Together on KorusAs the leader of the U.S. Chamber of Commerce’s international division for over 10 years, I have been fortunate to work with business and government leaders across the globe. As I travel to Korea this week, I don’t need to be reminded of the special role that this country plays in the global economy.
I have watched as Korea has undertaken deliberate, bold, innovative and consequential steps to reform its economy and ensure it remains globally competitive. Korea’s network of trade agreements is a tangible example of these steps, and in my view, none more so than the pursuit and adoption of the U.S.-Korea Free Trade Agreement, known colloquially in the United States as Korus.
The U.S. Chamber of Commerce and business community it represents have long been supporters of Korus, even when it was just an idea. We headed a coalition that led the charge for the agreement’s ratification in Congress and remain a vocal advocate to keep it intact. As champions of the global, rules-based trading system, we recognize that Korus is supporting jobs and growth in both countries and helping grow two-way trade and investment.
However, that’s not always the political reality in Washington. The Trump administration has been critical of the agreement, citing the United States’ trade deficit with Korea. The chamber and vast majority of economists have long argued that trade balance is the wrong metric to gauge the success or failure of any given trade relationship.
That said, it is a political factor that must be taken into account. Trends, though, are positive as U.S. exports to Korea are on pace to set a record in 2017, with the U.S. goods deficit declining considerably. And Korus helped keep American exports to Korea steady when Korea’s imports from the world plunged 22 percent in the 2015-16 period.
But to bolster political support for Korus, it is imperative that Korea act immediately to address longstanding implementation issues that inhibit investment and serve as a barrier to the success of American companies in the market. Longstanding concerns in the pharmaceutical and medical device sectors, fair treatment for electronic payment and express delivery service providers, and barriers related to importing U.S. cars still remain.
Furthermore, unpredictable and inconsistent regulations, coupled with Korea-unique standards and thinly veiled industrial policies have given investors pause. In some instances, they have forced U.S. investors to consider directing their investments elsewhere in Asia.
The failure to resolve these issues and fully honor the commitments within Korus has damaged the reputation of Korea in the eyes of certain U.S. government officials and businesses. Clearing some of the regulatory obstacles will help defuse tensions in the relationship, attract further American investment and ultimately benefit broad swaths of the Korean economy.
First, it will alleviate some of the challenges in the labor market. As foreign capital flows in, Korea’s highly educated young working class will see more diverse, secure, well-paid jobs; foreign investment will help raise youth and female employment; and the infusion of new technology and expertise will spur labor productivity. These are high priorities on all sides of the political spectrum in Korea and align closely with much of President Moon Jae-in’s agenda.
Second, it will help realize Korea’s aspirations to be a dynamic and innovative powerhouse. To become the financial hub of East Asia, Korea has to ensure fair treatment of foreign and domestic entities alike. And if Korea truly wants to be a global leader in health care research and development, it must put in place the proper ecosystem to incentivize firms to undertake the massive investment necessary to bring life-saving innovations to market.
Third, preserving the agreement will help Korean companies and Korean workers operate beyond the U.S. market. Korus has set high standards for investment, e-commerce and digital trade. Those provisions are not only important for Korean companies operating in the United States, but also in third markets where we face challenges related to things like data localization, cybersecurity and cloud computing. Resolving internal Korus issues will allow opportunities to cooperate in third-party countries, whether it be in rule-setting or exerting influence on policies detrimental to U.S. and Korean industry.
For these reasons, the U.S. business community is here to show its support of Korus and work with Korea to realize the agreement’s full potential. We are hopeful Korea’s entrepreneurial spirit will be helpful in resolving a number of outstanding implementation issues.
For the benefit of both our economies, we urge Korea not to underestimate the seriousness of the Trump administration. We urge both sides to come up with realistic and expeditious solutions that will ensure this important agreement — and all of the benefits associated with it — remain intact.
*The author is executive vice president and head of international affairs at the U.S. Chamber of Commerce.