Former ambassadors endorse FTA with South Korea

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Envoys: Approve free trade with S. Korea
Accord signals U.S. commitment to Asia

James R. Lilley, Donald Gregg, James T. Laney, Stephen W. Bosworth and Thomas C. Hubbard

August 13, 2007

On June 30, U.S. and Korean representatives signed the most significant free-trade agreement since NAFTA -- the U.S.-Korea FTA, known as KORUS. As former ambassadors to the Republic of Korea, we know that KORUS will not only bolster bilateral trade and investment ties but also reinforce our countries' important political and security partnership at a time of dramatic change in Asia.

In dollar terms, the scale of this agreement is enormous. With two-way trade totaling $78 billion last year, Korea is our seventh-largest trading partner. KORUS will effectively become the third-largest free trade area in the world -- exceeded only by the European Union and NAFTA -- and set new standards for bilateral trade agreements. Nearly 95 percent of bilateral trade in manufactured products will become duty free in three years as will two-thirds of U.S. agricultural exports.

Whereas the United States has been one of the world's most open markets, Korea has until recently been one of the most closed in the industrialized world. American exporters of industrial and farm products who have long struggled to compete in Korea, therefore, have much to gain from the elimination of Korea's relatively high tariffs and complex non-tariff barriers.

The agreement also gives important new rights and protections to U.S. investors and service industries. KORUS provides U.S. financial service companies the right to full ownership of banks, insurance companies and other financial businesses in Korea and establishes rules that will allow them to compete effectively. It also provides increased access to U.S. express service companies and expands opportunities for U.S. studios to sell television programs and films to Korea.

The political and strategic arguments for this agreement are equally compelling.

Now the world's 12th-largest economy, the Republic of Korea is a vibrant democracy whose standards in the areas of labor and environmental protection are equal to our own. Korea has provided valuable economic and military support in Vietnam, the Middle East and Afghanistan.

The trade agreement will complement our military alliance, which continues to deter North Korean aggression as we seek to deal with its nuclear-weapons program and build a broader peace on the divided Peninsula. More broadly, KORUS will underscore our nation's commitment to preserve our leadership in the Asia-Pacific region, the world's most dynamic center of economic activity.

The economies of East Asia are rapidly integrating, with such countries as China, Japan, Korea and India now trading with each other more than they are with the rest of the world. Moreover, they are actively pursuing bilateral and regional free-trade arrangements that could leave the U.S. on the outside if we do not remain engaged. The agreement with Korea will help ensure that the U.S. remains an insider as Asian economies continue to grow and join forces. U.S. exporters, service providers and investors will have preferential access to Korea's market and an important base for business with the rest of the region. At the same time, Korea's preferential access to the U.S. market could be a powerful incentive for others in the region, such as Japan, to open their markets to the United States with free-trade agreements as comprehensive as KORUS.

For all of these reasons, we urge Congress to act quickly to approve this agreement when it is ready for submission this fall. We are well aware that certain American industries feel they are not getting all that they desire in terms of KORUS benefits.

However, the overall U.S. economy will benefit hugely from KORUS, and we urge all Americans to support this agreement and not let the pursuit of elusive perfection become the enemy of the good.

For more than 50 years, the United States' political and economic commitment to Asia has contributed to the region's stability and prosperity. Nowhere has our engagement been more positive than with the Republic of Korea, which with our help rose from the ruins of the Korean War to become a vibrant democracy and one of the largest economies in the world. The accord with Korea will strengthen America's relationship with a longtime ally and enhance our presence and influence in the region. We are convinced that America, for its own sake, must remain a leader in Asia. Ratification of this agreement is one way of ensuring that our engagement with the world's fastest-growing region will support our fundamental security and economic interests into the future.

James R. Lilley was U.S. ambassador to Korea from 1986-1989. Donald Gregg was ambassador to Korea from 1989-1993. James T. Laney was ambassador to Korea from 1993-1997. Stephen W. Bosworth was ambassador to Korea, from 1997-2001. Thomas C. Hubbard was ambassador to Korea from 2001-2004. They wrote this commentary for the Orlando Sentinel. ◦

Former ambassadors endorse FTA with South Korea

U.S. and South Korea Reach Landmark Trade Deal

April 2, 2007

The United States and South Korea today struck a landmark bilateral free trade agreement, the United States’ biggest since the North American Free Trade Agreement in 1994 with Canada and Mexico, and its first with a major Asian economy.

Studies have estimated that the free trade pact could add $20 billion to bilateral trade between the two countries, estimated last year at $78 billion.

The deal “will generate export opportunities for U.S. farmers, ranchers, manufacturers, and service suppliers, promote economic growth and the creation of better paying jobs in the United States,” President George W. Bush said in a letter notifying Congress of his intention to enter into the deal. If ratified, the agreement will immediately remove tariffs on more than 90 percent of all goods bilaterally traded, officials said.

Potential gains to the United States economy range from $17 billion to $43 billion, according to Usha Haley, director of the Global Business Center at the University of New Haven. South Korea’s exports to the United States are expected to rise in the first year by 12 percent, or by $5.4 billion.

