[Outlook]FTA wedlock

Korea has been in a feverish hurry to seek legislative approval for the Korea-U.S. Free Trade Agreement.
The agreement is likely to be ratified in the National Assembly soon.
But the whole episode reminds me of a bachelor who wants to get married quickly in order to keep up appearances, but hasn’t really thought through the details of married life.
On closer inspection, there are a lot of points in the treaty that we need to think about carefully.
After all, even though the title focuses only on trade, the treaty covers the whole spectrum of economic cooperation between the two nations.
It includes commercial affairs, services, customs procedures, investment, quarantine, intellectual property rights, competition, labor and the environment.
The agreement is in fact a new economic constitutional law.
Several issues need addressing. First, the FTA includes a direct investor-to-state dispute mechanism, which grants corporations the right to file a claim against a government before an international trade tribunal.
For example, if an American investor thinks sanctions applied by the Korean government have damaged him, he can file a lawsuit against the Korean government with an international arbitration organization to try to secure compensation.
Some people may say this is not a concern. That’s because there are provisions in the treaty that prevent a lawsuit being filed against government sanctions designed to promote fair public welfare.
However, it’s still unclear what fair public welfare actually means.
When an American firm sued the Mexican government, the judiciary decided that the Mexican government should pay indemnity of $160 million.
“The judiciary took into consideration the deadly impact environmental protection measures had on investments, regardless of the measures’ motive,” the ruling said.
The dispute system of “non-violation complaints” is more ambiguous. If an American investor thinks Korean government measures have damaged his profits, even though the measures don’t violate the provisions of the treaty, the American company has the power to file a suit against the Korean government.
It can take the non-violation provisions to an international organization for the purpose of claiming damages.
However, it’s very difficult to assess what is a reasonably expected economic profit. Under the provisions of the World Trade Organization, the system still exists but it requires a complainant to show how he was damaged by the other party in order to prevent the system being abused.
On the other hand, the Korea-U.S. agreement stipulates that the complainant has no responsibility to demonstrate all his damages.
In addition, the treaty includes several clauses that are far more likely to infringe on Korea’s economic sovereignty. It will have a great influence on both people’s lives and the national economy, covering a variety of economic affairs, such as medicine, the medical system, genetically modified food, beef, labor, small business owners, small- and medium-sized enterprises, public corporations, services, energy, broadcasting, culture and art.
The American-style free trade agreement is characterized by its unilateral condition that foreign economies should suit the demands of the U.S. economy. There are no provisions designed for the protection of the underprivileged.
Against this backdrop, few countries have ratified free trade agreements with the U.S. Canada, Mexico, Australia and a handful of other countries are among the few.
Australia excluded the direct investor-to-state dispute mechanism and concluded the pact with the U.S.
Korea can benefit from the outcome of the agreement, such as improving exports. But Korea has not yet conducted a comprehensive survey on the losses and gains that the agreement will instigate, except for several national research institute reports.
The National Assembly, which has the power to ratify the agreement, has not yet conducted a thorough investigation.
So who will be responsible for for any damage that the Korean people and government have to bear later? The agreement refrains from taking retroactive measures. Once ratified, it cannot be cancelled.
That means we need to review the provisions in the agreement with due care. If the government wishes to write a new economic constitutional law, it should spare no effort to make it known to the public and establish a consensus among the people.
We will regret our current inaction if our economic sovereignty is sold at a dumping price.

*The writer is a professor in the economics department of the University of Seoul. Translation by the JoongAng Daily staff.

by Lee Keun-sik