EPT![[image loading]](http://newsimg.bbc.co.uk/media/images/41886000/jpg/_41886908_ftaap416.jpg)
FTA Protesters in Seoul, South Korea. I don't know why they're stepping on cardboard boxes.
South Korea and the US have concluded negotiations on their free trade agreement (FTA) and they're scheduled to sign it tomorrow (30 June).
South Korea and the US already have a healthy trade relationship. S.Korea is the US' 7th largest trading partner, and the US is S.Korea's 2nd largest (after China). There are more than 3,000 US companies that operate within S.Korea and Hyundai Motor's has a automotive factory in the US. This may seem a little lopsided, but it's somewhat expected considering relative GDP-- The US' GDP is nearly 11 times that of S.Korea. I think it's natural to assume that the country with more economic clout, if granted market access, would have an easier time penetrating the markets of the economically weaker country. The important question to answer, I think, isn't why does this lopsided condition exist? but why should the smaller country allow the penetration? It's a good question. S.Korea doesn't have to allow US businesses access to their markets. Trade can exist without it... ironically, an FTA just sets up ground-rules-- extra bureaucracy-- for trade. So... why enter into an FTA?
The Heritage Foundation (a US neo-conservative think tank) has this to say about the FTA with South Korea: "An FTA with South Korea would advance the interests of U.S. businesses and consumers, expand trade and investment opportunities with a close ally, and reaffirm America’s leadership on trade." Notice they're not too concerned with whether the FTA will benefit S.Korea as well as it does the United States. In fact, S.Korea's main incentive to sign this agreement is because "steadily growing economic ties have become one of the most important pillars supporting its dynamic and comprehensive alliance with the U.S." So their main reason to sign-on is not economic, but political. It'll make the US happy, so S.Korea should agree. No other incentive is necessary, at least as far as the Heritage Foundation cares to consider. And this strikes me as being perfectly correct.
Now I haven't read the agreement myself, so if anyone's closer to this issue, please correct me, but it strikes me that the best way to predict the effects of this FTA would be to look at the effects of NAFTA.
It's true that NAFTA has increased trade in North America, at least on paper, but most of that trade is pretty one-sided. For example, in the US, where consumers aren't starving and have a choice what to eat, white chicken and turkey meat is preferred over dark chicken/turkey meat for some bizarre and probably subconsciously racist reason. As a result, US agri-businesses compete with one another to provide the best white chicken/turkey meat to consumers that they can. However, this has the consequence of producing vast quantities of dark meat that US consumers don't really want. Very wasteful. In order to minimize waste/maximize profits, US companies that market chicken use the NAFTA in order to dump this waste on other countries. Most notably, Haiti, which has minimal tariff protection (by treaty, 1/5th of Canada's protection). And since US agri-business receives 40% of its profits from government subsidies (some free trade there....) and Haitians aren't as picky eaters as US citizens, Haitian chicken/turkey agri-business gets undercut tremendously (source), to the point where it suffers a collapse. So that's one strike against an FTA.
The vast majority of increased trade within NAFTA is the direct result of inter-corporate trade. I.e., a US corporation owns a widget manufacturing plant in Mexico, and a widget store in the US. When that corporation transfers raw materials from the US to their Mexico manufacturing plant and then back to the US in order to sell its widgets, it's considered international trade, although it's not really trade, but a couple of relocations of inventory. These factories are common enough to have a name: Maquiladoras So the real trade that's going on is for labor. US corporations enter a foreign country because they have access to that country due to NAFTA, and exploit the local labor practices to shave production and other costs. This creates jobs so proponents of NAFTA and similar trade agreements hail it as a good thing. However, there's a dark side to this good news, wherever maquiladoras pop-up there tends to be a steep increase human rights abuses, including murder, rape, disappearances and torture. It is thought that the human rights abuses are part of an effort to limit public organization and unionization to increase productivity. Terrorism for economic rather than political benefit, essentially.
William C. Gruben, Senior Economist at the Federal Reserve Bank of Dallas believes that the enactment of NAFTA and the subsequent increase of maquiladoras is a coincidence, and he might be right, I'm no expert... but Mexico's GDP is comparable to S.Korea's so it's sketchy enough for me, at least, to count it as a strike against an FTA. (Edit: Apologies, Mexico's GDP is comparable to S.Korea, but it's GDP per capita is less than half of S.Korea's, so I doubt maquiladoras are realistic to worry about. If farmers can't support themselves there may be an influx of new workers into other industry, which would lower wages. It's hard to speculate, though, especially for an outsider like me...)
A third strike against the FTA is public sentiment by those that will be most affected. Although general public polls show that roughly 60% of S.Koreans support the idea of an FTA. Chong Hye-won, director of the international department of the Korean Metal Workers' Union (KMWU) said that 110,000 members of the KMWU walked off the job in opposition to the FTA. Not a small number considering that KMWU only has 150,000 members. And the majority of the 23.4% of S.Korean National Assembly lawmakers that opposed the FTA in april (41.5% were undecided) are supported by farmers who expect strong negative repercussions despite the fact that President Roh has promised to use government resources to assist the industries that are hardest hit.
So what incentive is there to enter into an FTA? Personally, I think the Heritage Foundation was correct. The biggest incentive for the average S.Korean is it'll keep the US happy. I don't think thats a minor consideration. Countries that protect their markets from foreign competition, and especially countries that nationalize their resources, do not get treated well by the US government. Often, that maltreatment goes beyond rhetoric into minor punishment like withholding of military and humanitarian aid, to major punishment like economic strangulation through sanctions (though I imagine China would ignore sanctions imposed on S.Korea by the US, and it's not a likely punishment for an ally anyway).
What I'm curious about is what the S.Koreans on TL.net think about all this. When this agreement is signed tomorrow, will you be celebrating, lamenting, or ignoring? As a middle-class US citizen with a job that's not in danger of being outsourced, the FTA w/S.Korea will probably not affect my life one iota. But as a union member, and a conscientious human being, I sympathize with workers from other countries and would like to hear thoughts from the country the FTA will affect the most. Have any of you taken political action, and if so, what do you see your options as being? Are any of you wealthy and are looking forward to taking advantage of the new trade rules? Have any of you seen the agreement yet, and do you know of a link to an english-language copy of it?
Regardless, best wishes to you all. I truly hope the US/S.Korea FTA doesn't turn out the way NAFTA did with regard to Mexico/Haiti.
....lol. I have a feeling this blog gets 0 comments. ^^
Edit: 30 minute Google Video: Interview With Alexander Vershbow, US Ambassador to the Republic of Korea, about the US relationship with South Korea, economic cooperation between North and South Korea, the military threat of the North, and the potential for a Free Trade Agreement between the US and South Korea. It's old, but should give you a cursory glance at the US perspective on things.
Edit: Much more recent news on the FTA. The report is about more of the specifics of the FTA. It sounds like agricultural tariffs will be reduced or removed, etc.
Edit: Violent S.Korean Protest of the FTA. Wild.
