February 8, 2007

February 8, 2007 | Commentary on Asia

Where a trade push is needed

Since last year, trade representatives in the United States and South Korea have worked to forge a free-trade agreement (FTA) -- a pact that would provide significant economic and political benefits to both nations. But a deadline is looming: the expiration of "fast track" trade promotion authority. And if that happens before the deal is completed, it would derail the proposed FTA. 

Although "fast track" authority doesn't expire until June 30, the effective deadline for completing FTA negotiations is mid-February. The Bush administration must submit enabling documentation by March 30, and the preceding four to six weeks are necessary for "scrubbing the text," a critical but time-consuming technical and legal review.

Now is the time for Presidents George W. Bush and Roh Moo-hyun to exert strong leadership and resolve contentious trade issues. The U.S. and South Korean legislatures should look strategically beyond parochial trade demands and assist in completing an agreement that would serve as the first step in repairing the badly frayed alliance.

It won't be easy. The FTA faces formidable challenges in South Korea -- well-organized opposition, lukewarm support from a beleaguered president, and capricious public support.

The people remain ambivalent about the effects of market liberalization. They understand the need for open economies in an export-driven economy but are apprehensive about opening their country to foreign firms. A minority confederation of interest groups that fiercely oppose the agreement has helped shift public opinion against it.

The time has arrived for senior leaders in both countries to identify tradeoffs and fend off protectionist demands in order to achieve an equitable accord that maximizes bilateral economic opportunities while minimizing government intervention. Given mounting time constraints, negotiators must quickly clear out the underbrush of less contentious issues. If the delegations could reduce disputes to three or four remaining deal-breakers, these could then be brought to the presidents for final resolution.

U.S. policymakers should:
Identify bottom-line negotiating positions that further progress in the FTA and urge reciprocal initiative from Seoul.

Signal their intention to include South Korea in the visa waiver program. The program allows nationals from selected countries to visit the U.S. for tourism or business without a visa for up to 90 days. Though not formally part of the FTA negotiations, doing so would show good will and provide much needed impetus to the trade talks.

Highlight the benefits of an FTA. A successful agreement could strengthen South Korea's sputtering economic recovery as well as provide an advantage over regional competitors Japan and China. Beijing's growing competitiveness poses a formidable risk for South Korea's small- and medium-sized entrepreneurs, already weighed down by declining export profitability.

Guard against issues that could trigger a resurgence of anti-Americanism. Washington should consider postponing or downplaying contentious issues, such as the transformation of U.S. military forces, in order that they not become a distraction to completing the FTA.

Contrary to conventional wisdom, the new Democratic leadership in Congress does not necessarily represent a protectionist death knell for FTAs. There remains strong bipartisan support for such measures. Yes, we can expect greater advocacy for labor and environmental protection, but this should not deter the Bush administration from completing the FTA with South Korea and submitting it for ratification.

The trade talks are in a precarious balance between success and failure. Though some have all but declared the FTA dead-on-arrival, the patient's prognosis remains hopeful, but guarded. But Presidents Bush and Roh have to take decisive action quickly to prevent the agreement from flat-lining before the TPA deadline. Negotiators also will need strong legislative and industry sector support to achieve a last-minute success before the clock runs out.

Completing an FTA would not, of course, be a panacea for all of the strains brought on by steadily diverging policies. But it would strengthen bilateral ties by broadening the relationship beyond the military alliance, help retain U.S. influence in the region, and counter Seoul's growing economic ties to China.

Conversely, failing to attain an FTA would have a significant detrimental impact. It would reinforce perceptions of a degraded U.S.-South Korean relationship. It would signal that Seoul was unwilling to make the reforms necessary to maintain South Korea's viability as a foreign investment opportunity. As such, it would add to a growing list of concerns that could lead investors to increasingly bypass South Korea.

Bruce Klingner is senior research fellow for Northeast Asia in the Asian Studies Center at The Heritage Foundation (heritage.org) in Washington, DC.

About the Author

Bruce Klingner Senior Research Fellow, Northeast Asia
Asian Studies Center

First appeared in the Washington Times