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Concerns over KORUS FTA unfounded (April 15, 2013. The Korea Times)
- Date : 2013.04.15
- Views : 1300
Concerns over KORUS FTA unfounded
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Once again, diehard opposition logic and popular rhetoric against Korea’s FTA with the U.S. has proved to be wrong. When Korea announced the import liberalization schedule for bakeries, household appliances, and movie sectors one by one over decades, opposition camps fiercely protested the trade liberalization measures, arguing that they would cause the demise of domestic industries concerned due to flourishing imports of better quality.
In retrospect, however, Korea’s step-by-step domestic market liberalization has made these industries compete with imported items. All of these liberalized products later became the leading exports of Korea.
The lawmakers who opposed the ratification of the KORUS FTA at the National Assembly argued that it would destroy Korean agriculture and that there would be a nationwide spread of mad cow disease.
It has been a year since the KORUS FTA went into effect, and no signs of such symptoms have emerged. Mutual trade gains are realized in both countries. For example, at a micro level, the U.S. is expected to increase its agricultural exports to Korea this year and Korea is likely to export more of its auto parts and products made by small-and medium-sized enterprises(SMEs). Another significant development for Korea in 2012 occurred in the record high performance of inbound foreign direct investment(FDI) amounting to US$10.4 billion.
The drastic FDI increase from the U.S. and Japan contributed significantly to this. Obviously, the KORUS FTA has helped Korea attract more FDI due to Korea’s liberalized and transparent economic system.
Most importantly, the KORUS FTA has benefited the two countries in formulating their respective FTA strategies with other countries. Many experts in the U.S. and Korea view the KORUS FTA as a gold standard that can be applied to other trade deals. For instance, the U.S. can use the quality of the KORUS FTA as an empirical benchmark in making the U.S.-anchored Trans-Pacific Partnership on par with the KORUS FTA. Jeffrey Schott of the Washington D.C.-based Peterson Institute for International Economics suggests that both the U.S. and EU replace their respective counterpart as Korea, as stipulated in the KORUS FTA, with small modifications to reach an early conclusion of the recently proposed Trans-Atlantic Trade and Investment Partnership.
Several FTA initiatives are also underway in the Asia-Pacific region, starting with the Trans-Pacific Partnership, the Regional Comprehensive Economic Partnership (RCEP: ASEAN+ six economies), China-Korea FTA, and China-Japan-Korea trilateral FTA. The prospects of concluding any meaningful FTAs in the region might boil down to whether and what extent Japan is ready to open its sensitive sectors, such as agriculture and industries including construction and retail, and the government procurement market, as its tariffs on manufactured goods are already negligible.
Given the initial discussion of feasibility for the RCEP, perhaps a lower standard might be envisioned due to the different stage of development of the diverse economies involved in the ASEAN-plus-six framework. Korea could easily join the TPP process, in which Japan has declared it will participate, if Korea could see tangible gains from TPP membership, as it already has a very effective FTA with the U.S. Korea might focus on the China-Korea FTA to upgrade its current trade and investment linkages with China. Korea could also resume the suspended Korea-Japan FTA if Japan were to pursue more aggressive liberalization of its sensitive sectors.
Despite the tariff elimination or reduction merits of the KORUS FTA, only 66 percent of Korean exporters have used the pact. This low figure stems from ignorance as well as the burdensome requirements of preparing the rules of origin certification imposed on their export items. As Korea should work on more fully using the KORUS FTA, especially for SMEs, through organized efforts by business associations, so should the U.S. Korea should realize an early-mover’s advantage of having the KORUS FTA.
In the years ahead, the U.S. and Korea need to upgrade their FTA contents for mutual benefits. For example, they need to fine-tune the much-debated investor-state dispute clause and address the freer bilateral flows of professionals. The success of the gold standard KORUS FTA is likely to trigger the early advent of the afar-seeming “Asia-Pacific Economic Community,” including China via region-wide free trade and investment flows.
http://www.koreatimes.co.kr/www/news/biz/2013/04/333_133891.html