[Overseas]There are still many hurdles for the FTAThe recent announcement that negotiators had concluded a Korea-U.S. Free Trade Agreement set off celebrations among the pact’s supporters. Indeed, this is a historic development, and both the Roh and Bush administrations are to be commended for bringing the negotiations to a successful conclusion. However, it should be recognized that a number of significant political and procedural issues still remain to be resolved before the FTA becomes a reality.
The recently concluded agreement is no doubt a major achievement for both Korea and the United States. The FTA will have a positive effect on both economies, increasing bilateral trade between two of the largest economies in the world. The Korean Institute for International Economic Policy predicts the Korean economy could grow by more than 2 percent if the agreement goes into effect. The U.S. International Trade Commission has forecast that each country’s exports to the other could increase by tens of billions of dollars a year.
Also, the agreement offers more than just economic gains. It will help strengthen diplomatic ties and enhance the strategic partnership between Korea and the United States. Given the strained relations between the two countries in recent years, this is indeed a very positive development for Korea.
The agreement, though, must overcome a number of high hurdles in both capitals. Prime Minister Han Duck-soo has called for the 296-member National Assembly to approve the FTA soon. Press reports indicate that the prime minister is likely to get the votes he seeks, as supporters are reported to outnumber opponents. Approval of the agreement, though, is by no means assured. I understand that a group of 47 lawmakers have already formed a coalition against the pact, claiming it would threaten the livelihoods of farmers and urban laborers.
Whatever obstacles the agreement faces in Seoul, the pact must go down an even more difficult road in Washington. First, there is at this time a serious doubt whether the Bush administration and the U.S. Congress will be able to forge a consensus to move forward on any free trade agreement ― including the pact with Korea. As Korea knows, the U.S. elections in November 2006 resulted in a new Democratic Party majority in both Houses of Congress, which must approve the FTA. Congress now has more members who are wary of U.S. trade agreements. In fact, the new congressional leadership has decided to block all U.S. FTAs at this time unless the White House revises its approach on a number of key trade issues, most notably more aggressive labor standards. Without an overarching understanding on labor and other items, there is a strong likelihood Congress will put all U.S. trade agreements on hold indefinitely ― perhaps until a new president is elected in November 2008.
Second, even if such an understanding is reached, the Korea-U.S. FTA has its own challenges. Already, specific provisions of the FTA have led to a number of objections by U.S. lawmakers. In particular, these members of Congress have criticized the timing of Korean tariff eliminations for automobiles, inadequate Korean treatment and protection of foreign investors and the failure to open the Korean market to U.S. exports of beef, rice, citrus and other agricultural products. Thus, although President Bush did submit on April 2 a draft version of the agreement to Congress along with a statement of his intent to enter into the agreement with Korea and met the deadline for the so-called fast-track consideration (i.e., an up-or-down vote without amendments), over the next 90 days (until June 30), a great deal can happen. Congress will review the agreement, offer suggestions and seek changes by negotiating with the administration. In fact, the Bush Administration has already indicated it may need to renegotiate certain issues with Korea in response to concerns from Congress. Such renegotiations have happened before. In 2003, during the same 90-day review period, substantial changes were made to U.S. FTAs with Singapore and Chile in response to congressional concerns.
Finally, there is uncertainty over the administrative timeline for considering the agreement. Once the initial 90-day review period has passed, by June 30, 2007, the president then must submit the implementing legislation to Congress. But the president has considerable leeway, and the seemingly simple act of submitting the legislation to Congress can take months, as is currently the case with U.S. agreements with Peru, Colombia and Panama. Moreover, once the implementing legislation is submitted, the Congress will then have another 90 “legislative days” (not calendar days, but rather days in which the Congress is in session) to vote up-or-down on the implementing bill without offering amendments ― which means it could easily take the rest of 2007 to vote on it. In fact, the process could easily stretch into 2008 or beyond.
In short, much hard work still remains. And both sides must be willing to listen and find ways to reach a mutual compromise. Korean officials will undoubtedly have to grapple with U.S. demands on automobiles, investment and agriculture. The Bush administration will then need to offer compensation on par with Korea’s concessions.
Unfortunately, however, with the political change of control in the U.S. Congress, the sagging popularity of President Bush, and with elections on the horizon in both Korea and the United States, the Korea-U.S. FTA faces more of an uphill battle than previous free trade agreements.
But for now, supporters of the Korea-U.S. FTA can take comfort in the fact that no free trade agreement negotiated by the United States has failed to pass Congress and ultimately take effect.
*The writer is a senior partner at the law firm Akin, Gump, Strauss, Hauer & Feld in Washington D.C.
by Sukhan Kim