0322- 1 year of KORUS FTA

Is Seoul ready for changes in global trade regime?

Exactly one year ago Friday, the controversial Korea-U.S. free trade agreement, called the KORUS FTA here, went into effect. Yet government and business officials appear more relieved now, and doomsayers remain barely audible, because a number of much-feared and discussed adverse effects have yet to take their toll on domestic businesses, so far.

In contrast, the U.S. Congress and industry are abuzz with what they see as one-sided negative impacts of the bilateral free trade pact. Little wonder: over the past 11 months, America’s exports to Korea fell 2.67 percent while imports from it jumped 7.35 percent to widen the U.S. loss in two-way trade by a hefty 44 percent. To the dismay of Washington, two major sectors _ auto and beef _ fared quite poorly, too.

Does this mean Korean officials can afford to remain complacent with what they regard as “half success,” then? Hardly, especially at a time when their U.S. counterparts are busy analyzing the smaller-than-expected benefits of free trade and racking their brains for a means of recovery.

It is uncertain in this regard whether Seoul is ready for renewed market-opening pressure from Washington, particularly in the area of intellectual property rights and farm trade.

Nor can one be sure if the Park Geun-hye administration is preparing to supplement the agreement, as it vowed to do during the presidential campaigns last year, by, for instance, revising or abolishing the controversial investor-state dispute (ISD) provision, and persuading U.S. officials to recognize products made by inter-Korean joint venture firms in the Gaeseong Industrial Complex as eligible for reduced import duties. Unfortunately, for now, there appear to be only words, not actions.

The sharply different scenes in Seoul and Washington concerning the FTA’s follow-up steps are feared to turn the table around a year later.

Worse yet, the Barack Obama administration appears set to pursue arguably the most aggressive trade talks in a generation, which will encompass Europe and Asia. Korea, which has concluded FTAs with both the United States and the European Union, may experience less direct impact from Washington’s renewed trade offensive, but needs to brace itself for at least two possibilities: the reduced benefits of free trade because more competitors, such as Japan, will jump in the fray; and a relative shrinkage of its single biggest market _ China. 

If the free trade agreement between the U.S. and EU is aimed at retaking the hegemony of global economy from large emerging economies such as the BRICS, Seoul will have to work out an elaborate strategy to play both ends against the middle instead of becoming a pig in the middle.

Of course, product quality and technological competitiveness will decide final results. Yet shrewd trade diplomacy is as important as solid industrial policy. It’s quite discomforting to think how deftly the restructured Ministry of Industry, Resources and Trade will handle this complicated job. Also hard to know is where are the group of lawmakers, who vowed last year to form an FTA “study group.”

Signing FTAs is not the end, not even the end of beginning, of engaging in a trade war. The real battle has not even started yet. It’s a pity the attention of political and administrative leaders appears directed somewhere else.  

This is The Korea Times editorial for Thursday, March, 14, 2013.