Korea and the United States have finally sealed their 10-month negotiation on the biggest bilateral trade deal ever. The scope and impact of the U.S.-Korea Free Trade Agreement (KORUS FTA) by two major trading nations, the United States being the largest economy and Korea the 11th-largest economy in the world, will undeniably be gigantic. Yet the KORUS FTA needs to be put into a broader perspective. The global trading system has recently been inundated by a sea of regional trade agreements (RTAs), which are also called free trade agreements (FTAs). Out of 300 RTAs extant as of October 2004, 176 RTAs were created since the launch of the World Trade Organization (1994a) in 1995 (Sutherland et al. 2004, 21).
It can be conceded that regionalism has certain merits, such as speed and flexibility in trade liberalization. Yet some of these merits are often exaggerated, while the demerits of FTAs are clouded by political agendas expedient to short-term interests. Internationally, FTAs tend to seriously fragment global trade and thus give rise to various transaction costs impacting global businesspeople. Domestically, FTAs may deliver limited blessings to economic welfare because they can be designed to inhibit, not promote, market competition.
Against this backdrop, this article calls for a sobering reassessment of regionalism’s balance sheet vis-à-vis multilateralism. Too much emphasis on FTAs might blind us to the demerits and at the same time eclipse the merits of more principled approaches such as multilateralism or even unilateral liberalization. In terms of the KORUS FTA, this article argues that both the United States and Korea should multilateralize their bilateral market-opening commitments not only for themselves but also to offer a catalyst to the currently comatose Doha Development Agenda. Debates and discussions over the KORUS FTA should be refocused away from short-term mercantilist calculations and onto long-term progressive economic strategies. Without a grand consensus on the nation’s economic future, which involves not only trade policies but also other economic and social policies such as labor and wealth redistribution, any market-opening projects, including the KORUS FTA, will not be free from the current atrophying dynamics in both countries.