WSJ: KORUS FTA Dead on Arrival; Democrats Won’t Approve
by Brendon Carr
Thanks to an eagle-eyed Korea Law Blog reader who sent me this article (Thanks, reader!), we report that the Wall Street Journal says the Democrats won’t allow the United States’ Free Trade Agreement with Korea (KORUS FTA) to receive its necessary Congressional ratification. As I have predicted here and at the Marmot’s Hole, this deal—rightly or wrongly—suffers from a number of perceptions that conspire to make it unpalatable. Chief among them are that it doesn’t do enough to open Korean markets, when compared to the benefits Korea gets from US.
The Wall Street Journal says something is better than nothing:
In any case, the U.S.-Korea FTA is a big new opportunity for American goods and services. As soon as the deal goes into force, 95% of tariffs on consumer and industrial goods will be eliminated. Within a decade, almost all remaining tariffs will hit zero. In financial services, U.S. firms will have carte blanche to start up or acquire South Korean companies, part of Seoul’s aspiration to become a regional financial hub.
Agriculture has long been a bulwark of Korean protectionism, but under the deal more than half of all U.S. farm exports will receive duty-free treatment. The pact also guarantees that U.S. investors will be treated on a level playing field in Korean courts. And it sets up an international arbitration panel for U.S. firms that believe they’ve been wronged by the Korean government.
Even in autos, the pact is a big improvement over South Korea’s current protectionism. Last year Korea imported 4,344 U.S.-made passenger vehicles, while the U.S. imported more than 695,000 from Korea. Seoul has also failed to follow through on its 1995 and 1998 auto agreements with the U.S., but the biggest losers on that score have been Korean consumers. The free-trade pact would eliminate South Korea’s 8% tariff on passenger cars (versus 2.5% in the U.S.), and it would introduce a new mechanism to provide a head’s-up about Korea’s bad habit of imposing non-tariff import barriers.
The problem with U.S. autos in Korea is more than trade barriers, by the way. European car makers are subject to similar barriers, but their sales are doing just fine. It’s also worth noting that, while Ford and Chrysler oppose the FTA, General Motors does not, perhaps because it is doing well in its joint venture with Daewoo.
But the “something is better than nothing” view is only tenable in the case that one believes Korea is good to its word on international agreements. My observation is that Korea likes to belong to international agreements, but only to the extent that the agreements do not require Korea to do anything differently—i.e., signing an agreement is easy, abiding by the terms and spirit of that agreement is something else entirely.
Comments
4 Responses to This Entry
Comments Policy: Comments to Korea Law Blog are moderated. This means abusive, or just plain stupid comments will be deleted. So don't be a jerk. It also means there may be some delay from the time you post a comment to the time it shows up here. If your comment wasn't against the policy, it will show up in a little bit.
-
About Korea Law Blog
Korea Law Blog is brought to you by Brendon Carr, an American lawyer working as a foreign legal consultant for more than 10 years in Seoul. (Brendon is not admitted as an attorney in Korea. But you knew that.) -
Contact Details
-
Tel. +82 (0)2 772 2734
Fax +82 (0)2 772 2800
Mobile +82 (0)10 8788 0750 -
Download My FREE Korea Employment Law FAQ
-
Korean Media
-
Blogroll
-
Your blog is excellent - keep up the terrific work.
The Joongang Ilbo is interpreting the Democrats’ statements as mere pre-election palaver. http://joongangdaily.joins.com/article/view.asp?aid=2879216.
That’s certainly, the safe - and, more importantly for the Koreans, the wishful thinking - take given the well-known tendency of the donkeys, cited by the JI, to bait traditional labor support with protectionist positions during campaigns and then switch to bipartisan economic “internationalism” post-election.
But I don’t think it’s correct this time around - at least with regard to the Korean FTA. The so-called “relationship” is being quietly but dramatically and steadily altered by the US in ways that are going to cause Korea to wake up soon and be sorry what their current leadership has so offensively wished for. And the alarm is going to be the post-election demise of the FTA at or around the same time that the Korean economy takes another big hit because of its failure to really take the lessons of ‘97 to heart.
Saturday Greetings Mr. Brendon Carr,
Pleased to make the acquaintance of you through your website, thanks to a reference from your professional brother’s (?) One Free Korea. Your analysis of USA-RoK FTA rings true, and am additionally delighted to see your interest in the Korea language’s extensive borrowings of Chinese vocabulary (concomitant to much else!).
Assuming for the present a GNP victory in December, it will be interesting to see what options may be available to a new RoK administration in rebuilding USA-Korean relations. I for one would hope that in all aspects of the relationship, the parties concerned will be rid of the patron-client psychology that has dominated USA-RoK affairs for decades longer than it ought, to the detriment of both.
Best wishes that you will keep up your fine work.
The key point to notice in the WSJ is this:
“In financial services, U.S. firms will have carte blanche to start up or acquire South Korean companies, part of Seoul’s aspiration to become a regional financial hub. “
I don’t read the WSJ regularly anymore, but I did have a subscription for some years and one thing you do notice is how fervently and consistently it backs the financial services industry. I think that is the case here. It will support American farmers and the auto industry in general, but if financiers have something to gain than everyone else can go hang.