Nearly five years after its original signing, the long-debated US-Korea FTA will enter into force on 15 March, despite continued sparring in Seoul at both the public and political levels.
The March start date follows months of technical-level talks between South Korean and US officials to review each side’s laws and regulations.
The long-awaited announcement of the pact’s entry into force was praised by officials on both sides.
“Entry into force of this agreement will open up Korea’s US$1 trillion economy for America’s workers, businesses, famers, and ranchers while also strengthening our economic partnership with a key Asia-Pacific ally,” US Trade Representative Ron Kirk said.
“Coming at a time such as this, the US free trade agreement is a positive opportunity for our exports to the United States, which is the world’s largest developed market, to grow significantly,” South Korean Minister for Trade Park Tae-ho stated.
The pact could also attract Chinese and Japanese investment to Korea, along with creating jobs, Korean President Lee Myung-Bak told reporters last week.
US business groups similarly praised the news. “We will now be able to play on a level playing field in South Korea’s dynamic market and start creating tens of thousands of new jobs here at home,” US Chamber of Commerce president and CEO Thomas Donohue said in a statement.
Last week’s announcement of the FTA’s 15 March start date was not welcomed in all quarters, however, provoking a rally in Seoul on Saturday. The event was one of several that have already been held in South Korea to protest the pact, with critics citing concerns that cheaper agricultural imports from the US could hurt the Korean agriculture and livestock industries.
In response to these concerns, Lee told reporters that “our government can take this chance to support those fragile industries and make them more competitive.”
Estimates from the US International Trade Commission suggest that US agricultural exports would increase by anywhere between US$1.9 billion to $US3.8 billion as a result of the trade agreement. The deal is set to slash tariffs on nearly two-thirds of US farm exports, and increase US goods exports by approximately US$12 billion.
Under the pact, South Korea will also open up its US$580 billion services market. Seoul will eliminate its duties on almost 80 percent of US industrial products.
A turbulent five years
The original accord was negotiated and signed under former Korean President Roh Moo-hyun and his counterpart, then-US President George W. Bush, in 2007. In response to the concerns of US automakers, 2010 renegotiations included a safeguard allowing increased duties for a decade after the US’s elimination of tariffs on Korean auto products, in order to respond to surges in auto trade (See Bridges Weekly, 9 December 2010).
“Obama’s insistence on renegotiating the agreement to get more favorable auto provisions… was the reason it was approved with ‘strong bipartisan support’ in the US,” USTR Kirk commented to Reuters.
The deal in its current form, championed by Korea’s ruling Grand National Party, contains amendments that the opposition claims awards US carmakers an unfair inroad into the market. Fears that Korea would be defenseless to protect its interests were further intensified by an ‘investor-state dispute clause’, which lets parties bypass domestic courts in favour of an international arbitration panel (see Bridges Weekly, 15 February 2012).
The deal was ratified by the US Congress in October 2011, receiving presidential approval soon after. It was ratified in Seoul by the South Korean parliament a month later.
South Korea’s opposition Democratic United Party – which is widely expected to win April’s parliamentary elections – has promised to repeal the pact unless several provisions are renegotiated with Washington, including the investor-state dispute clause. (See Bridges Weekly, 15 February 2012).
ICTSD reporting; “Korea, China, Japan to conclude investment pact after 5 years,” DONG-A ILBO, 28 February 2012; “S. Korea President says US FTA to draw China, Japan,” 22 February 2012; “South Koreans still angry over U.S. free-trade pact,” LA TIMES, 25 February 2012; “S.Korea, U.S. free trade deal to take effect March 15,” REUTERS, 21 February 2012.