[Viewpoint] Carpe diem, for free trade dealU.S. President Barack Obama arrived in Korea yesterday and is scheduled to have a summit with President Lee Myung-bak today. The summit will take place shortly after Washington announced its decision to send its special envoy Stephen Bosworth to North Korea to try to resolve the nuclear impasse. The Lee-Obama summit is also expected to serve as a crucial opportunity for the Korea-U.S. free trade agreement, which has remained dormant since the signing of June 2007, to be ratified.
Since his inauguration in January, Obama is still strongly supported by Americans, and his Democratic Party is also the majority political party of the country. When Obama strongly requests the ratification of the Korus FTA, the Congress will likely endorse it.
Until now, the trade issues including the free trade agreement with Korea have not been at the center of the U.S.’s attention because of other major issues of medical reform and troop deployment to Afghanistan. However, the health care reform bill was recently approved in the House of Representatives and Obama’s political power was largely strengthened. With this development, it is likely that he will pay attention to trade issues including the FTA.
The atmosphere is amicable toward the ratification of the Korea-U.S. free trade agreement in the U.S. Congress and business community.
Republican Congressman Wally Herger said the Korea-U.S. FTA should be ratified because U.S. exports to Korea are expected to drop by 8 percent if the Korea-EU FTA takes effect first. Democratic Congressman Adam Smith also obtained signatures of 87 bipartisan lawmakers and submitted a letter to the White House, urging Obama to move forward the ratification bill quickly.
The Office of the United States Trade Representative also collected opinions from July to September regarding the Korea-U.S. FTA, and 73.9 percent of the 161 surveyed companies actively support the deal.
Inside the United States, efforts have sped up to ratify the trade deal with Korea because Korea has emerged as a free trade hub in Asia. If the Korea-EU FTA takes effect, the Asian market will lean toward Europe, and U.S. companies’ competitiveness will be weakened. The sense of crisis that U.S. goods could become unattractive in the Asian market has triggered the efforts for ratification.
It is also urgent for Korea to ratify the free trade agreement. According to the Korean government’s recent report, the economy’s dependency on trade has reached over 90 percent since 2008 as the domestic market suffered. This shows that trade is the key measure to revive the nation’s economy. Therefore, the free trade agreement with the United States, the key strategic market of Korean companies, is expected to expedite the Korean economy’s recovery.
The most direct effect of the Korea-U.S. FTA is the lifting of tariffs. The average tariff of the United States is 4.9 percent, and the FTA will improve Korean goods’ price competitiveness roughly that much. Furthermore, eased anti-dumping regulations and simpler customs clearance are also expected to support Korean companies’ entry to U.S. market. The U.S. government’s stimulus policy has created a $1.5 trillion government procurement market, and the FTA will also lower the entry to the sector for Korean companies. Procurement thresholds will be lowered to $100,000, and most of the procurement market will be open to Korean companies.
The expected effects of the FTA are also meaningful when we look at the latest statistics on Korea’s exports to the United States. Because of the slow U.S. economy, exports have dropped more than 20 percent, but the market shares of made-in-Korea automobiles and home appliances in the United States are actually growing.
Korean companies have strategically used the changed pattern of customers in the restructured U.S. market under recession. If the Korea-U.S. FTA is ratified in the near future and improves Korean goods’ competitiveness in prices further, the increase in the market shares will bring about a larger increase in exports when the U.S. economy recovers.
The U.S. economy is heading toward recovery. The American market has been reshaped by the economic crisis and new opportunities were opened up for Korea. The Korea-U.S. FTA is a secret weapon. Expectations are high that today’s Lee-Obama summit will serve as a trigger for the two countries to speed up the ratification of the free trade deal.
*The writer is the president of the North American Headquarters of the Korea Trade-Investment Promotion Agency. Translation by the JoongAng Daily staff.
by Hong Soon-yong