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Can the United States and South Korea Sing without KORUS? The Economic and Strategic Effects of the KORUS FTA
Published May 25, 2011
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On 30 June 2007, U.S. and South Korean trade officials signed the U.S.- Korea Free Trade Agreement (KORUS FTA). The two countries reached the agreement after 10 months of very tense negotiations that reflected the difficult issues the two countries confront and the importance they both place on the agreement. South Korea and the United States took a major gamble when they launched the KORUS FTA negotiations in February 2006. The U.S. Trade Promotion Authority statute required that they could not officially begin the actual negotiations until June 2006 and had to complete the negotiations by 1 April 2007. That left them only 10 months to address difficult issues relating to agriculture, autos, services, intellectual property rights, and the Kaesong industrial complex in North Korea, among others. Many of these issues had been plaguing the bilateral economic relationship for years, but the two countries had to resolve them somehow if they were going to reach a meaningful free trade agreement (FTA). Other negotiations on less complex FTAs, such as the U.S.-Australia FTA, took longer than 10 months. The United States and South Korea were arguably also putting the future of their alliance on the line, an alliance that at the time the FTA was launched had been showing signs of fraying.

It has been more than a year since South Korea and the United States signed the KORUS FTA. Before the agreement can enter into force, the U.S. Congress and the Korean National Assembly must approve it. Both former President George W. Bush and President Lee Myung-bak have urged their respective legislatures to take up and pass the implementing legislation for KORUS FTA. Incoming President Barack Obama and a number of members of Congress have, however, expressed concerns about the adequacy of the KORUS FTA to address market access issues in the South Korean market, particularly for U.S.-made cars, as well as issues regarding the plight of U.S. labor. Those concerns have made the timing and even the likelihood of congressional consideration uncertain. In South Korea, some popular opposition to President Lee’s handling of a dispute over imports of U.S. beef and discontent with governing style have made members of the National Assembly reluctant to consider the agreement for the time being.

The future of the KORUS FTA is one of the most important issues that the United States and South Korea face in their relationship at this time. On one hand, if enacted, it would be the largest FTA that the United States has entered into since NAFTA in 1994 and would be the largest FTA for South Korea based on market size. The KORUS FTA also has potential implications for the U.S.- South Korean alliance as a whole, as both countries have viewed it as a vehicle for deepening that relationship, at least in a symbolic way. On the other hand, opponents argue that because the KORUS FTA does not address some critical issues regarding market access in South Korea and issues regarding labor, it should not be approved in its current form.

At the same time, the importance of the KORUS FTA to the alliance should not be exaggerated. Trade and investment between the United States and South Korea will continue regardless of the future of the KORUS FTA as their respective economic interests require. Moreover, the KORUS FTA need not be seen as a necessary, let alone sufficient, condition for enhancing the U.S.-ROK alliance. Mutual interests on critical issues pertaining to North Korea and the rest of the region will continue to require close cooperation between the two countries in the national security sphere. Indeed, in many respects, the KORUS FTA’s fate may have more profound implications for U.S. trade policy and East Asia policy than for U.S.–South Korea relations.

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