The Korea-US Free Trade Agreement: A Summary Assessment
The Korea-United States Free Trade Agreement (KORUS FTA) opens up substantial new opportunities for bilateral trade and investment in goods and services and promotes important foreign policy interests of both countries. The FTA quickly removes most tariff barriers to auto trade and substantially reduces tax and regulatory burdens that impede sales of US cars in Korea; improves access to the Korean market for a wide range of US farm products; and opens up the Korean services market in key areas such as financial services, insurance, express delivery, and legal and accounting services. Nonetheless the ratification of the KORUS FTA has been controversial. In the United States attention has focused on both the auto sector, which accounts for almost one-quarter of bilateral trade and a large share of the US trade deficit with Korea, and Korean restrictions on US beef imports due to bovine spongiform encephalopathy (BSE) concerns. Several automakers and auto unions have opposed the deal, and the Democratic leadership in the US House of Representatives has demanded that the auto provisions be recast. In the US Senate, the resolution of the beef problem-which is now being addressed by Korean regulators-is a prerequisite to passage of implementing legislation. No clear timetable exists for the congressional vote and action may be deferred until 2008. The Bush administration will have to respond constructively to Democratic concerns about the FTA before the deal can be ratified and should consider new federal programs to help promote the competitiveness of US automakers. Doing so should attract a substantial minority of Democrats in the House, along with the majority of Republicans, to support the FTA. The stakes-in terms of both US economic and security interests in East Asia-are too great, and the costs too high, to reject the pact or defer a decision.