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Discord over KORUS

NAFTA's defects show room for improvement in trade negotiations. Has the United States struck a fairer deal with South Korea?

By Alexandra Reihing | April 17, 2007

Trade negotiations met with protest.
Photo by Chong Head (CC).

In early April after ten months of difficult negotiations, the United States and South Korea arrived at a free trade agreement, KORUS FTA. Studies estimate that it will add $20 billion per year in trade between the two countries.

President Bush reported in a letter to Congress that 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, and help American consumers save money while offering them greater choices." In addition, American corporations may find a move to Korea more attractive thanks to decreased red tape.

Consumers in Korea will profit from the low prices of American imports, including fruit and vegetables. After a three-year ban on beef imports due to mad cow disease, American beef will now be accepted and its 40 percent tariff will be dropped over the next 15 years. Tariffs will also be commuted on automobiles and trucks.

Disagreements over free trade can seem extremely black and white, with one side pushing for a laissez-faire corporate playground and the other side decrying the potential harm to domestic workers. Ford and Chrysler are refusing to support KORUS when it comes up for review in Congress because they feel the agreement does not go far enough. "We see the real and tangible benefits of free trade. Unfortunately this agreement… will not open the Korean market to free trade in automobiles," said Steve Biegun, VP for international governmental affairs at Ford.

AFL-CIO President John Sweeney also opposes the FTA, saying it "contains no enforceable protections for core workers' rights, and it will undermine both governments' ability to provide affordable and high-quality public and social services, and to protect food safety, the environment and public health."

KORUS FTA is the largest deal the United States has signed since the North American Free Trade Agreement, a new examination of which is in order. NAFTA was sold to Congress and the American public as a chance to increase manufacturing jobs and improve democracy and the environment in the United States, Canada, and Mexico. Results have not matched expectations in all cases.

Many U.S. workers needed help making ends meet in the wake of the agreement. The Department of Labor reported that at least 525,094 people were eligible for NAFTA-Trade Adjustment Assistance from 1994 to 2002. The program provided up to 52 weeks of income for workers who had lost manufacturing jobs and income due to Canadian or Mexican imports, as well as to employees whose companies relocated there.

Mexico enjoyed a growth rate of only 1 percent per year from 1994 to 2004 and its income disparity with the United States actually grew by 10.6 percent. However, Mexico is not Korea. Already the world's eleventh largest economy, South Korea could become even more of a major player in Asia with the KORUS FTA.

Opposition in South Korea to the KORUS FTA stems from four areas. First, although the agreement contains protections in the form of subsidies for South Korea's rice farmers, South Korean economists predict a loss of agricultural revenue totaling $2 billion. Second, many labor groups have protested the KORUS FTA, fearing major job losses. 170,000 people answered the call for a general strike by the Korean Confederation of Trade Unions in July 2006. Union members, farmers, and activists continued the protest outside a Seoul hotel until the negotiations were concluded. Third, South Koreans fear an erosion of sovereignty, given the disparity in economic power between the two countries. Fourth, wariness about globalization itself colors the debate.

South Korea's President Roh is banking on increased competition and production, as his country faces looming regional economic giants Japan and China. Hyun Oh-seok, President of South Korea's Institute for International Trade, reminds naysayers that economic development in Korea has been the result of market liberalization and foreign trade: "The tide of globalization is rising high and we would be reckless to try to defy it. The conclusion of the KORUS FTA is most welcome in that it provides us with a valuable edge in global market competition."

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Read More: Agriculture, Business, Economy, Globalization, Jobs, Trade, Korea (South), United States, Americas, Asia

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