US may ratchet up FTA drive amid economic woes: experts
Yonhap 2011/08/10
U.S. may ratchet up FTA drive amid economic woes: experts
SEOUL, Aug. 10 (Yonhap) — Faced with the risk of its economy relapsing into another recession, the U.S. may pin its hopes on free trade deals, including the one with South Korea, to jump-start its economic recovery, experts here said Wednesday.
A series of economic data from the U.S. is raising concerns that the world’s largest economy is losing momentum for a recovery. The U.S. economy expanded at less than a 1 percent annual rate in the first half of the year, and consumer spending there dropped in June for the first time in nearly two years, underscoring the fragile state of the economy, according to the latest data.
But the U.S. seems to be running out of ammunition to revive its economy at the moment. Last week, U.S. President Barack Obama signed a bill lifting the nation’s debt limit through 2013 and cutting the deficit by more than US$2 trillion.
Concerns over the U.S. economic slowdown has also spurred speculation the U.S. Federal Reserve may start another stimulus program. But given the country’s current inflation rate, it is hard to see it move in that direction, they said.
"The U.S. has no viable options at the moment to prevent a further slowdown in the economy," said Kim Han-seong, a researcher at the state-run Korea Institute for International Economic Policy (KIEP). "The only answer is free trade deals, and the U.S. is now forced to seek free trade deals aggressively."
The free trade agreement (FTA) between South Korea and the U.S., known as KORUS FTA, was signed in 2007, but the deal was supplemented in late December with minor modifications that mostly dealt with the auto industry. The agreement has been awaiting approval from the legislatures of the two countries.
Last week, U.S. congressional leaders announced a breakthrough in efforts to pass the free trade pacts with South Korea, Colombia and Panama.
The Democrats and the Republicans in the Senate agreed to a "path forward" to handle the issue of renewing a worker aid program, and passing bills on the three FTAs when Congress returns after a summer break on Sept. 6.
"Due to the downgrade of its credit rating and budget deficit, the U.S. can not help but push for free trade pacts," said Kwak Su-jong, a researcher at the Samsung Economic Research Institute. "The House of Representatives is also expected to deal with the pending free trade pacts next month."
Experts said economic benefits from the free trade pact are likely to be reduced, however, as the economic slowdown may sap consumer spending there to some degree.
"The question is how long the U.S. economic slowdown will last, and when the economy will start to recover," said Kim at the KIEP. "But over the mid- and long haul, economic benefits will be pronounced."
Early this month, a group of 10 state-run think tanks estimated that South Korea will see its gross domestic product expand by an additional 5.66 percent in the long term thanks to the free trade deal with the U.S.
The think tanks also predicted that South Korea will see its trade surplus with the U.S. increase by US$140 million annually over the next 15 years after the FTA goes into effect.