The agreement “highlights the United States’ strong commitment to active engagement and partnership throughout Asia,” said Deputy U.S. Trade Representative Karan Bhatia.

The deal gives the United States badly needed support for its trade policy and South Korea a chance to boost its export-driven economy in return for opening up its market. It has long restricted access to such iconic American products as cars and beef.

The last-minute agreement marks a significant victory for the Bush administration, which sought a high-profile deal to add to a list of bilateral trade pacts with Panama, Peru and Colombia that it is struggling to sell to a Democrat-controlled Congress.

The increased relations between the United States and South Korean economies — the world’s biggest and eleventh-largest, respectively — provide the United States economy with an important stronghold in Asia to check the growing influence of China.

It could fuel a global race to forge bilateral trade pacts as an alternative to stalled multilateral talks under the World Trade Organization, economists said.

With pressure mounting from Congress, and Seoul’s streets reverberating with farmers’ protests in the early hours of Monday, negotiators haggled right up to the deadline set for resolution of the talks.

Students marched on the presidential palace in Seoul, chanting “No to FTA!” or “Feed mad cow beef to Bush!”

Once hailed for seeking a greater distance from Washington, President Roh Moo Hyun has now stood accused of turning his country into a “51st state of the United States of America.”

Breakthroughs came when negotiators exchanged compromises in politically sensitive issues. South Korea agreed to phase out its 40 percent tariffs on beef over 15 years.

It also indicated today that it would resume American beef imports, which have been banned for three years over mad cow disease, if the World Organization on Animal Health, or OIE, declares United States meat safe in a ruling expected in May.

Seoul will also remove an 8 percent duty on cars and revise its taxation system that American officials said discriminates against American cars with bigger engines and makes South Korea one of the world’s most protected auto markets.

In return, Washington agreed to South Korea’s wish to keep its heavily subsidized rice market out of any free trade deal, even though South Koreans were buying rice for four times the global price.

Washington will also remove 2.5 percent tariffs on cars with engine sizes of 3,000 cc or less — a key South Korean export item — and phase out 25 percent duty on trucks, as well as slashing tariffs on textiles.

Mr. Bush said the trade pact would strengthen ties between the United States and South Korean — an assessment shared by analysts who had repeatedly warned that the alliance, forged during the Korean War, was fraying during the terms of Mr. Bush and Mr. Roh in disputes over Communist North Korea.

“President Roh believes the free trade agreement with the United States will serve as a spring board for South Korea to become an advanced economy,” said Roh’s spokesman, Yoon Seung Yong.

Consumers of both countries are the biggest winners from the deal. Hyundai cars and Samsung flat-panel TV sets, as well as Korean-made hats and clothes, will become cheaper in the United States. American beef and oranges, as well as Ford cars and Toyota vehicles built in the United States, will be more affordable in South Korea.

TV networks can air more American movies and TV series, such as “CSI,” “Prison Break” or “Grey’s Anatomy,” which already command large followings here.

But the deal will cost South Korean farmers tens of thousands of jobs and up to 2 trillion won, or $2.1 billion, in lost revenue, as cheap American corn, soybeans and processed foods flood in, according to studies by South Korean economists.

Meanwhile, there is doubt American carmakers will win quick gains in South Korea, even after the deal is implemented. Many South Koreans still equate buying domestic vehicles to patriotism. High-end consumers prefer European models like Mercedes or BMWs to American cars.

The ambitious talks began in June last year. In their final round, the negotiators held eight days of marathon talks in Seoul, lasting through the night because Mr. Bush must notify Congress of his plan to sign a trade agreement 90 days before his special Trade Promotion Authority expires July 1.

Congress must ratify or reject a trade deal submitted under the special authority, but cannot amend it.

Originally, American officials said a deal had to be agreed by March 31, but later said the deadline was April 1. Shortly after midnight today, the White House released Mr. Bush’s letter to congressional leaders, dated April 1.

Washington seeks bilateral pacts in Asia to counter China’s move to expand its influence in the region through its own free trade agreements. Washington’s talks with Malaysia are stalling, while deals are unlikely with Japan, with its powerful farmers, or with China, with its huge state-owned industries.

The new deal will help narrow Washington’s large trade imbalance with South Korea, experts on both sides said. Only 5,000 American cars were sold here last year while South Korean carmakers sold 800,000 vehicles in the United States. The gap accounted for 80 percent of the estimated $13 billion United States trade deficit with South Korea last year.
United States officials hope that today’s deal will placate American cattle raisers, who were struggling to recapture their global beef market following an outbreak of mad cow disease in late 2003.

Before its import ban, South Korea used to be the world’s third-largest consumer of American beef, importing $800 million a year.

“A free trade agreement with the United States carries a huge potential for the South Korean economy,” said Huh Chan Guk, director of research at the private Korea Economic Research Institute in Seoul.

“Besides winning more access to the U.S. market, it will help upgrade the economy by exposing its inefficient sectors, like the service industry, to competition.”

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U.S. and South Korea Reach Landmark Trade Deal