Friday, December 3, 2010

Korea is Right on the FTA Impasse, But the Bigger Picture is More Important

The Seoul Gyopo Guide has pointed out the importance of the Korea-U.S. Free Trade Agreement (KORUS) to the Korean population here, and pointed out that the lack of a ratified agreement victimizes the Korean people.  The KORUS FTA  was an agreement reached many years ago, and there was anticipation that Presidents Obama and Lee would have used the G20 Seoul Summit in order to be a place where they would announce a final agreement which could be ratified by both legislatures.  Wrong.  No final agreement has yet been reached.

In today's Wall Street Journal, it is reported that tariffs on the auto industry is the only remaining sticking point.  Korea objects to the phasing out of the existing tariffs over a five-year period.  Instead, Korea wants to have the tariff removed immediately.  It is perfectly reasonable that Korea would attempt to get this concession from the U.S., given that the other matters have been resolved, and that Korean auto manufacturers have invested heavily in the U.S. and employ a large number of Americans.  Hyundai Motors, in particular, is well-known to have manufacturing plants in Alabama and Georgia.

Even though it will hurt Hyundai Motors and Kia Motors on the margin, the fact is that the overall agreement will help the Korean population.  Given that inflation is the most difficult domestic economic challenge faced by everyday Koreans, the Korean government must consider this first, and do everything that it can in order to lessen the burden of the increased cost of living in Korea.  It should ratify the KORUS FTA as soon as possible.  Korea should not attempt hold up the agreement on this minor point, so that the general Korean population can benefit immediately.  Korea is the U.S. 7th largest trade partner, and there will be additional negotiations in the future.  The notion of not setting a negative precedent must be weighed against the notion of reasonableness and cooperation.  Since those two basically cancel each other out, the benefits to the Korean people should be the deciding factor.  Hopefully, the Korean government fully understands this.


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