August 1, 2011｜Korean Peninsula
Professor, Faculty of Economics, University of Toyama
In connection with the ratification at the legislature-level of the ROK–US Free Trade Agreement (FTA), more than the United States the ROK is in a tough situation. While the United States has agreed to process the ratification of the ROK–US FTA bill at an ordinary session of Congress in September this year, in the ROK’s case they still haven’t even been able to bring it up for discussion at the Foreign Affairs, Trade and Unification Committee, which is the preliminary step to the actual National Assembly.
For the ROK–US FTA negotiations, after their conclusion in April 2007 legislative ratification was shelved with the opposition of the US Congress and others, but after amending part of the content of the agreement on such things as the automotive sector, the greatest point of contention, agreement was reached at the renegotiation of December 2010. In such a fashion the ROK–US FTA was finally concluded, overcoming four years of twists and turns after reaching agreement, yet now it has stalled at the final stage of ratification by the ROK National Assembly.
In the case of the ROK, a cooperation body for the ruling and opposition parties was set up to handle the FTA ratification bill and public hearings were also held, but as the differences in opinion were too great, it also wasn’t brought up for discussion at the Foreign Affairs, Trade and Unification Committee of the National Assembly. For the opposing side, the results of the 2010 renegotiation were not mutually-beneficial, and because they were negotiation outcomes one-sidedly advantageous to the United States, they have insisted that they should embark on renegotiation with the United States. The Democratic Party, the leading opposition party, has presented a so-called “10+2 re-renegotiation proposal” including the amendment of ten clauses relating to the postponement of the elimination of tariffs on beef, finance and finance for such things as the strengthening of the safeguard invocation requirements for automobiles, agriculture, services, and the pharmaceutical sector, and the two supplementary provisions of regulation on trade procedures and strengthening the system for supporting trade adjustment, and has insisted that they should take this and embark on a renegotiation with the United States.
Even looking at the content of the Democratic Party’s re-renegotiation proposal, however, it is content that mostly has been agreed in domestic debate to date, and at this stage of the game revising it is too unrealistic. Furthermore, a part of the content was agreed with the United States in negotiations when there was a Democratic Party administration. In particular, the opposing side raised the automotive sector, where there was a four-year extension for the period for the elimination of tariffs on US imports, as the sector for the greatest damage. In the case of the automotive industry, it is a fact that the period for the elimination of tariffs on US imports being extended by four years was initially a disadvantage of the initial coverage of the negotiations. However, taking into consideration such things as the fact that the ROK’s tariffs on passenger car imports are to be maintained for four years at 4% higher than those of the United States, and the fact that the import tariff for automobile components (8%), for which exports to the United States have been increasing rapidly accompanying the expansion of local production, are to be eliminated at the coming into effect of the FTA, it can’t be called content for negotiation which is out of balance. Above all from the automotive business side, it is hoped that the ratification bill will be dealt with earlier than the content of the negotiations. Moreover, such things as the extracting of US concessions in sectors such as pork and pharmaceuticals, in place of concessions in the automotive sector, cannot be called one-sided, disadvantageous negotiation outcomes. The basis of trade negotiations such as bilateral FTAs is give-and-take, and in order to force concessions such as tariff elimination on the United States, first of all the ROK has to open its markets in accordance with this.
The United States is the largest market, constituting 25% of the global market. The ROK, via the FTA with the United States, will be in a superior competitive position in the world’s largest market to Japan, Taiwan and China, which are its main competitors in such areas as communications devices, electrical and electronic devices, and automobiles. In actuality, from the competitor nations’ view of the ROK–US FTA, calls concerned about its influence have been growing stronger. In addition the ROK–US FTA is a comprehensive agreement that includes not only trade in commodities, but also services and the investment sector, and should be judged from a profit-and-loss and medium-to-long-term viewpoint in all sectors, and not just a section of commodities such as automobiles. In particular, the ROK, with its high degree of external dependence, has to participate actively in the flow toward global-scale FTAs, and in order to make sustained growth possible within a fast-changing international economic environment the conclusion of FTAs with giant economic areas such as the United States and the EU cannot be avoided. For the ROK, when the FTA with the United States, following on the conclusion of FTAs with India and the EU, goes into effect, there will be the promise also of the role as the hub nation within the Asian economy.
As above, the ROK–US FTA has content that will be win-win for both countries, and there is no reason for it not to be ratified. The insistence of the opposing side at the current point in time can only be thought of as politically motivated, rather than economic logic, conscious of next year’s general and presidential elections. Amid the global economic environment increasing in severity, they must not make the ROK–US FTA ratification issue, which greatly impacts on national interests, a tool for further political dispute.
[Translated by ERINA]