Free trade agreement between US and Korea
The free trade agreement (FTA) between United States and South Korea has elicited resounding debates over its advantages and disadvantages. Theoretically, it is often claimed that free trade agreements are signed to gain comparative advantage but the fact remains that these agreements do not come up with the projected results. The entire theory of free trade agreement focuses only on the aggregate gain or wealth and does not talk about the distribution of accumulated gain. Precisely put, the free trade agreement between America and South Korea has its pitfalls that resulted in more disadvantage than benefits.
The agreement has been met with sharp criticism from both the sides. Critics contend the agreement has failed to reap the rewards and they cite the onrush of outsourcing as its primary reason. The US middle-class job seekers have faced enormous trouble due to this agreement. The New York Times noted in 2006 that “Globalization is tough to sell to average people…but what sticks in our minds is the television image of the father of three laid off when his factory moves offshore.” (New York Times, 25 December, 2006)
Congress denounced the Bush deals for various plausible reasons. The agreement has given way to various problems at home. First, as mentioned above, America underwent losses of millions of jobs to foreign. The exploitation of labor and resources and defilement of the environment in foreign countries took place. More significantly, it resulted in huge trade deficit.
Put it other way, the trade agreement has threatened people’s rights to livelihood, access to medicines, and local development
Another argument against the agreement is that it has excluded the import of rice much to the displeasure of South Korean exporters. The agreement has nothing much to talk about services which is America’s strength area. The agreement also sent out a message to Korea that it has liberty and an absolute right to sell, cars, ships and computers around the world while providing Korean high-cost farmers with the level of subsidy more than EU’s farm payments.
There has been an utter imbalance in terms auto trade without much insistence on the steel shipments from US to Korea. The benefits will not reach the common public of America. Even if it would increase South Korea’s gross domestic product by 2 percent, it has been received with harsh criticism.
Though US agricultural exports to South Korea were estimated to double but this reward will be achieved at the cost of loss of 159,000 jobs back home. Given this, the agreement between two countries has become a major cause for concern. According to the US international Trade Commission has estimated that the agreement will add to economic woes of America with the increase in trade deficit crumbling down employment opportunities as well.
Plus, Korean laws are stringent for foreign countries to carry out their outsourcing and offshore activities. Foreign companies cannot transfer any data outside Korea. Moreover, it has been mandatory on insurance companies to maintain human and non-human resources such as IT systems and other components necessary for insurance business. These restrictions have significantly seen an upsurge in operating cost in Korea.
The trade agreement has been automobile-centric intensifying US grievances about trade deficit. The FTA will do away the taxes on large cars manufactured in America and exported to South Korea. This initiative has been seen as a major hindrance to market access in Korea.
The agreement also demands Korea to minimize its car taxes much to the disadvantage of US-made cars. Rice is ruled out of the main points on agenda against reduction of US beef tariff by 40 percent. The agreement has pulled the rug from under agriculture sector in South Korea.
The free trade agreement has raised political concerns as well. Opposition parties in America have linked its approval to the Colombia and Panama deal. Opposition has also raised its voice over the human rights abuses in Colombia.
An inherent danger that lies in free trade agreement is that it will more likely put America’s trade with European Union (EU) at stake. So much so, it is an uphill task for US to make inroads into the South Korean market for various reasons. The domestic American industry will be more likely to face a greater loss than gain.
In conclusion, the free trade agreement may reap certain rewards and benefits but all of them will be short-lived. Its disadvantages will get the better of US with trade deficits and loss of employment.
The New York Times,(2006) Still Flying High, December 25, 2006