[VIEWPOINT]Pay the price for free trade

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[VIEWPOINT]Pay the price for free trade

In his New Year’s address on Jan. 18, President Roh Moo-hyun announced that he would begin free trade agreement negotiations as soon as Korea and the United States are in tune. At the Asia-Pacific Economic Cooperation summit held in Busan last November, President Roh agreed to the principle that Korea and the United States would make an effort to reach an FTA. But this is the first time the president has mentioned the issue directly to the nation.
The responses at home and abroad have been generally positive. An FTA between Korea and the United States is expected to have a real positive effect on our economy, society and security. Above all, from the economic aspect, a Korea-U.S. FTA will accelerate the pace of reform and the opening of our economy.
The development model for our economy over the past half-century has in many ways been that of Japan. Korea and Japan both focus on exports, protecting domestic industries, running government-initiated industries and promoting big business-centered growth. A Korea-United States FTA would greatly help us break from that method of economic operation and reorganize our economic model to, literally, the kind that advanced countries use.
A national research institute estimated that a free trade pact with the United States would increase our gross national product by 18 trillion won ($17.8 billion), or 2.46 percent, and create 260,000 jobs in the long term. In particular, a free trade agreement could contribute to reducing the trade deficit with Japan by replacing parts and materials made in Japan with those from the United States and have a great effect on job creation, if the opening up of the service industry leads to the active creation of enterprises in a new kind of advanced service industry.
Free trade between Korea and the United States will also have a great invisible value. It will help enhance our country’s credit standing and foreign investment would be likely to increase. Mexico has seen a big rise in foreign investment since it entered the North American Free Trade Agreement in 1994, which greatly helped the country in its effort to overcome the financial crisis.
In discussing relations between Korea and the United States, we cannot help but be conscious of China and Japan, the two powers in Northeast Asia. Although they say on the surface that they do not compete for hegemony, the two countries are in fact engaged in an invisible power struggle. In this situation, the maintenance of peace and prosperity in this region is something of direct interest to us. In this respect, the presence of the United States is important and a Korea-United States FTA can serve to reinforce the unity between the two countries.
What is remarkable is the fact that the United States put aside 25 major Asian countries, including Japan and Malaysia, that had hoped to enter FTAs with it and instead moved first to start negotiations with Korea. Those countries with which the United States have made bilateral FTAs are the ones that are indispensable for America’s economic stability and security maintenance, such as Canada, Mexico, Israel, Singapore and Jordan. Since the September 11, 2001 terrorist attacks, the United States’ foreign policy has aimed at determining who its allies really are by combining trade with security. The United States has made efforts to enter multilateral agreements to promote freer and fairer trade under the World Trade Organization system. But as this multilateral effort has been stalled, the country judges that the second-best thing is to increase the number of countries that share its economic and security goals by entering into bilateral free trade agreements.
But in the pursuit of a Korea-United States FTA, there will be many parts that will be difficult for us to swallow. In this regard, the government needs to prepare supplementary measures for the industries that would be hit by the opening of the market and seek consent from the public before taking irreversible steps.
Greater access to imported agricultural products and the reduction of screen quotas are two good examples of policies that will be difficult to accept. Even if we can get a ten-year extension for the opening of the rice market, other farm products are highly likely to be opened completely. In this case, the government should provide ways for farmers to make a living by providing alternative products to products that are non-competitive and encouraging them to take up new occupations.
Regarding the screen quota, which requires theaters to show Korean-made movies for a minimum of 146 days each year, the government has agreed with the United States to reduce the required screen time to 73 days. Naturally, there is strong resistance from the domestic film industry, but we cannot insist on keeping the screen quota system indefinitely. After all, the government and the public must make concerted efforts to solve this problem by promoting the competitiveness of local movies.

* The writer is the vice president and professor of economics at Ewha Womans University. Translation by the JoongAng Daily staff.

by Yoo Jang-hee
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