[Outlook]Go slow to secure FTA

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[Outlook]Go slow to secure FTA

Korea is pushing for quick ratification of the Korea?U.S. Free Trade Agreement, insisting that it will not renegotiate the deal with Washington, where it remains stalled. The FTA has already passed a National Assembly subcommittee toward ratification.

Many in Korea believe that these moves will speed the agreement’s ratification in the U.S. Congress. There is a sense of optimism in Korea that the agreement will be finalized this year.

Some believe that President Barack Obama’s objections to the Korea?U.S. FTA during the campaign were just campaign rhetoric, and now that he is president, he will pursue prudent policies and will come to support the agreement as is.

Others believe that quick action on the agreement in Korea will pressure the U.S. to move more quickly, or will make it harder for the U.S. to seek changes to the deal’s auto provisions.

Unfortunately, such beliefs are misplaced, given the political and economic reality in Washington.

There are two main aspects to this reality that Korea must make sure to gauge properly.

First, without changes to its auto provisions, the agreement is unlikely to be submitted to the U.S. Congress for approval, let alone ratified. Second, even with changes to the agreement’s auto provisions, 2009 will be a very difficult year for movement on the agreement in the United States.

The agreement was negotiated by the Bush administration amid growing fear that globalization was squeezing out the American middle class.

In 2006, American voters elected some 45 new Democrats to Congress from areas that are seen as having been hurt by free trade.

These Democrats sharply criticized the Bush administration’s pursuit of new FTAs, and its approach to the agreement, for inadequate protection of American jobs.

Reflecting this sentiment, during the prolonged 2008 presidential primary, Obama was compelled to take a stronger stance against the agreement than he otherwise might have in order to gain labor union support.

Then, in the 2008 election, Democrats, who are ideologically less favorably disposed toward FTAs, increased their majorities in Congress.

The financial crisis and possible bankruptcy of General Motors and Chrysler have compounded the problem. Under these circumstances, neither President Obama nor key Democrats on Capitol Hill can afford to backtrack and accept the agreement in its current form.

Furthermore, the gravity of economic and other challenges facing the new administration has pushed trade issues, including the agreement, to the back burner. Thus, the administration is unlikely to invest much time and energy into the agreement, at least in the near term.

After all, the Obama administration inherited this pending agreement from its predecessor and does not have a vested interest in its quick ratification.

Accordingly, even if Korea were to make concessions on auto trade, it will be difficult for the U.S. to approve the agreement this year.

If Korea’s goal is for both countries ultimately to ratify the agreement, it will need to modify its current approach. Korea is currently taking steps toward ratification by the National Assembly and is also publicly stating that it will not renegotiate the deal. But each such step and each such pronouncement hardens Korea’s position.

Korea’s approach raises the stakes for the negotiations, leaving little room for maneuvering. In short, this approach limits Korea’s flexibility and options in resolving the remaining U.S. concerns about the agreement.

Korea should instead keep the agreement out of the spotlight for now, and remove the pressure for quick passage. A respite from the public debate about the agreement should create a calmer environment in which Korea can quietly explore with the U.S. possible compromises on the agreement that would allow U.S. Democrats to accept it.

This strategy may also afford enough time for the U.S. Congress and the administration to implement their strategy to save the U.S. auto industry, which could remove some political heat from the agreement’s auto provisions. Further, a slower and more deliberate approach would also allow Korea to seek additional concessions from the U.S. that might be offered in exchange for any changes to the auto provisions.

Korea must understand that the agreement, like all trade agreements, is a political deal and, therefore, subject to change. Indeed, when it became clear last year that the Korean public could not accept reopening Korea’s market to all U.S. beef, Washington recognized the changed political reality in Korea and accepted a new, more limited arrangement.

Now, it is Korea’s turn to recognize that, in the U.S., the political reality mandates some changes to the agreement’s auto provisions. Indeed, during these challenging times, Korea needs to be both flexible and creative in dealing with the U.S. on the FTA because the agreement is simply too important to fail.

The writer is a senior partner in the law firm Akin Gump Strauss Hauer and Feld LLP in Washington, D.C.

by Sukhan Kim
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