Korus FTA just the beginningThis week’s ratification of the Korea-U.S. free trade deal marks just the beginning of the process. There is no need for the ruling party to gloat about how it outnumbered and outmaneuvred the opposition to railroad the pact through Congress, now is the time to capitalize on this to help the nation weather the global economic storm and ensure the economy benefits in the long run.
Korea has gained a lead ahead of regional rivals Japan, China and Taiwan in signing an FTA with the world’s largest market. It has established fairer trade rules to pave the way for more equal competition with the U.S., but this is no guarantee of success. After all, even runners with a head start can end up losing the race.
Viewed in another way, the new trade pact can be seen as either an expressway across the Pacific, or a kiss of death, depending on which business and industry is referred to. The farming, fisheries and self-employed businesses appear to be the most vulnerable.
However, the ultimate outcome will depend on how adept the government and business circles prove at turning opportunities into success stories, despite the heightened competition. The government certainly has its work cut out. But it should prioritize social harmony above all, as the FTA will likely result in batches of winners and losers, and the state must provide compensation and aid programs for those who fall by the wayside.
This support must not be presented merely in the form of hand-outs, but based on a carefully worked out program to strengthen their resilience. The government must prepare subsidies worth 22 trillion won ($19 billion) for the farming and fisheries sector. But before that, it should work out a clear road map.
Since President Lee Myung-bak has given his word, the government must initiate renegotiations on the contentious investor-state dispute settlement (ISD) clause, a regular feature in such pacts to protect international investors, but also one that can be abused by predatory parties. The government overlooked the potentially negative side-effects of the ISD clause during negotiations in 2006, but now it needs to address the complaints and anxieties of critics and the pubic before embarking on renegotiations.
The government should step up its moves to reform public policies. The services and intellectual property rights sector need to be upgraded to withstand competition from U.S. enterprises, while the medical and education sectors must prepare thoroughly for liberalization.