US FTA: A good opportunity to upgrade Korean economy
Korea Times
US FTA: A Good Opportunity to Upgrade Korean Economy
By Cho Kun-ho
15 May 2006
Korea and the U.S. officially announced the start of negotiations for a Free Trade Agreement (FTA) three months ago. The two sides are set to begin negotiations this June after gathering opinions from various fields of society.
According to a poll that surveyed small and mid-size enterprises (SMEs) in Korea, a majority of them supports an FTA with the U.S. At the same time, strong opposition has been voiced by other parts of society. In response to these negative opinions, the Korean government is taking a very cautious approach, saying that it will be very careful in negotiating an FTA with the U.S.
Proponents argue that the trade agreement will boost Korean exports and economic growth. They also state that the trade deal will create an environment where the Korean service industry, like the financial, education and medical sectors, which are all relatively vulnerable to foreign competition, can upgrade its own competitiveness, thereby contributing to the overall well-being of the Korean people.
Opponents question the economic benefits of the trade agreement, stating that U.S. tariff rates on imported Korean products are already low. They are concerned about the elimination of import duties, which they fear would deal a critical blow to many Korean industries and could undermine the whole agricultural industry.
However, such arguments seem preoccupied with figures. It is not prudent to focus only on short-term gains and losses of the trade deal. When only tariff rates are compared, those of the U.S. are low while those of Korea are high. In light of this, some may come to the hasty conclusion that a Korea-U.S. FTA is not beneficial but rather detrimental for Korea. The bilateral trade deal, however, is not just limited to negotiating tariff rates. Opening more of the Korean market and instilling competition within the market would be the wise approach to a Korea-U.S. FTA.
Last February President Roh was right in saying, “The goal of an FTA is to strengthen competitiveness, and market opening and competition will lead us to become the world best.”
Korean people take pride in Korean companies that operate overseas, seeing foreigners use, for example, a Samsung cell phone, an LG TV set, or a Hyundai car. Business strategies targeting the world market were the reason why those firms were able to earn the world’s recognition. They chose to embrace foreign competition. That was an inevitable choice, but the most effective strategy to achieve their goals.
When the market opens, companies face overwhelmingly fierce competition. As the Korean market progressively opened after the 1997 financial crisis, Korean companies went through drastic restructuring while striving to develop new technologies and markets. Some have finally been transformed into global companies with higher international status, proving that a more open market is beneficial, as it induces competition.
In order to fully utilize the trade deal as a positive opportunity, Korea should be fully prepared for possible side-effects from a Korea-U.S. FTA, as it is the largest and most significant in Korea’s history. The Federation of Korean Industries (FKI) has established task force teams along with various domestic organizations such as the National Agricultural Cooperative Federation and other leading business groups including the Korea Chamber of Commerce and Industries (KCCI) and the Korea International Trade Association (KITA) to hear various voices from Korea’s business sector. Best efforts should be made to reflect opinions from each industry on the FTA negotiations with the US in this process. Korea should never forget that the trade deal is a strategic opportunity to sharpen the nation’s competitive edge. I sincerely hope for a successful conclusion to the Korea-U.S. FTA.
The writer is vice president and CEO of the Federation of Korean Industries (FKI).
