By Kim Tae-gyu
As the Korean government is found to have made big concessions to the United States in the renegotiation of the free trade agreement (FTA), fears are rising that other countries may ask for similar requests and expect the same in the future.
Such concerns run deep as Asia’s fourth-largest economy has already signed an FTA with the EU, which has yet to win parliamentary ratification, and strives to reach agreements with China and Japan.
Seoul and Washington agreed on a bilateral trade agreement in 2007 but the latter asked for renegotiations. Both countries eventually finalized the new deal late last week.
“It is very rare for a government to require a change to already-signed agreements. If one tries to do so for a specific provision, it might have to make big concessions in other segments,” professor Baik Il at Ulsan College said.
“Yet, the reality seems to be the opposite. Although the U.S. initiated the renegotiations, Korea gave up so many benefits for almost nothing. Do you think that other countries will sit idle? Many will ask for similar windfalls.”
Seoul accepted the U.S. demands of delaying the phasing-out of tariffs on passenger cars in four years and including the safeguard clauses, which let Washington protect its auto markets with customs duties when imports hurt its industry too much.
Instead, Korea gained some benefits in the agricultural and medical patent segments. Observers point out the quid pro quo is too small compared to the potential losses generated by the rescheduling of the elimination of automotive tariffs.
Professor Lee Hae-young at Hanshin University agreed that the renegotiations would set a bad example and worried about a negative chain reaction, or a domino effect, from other countries or economies.
“The chances are that the EU might ask for better conditions in the safeguard provisions. They may ask why the Korean government does not offer the same benefits to the EU as the country did to the U.S.,” Lee said.
Korea and the EU signed a free trade deal in July and it is supposed to take effect midway through next year after obtaining approval from its member countries.
In particular, Lee took issue with the newly-included motor vehicle safeguard in the Korea-U.S. FTA under which the U.S. government can activate the safeguard steps without having to provide Korea with tariff reductions or other compensation for up to two years unlike the international norm.
“While signing the FTA with us, do you think that China and Japan will not demand similar special benefits? The concessions of the Korean government this time may not be just a one-off. It may continue as a negative benchmark,” Lee said.
Even Deputy Trade Minister Choi Seok-young admitted that the U.S. tried to earn improper benefits by saying last month, “It is not desirable to negotiate on the contract that was already agreed.”