February 11, 2004

February 11, 2004 | Commentary on Asia

South Korea's Lack of Leadership

In an era when countries around the world are scrambling to enter into free trade agreements as the path to economic growth and prosperity, South Korea risks being left behind to face economic stagnation. On Monday, the South Korean National Assembly once again failed to ratify its FTA with Chile, a decision which had already been postponed three times due to vehement political opposition from South Korean farmers. They fear losing their livelihood as a result of an inflow of foreign agricultural products.

The agreement, signed a year ago in February 2003 and recently ratified by a unanimous vote of the Chilean Senate on Jan. 22, would lower barriers on $1.5 billion of annual bilateral trade between Chile and South Korea.

Yet, passage of this important FTA with obvious benefits for both economies remains in doubt in South Korea, due to an embattled and highly factionalized National Assembly preoccupied with impending general elections in April. Curiously, despite South Korean political leaders' inability to overcome narrow political interests in order to formalize its agreement with Chile, the South Korean Ministry of Foreign Affairs and Trade is concurrently pursuing an FTA with Singapore and engaging in similar talks with Japan.

South Korea has far more at stake here than just economic benefits and costs. Although 73% of Korea's economy is dependent on external trade, it is only one of two members of the World Trade Organization that does not have a single FTA with any country, while Chile already has FTAs with 28 countries. If the FTA with Chile is not ratified in the current parliamentary session, not only will South Korea's economy suffer but it also risks losing credibility to successfully negotiate future FTAs with other trading partners. And Seoul's reputation as a reliable trading partner may be in jeopardy. South Korea's reliability as a trusted ally of the United States has already weakened in recent years, due to the disturbing perception of rising anti-Americanism.

The future of South Korea's political process is also on the line. South Korean lawmakers are suffering a crisis of public confidence following recent political scandals, and interparty bickering resulting in the breakup of the ruling Millennium Democratic Party.

Weakening the political system further are special-interest groups such as labor and farmers, who have managed to coalesce their small numbers into powerful oppositions, often resorting to violent means to assert their positions. While the definition of a representative democracy is that elected officials answer to their constituents, a truly stable and mature democratic system should not allow militant minorities to hold lawmakers hostage and prevent them from enacting policies that serve broader national goals. Although opening the domestic agricultural sector will be a painful process, its competitive weakness is a result of the government's prolonged protection over the years.

It is crucial for the South Korean government to take determined action on this FTA. Freer trade is a source of productive competition that engenders continuous innovation and leads to more efficient allocation of resources. Certainly, there will always be winners and losers whenever a country opens its markets to foreign competition. Yet, South Korea must ask whether it wants to move forward towards greater prosperity through more open trade, or whether it wants to remain closed and tied to inefficient utilization of precious national resources.

Thus, any further delay of the ratification of the FTA with Chile simply does not serve South Korea's national interest. Politically difficult and unpopular decisions may not be easy, but nonetheless necessary in stable democracies. South Korea cannot be an exception to this rule if it desires to have a more mature political system and enjoy greater economic prosperity. Violent protests staged by militant farmers or other groups representing narrow interests should not be allowed to cause stalemate in the legislative process. To do so is a serious indictment on the progress of democracy and rule of law in South Korea.

The South Korean public should do its part by encouraging leaders to pass the FTA bill and so show Korea's strong and unwavering commitment to furthering the goals of economic freedom and liberalizing international trade. Leadership is not an option, but a necessity for South Korea's future."

Mr. Kim is a research assistant in the Center for International Trade and Economics and Ms. Hwang is the policy analyst for Northeast Asia in the Asian Studies Center at the Heritage Foundation.

About the Author

Anthony B. Kim Research Manager, Index of Economic Freedom, and Senior Policy Analyst
Center for Trade and Economics (CTE)

Balbina Y. Hwang, Ph.D. Senior Policy Analyst
Asian Studies Center

First appeared in the Wall Street Journal