|US-ROK FTA – A Lost Cause in the Making?|
By Tom Coyner
Dec. 6, 2006
One could say most of the world gave out a collective sigh of relief a few weeks ago with the US elections swinging the US Government back toward a more centrist posture. But nothing of that magnitude may be described in simple terms. One of the casualties of that election could be the US-ROK Free Trade Agreement (FTA). But one may ask, particularly from within Korea, is that a bad thing?
Let's consider what a free trade agreement for Korea could mean, particularly given the nation's peculiar circumstances -- much of which has been created by recent events.
Recently, I listened to an impassioned case for the US-ROK FTA presented by the Ministry of Finance and Economy's Dr. Junkyu Lee. Dr. Lee is an internationally trained economist who gave many of the standard arguments in favor of free trade. He also allowed for some privileged areas not to be open to negotiation, presumably rice. He repeatedly argued with conviction that Korea must move forward to be like other advanced countries.
Indeed, when living and traveling abroad, one of the most striking observations for many Koreans and foreigners is the limited selection for the Korean consumer in this relatively closed market. Recently I traveled along the east coast of Asia where I noted that even in Shanghai convenience stores there is a wider selection of goods from various countries than I normally see in Korean retailers. Even more so were the cases of Hong Kong, Singapore, and Japan. In other words, Korea's protectionism is not doing its consumers any favors, other than artificially protecting second-class products from their international class competitors. And by doing so, government policy keeps domestic product suppliers on a lesser playing field of inferior quality and fewer selections.
One may argue that the current arrangement of Korean protectionism is protecting Korean jobs and preserving culturally sensitive market segments, such as agriculture. In the short term, this argument has merit. In the medium and long term, Korea has more to lose than to gain and even some of the plausible arguments against FTAs are a bit dodgy.
For example, let us consider rice. Native rice production strikes a strong resonance among most Koreans. One could say the protection of the rice market even has a cultural significance. Yet, I remember the 1980s, when the late US Congressman Robert Matsui argued against the Japanese resisting the opening of their rice market due to cultural priorities. Rep. Matsui suggested the US should close its market to foreign automobiles, since what could be more culturally significant for Americans than their love for cars and driving? The same argument may apply with Korea today.
For another way to look at this example, consider how many rice-growing families are now accepting foreign daughters-in-law, given the lack of young Korean women wishing to become part of the next generation of rice farmers. In contrast, consider how many American families there are in which both husbands and wives once planned careers in the US automobile industry, but are now unemployed or underemployed. Given the contrast, one could say it would make more sense for the US to be protectionist against foreign automobiles and for Koreans to open their rice market. But, of course, the reverse is the case. Koreans pay well above international market prices for rice grown by a respected but dwindling segment of the local labor force -- while many American families struggle on welfare, partially due to competition from imported automobiles.
I only use this example to illustrate how strange anti-FTA sentiments may become in spite of contrary conditions in the real world. But regardless of prevailing sentiments, politics can take the observer to yet stranger places.
For example, Dr. Junkyu Lee pleaded to an assembly of Korean and international business professionals to go out and evangelize his position. At the same time, his own nation's president, if I correctly understand the English media, has been less than persuasive in support of the US FTA. My impression of President Roh Moo-hyun's position is that the FTA is a necessary evil that must be tolerated for the long-term growth of the Korean economy -- even if Koreans may suffer in the short term. At times, he seems only slightly more enthusiastic than Hirohito when the Emperor made his famous call for Japan to “endure the unendurable'' in accepting 1945's defeat.
Dr. Lee, defending President Roh, pointed out quite rightly that the president has on at least two major public occasions spoken in favor of the FTA, including when meeting with film industry workers. And, Dr Lee pointed out, that is about twice as often as Pres. George W. Bush has publicly supported an FTA with Korea.
Quite so and not surprising, considering that this FTA is of greater importance to Korea than to the United States. But one would not get that impression following the media or watching the demonstrations in Korea.
Particularly in the case of Korea, the positive cascade effect of a successful FTA promises in the end to be of even greater significance than the obvious economic consequences. Countries that draw close to each other due to unified marketplaces develop stronger political and military relations, since both countries have increased common interests and dependencies.
Given the reciprocal alienation between the US and South Korea during the past half dozen years, together with an unofficial but noticeable inclination of the US to disentangle itself from Korea militarily, it is no surprise that Korea's ties with its strongest and least cynical ally are weakening. To many 386'ers, this may be a very good thing indeed. At the same time, China is not allowing a relative political and military vacuum to develop near its borders without understandably taking advantage of the development.
Against this backdrop, the US-ROK FTA negotiators have until July 2007 to wrap up the negotiations. One should keep in mind that according to the US Constitution, only the Senate can ratify treaties with foreign nations. In the case of FTAs, the US Congress specifically authorizes the Executive Branch to conduct treaty negotiations. The Korean Government is thus in effect negotiating with an ad hoc representation of the US Government that expires in July. There is no automatic extension of the US Trade Representative's authority to negotiate further on an FTA without specific Congressional approval.
So far, it appears somewhat doubtful that the July deadline will be met. In many ways, the current negotiations seem more like a dress rehearsal that smokes out the most obstinate issues to be resolved in a future round of trade talks -- providing that they ever take place.
The next FTA initiative, however, may not come until 2009, or even later. Last week's Democratic takeover of both houses of Congress has created a whole new game. With the Democrats in control harboring an overriding desire to take the White House back from the Republicans in 2008, there is likely to be little interest in FTAs anywhere. The Democrats tend to represent organized labor and protectionist interests in the US, and the Republicans tend to be aligned with Free Traders. That, of course, is an oversimplification, but the next two years of American national politics could be relatively straight forward.
US Congresswoman Nancy Pelosi, the next Speaker of the House, has become known as a brilliant politician simply by opposing Republican legislative initiatives. Free trade and FTAs fall into that basket of Republican favorite issues _ and for that reason, in the coming two years, we can expect no future extensions for any FTA negotiations once their deadlines have expired.