to be approved by the Assembly after it was signed.
