Seoul expects 5.7% GDP growth over next 10 years
By Kim Tong-hyung
After nearly five years of debate, division and political bickering, Korea’s controversial free trade agreement with the United States (KORUSFTA) goes into effect at the stroke of midnight today.
The deal brings together the world’s largest and 15th largest economies whose current annual exchange of goods and services is valued at $100 billion. Tariffs will be eliminated immediately on 7,218 Korean products and 61,768 American ones, while levies on sensitive items such as cars, textiles, agricultural products and meat will be lifted in phases.
Optimists say the free trade pact, which follows similar agreements with the European Union and other regions, expands Korea’s economic territory by allowing its export juggernauts to penetrate into the planet’s marquee markets.
Critics, who have been increasing their speechifying as parliamentary and presidential elections near, claim that the benefits expected for big businesses will come at the cost of small- and medium-sized firms, workers and farmers whose futures are looking precarious.
The state-run Korea Institute for International Economic Policy forecasts that free trade with the United States will boost Korea’s gross domestic product growth by 5.7 percent over the next 10 years and create 350,000 new jobs.
Even in the final hours before the agreement goes into effect, the strange narrative taking hold among politicians in Yeouido is that the country could back off from the deal rather than pushing forward with it. Korea is the first Asian economy to execute FTAs with both the United States and the European Union.
Desperate to massage the egos of voters as poll days near, opposition parties such as the Democratic United Party (DUP) continue to insist that a renegotiation of the deal is still in play as well as an outright rejection of it.
This certainly is an awkward position to take as the DUP is the successor to the party of late President Roh Moo-hyun, who first put the free trade negations with the United States on track.
Speaking with reporters Tuesday, Trade Minister Park Tae-ho didn’t hide his frustration over the arguments that Korea could bail from the agreement, stressing that such an action would irrevocably damage the country’s credibility.
“The talk about discarding the KORUS FTA will have a negative effect on Korea’s international status and an adverse effect on our economy as well,” Park said.
“The Korean public is well aware of the good things that the deal could bring, which includes more jobs.”
Korea exported $56.2 billion worth of goods and services to the United States last year, while its imports from the country were measured at $52.1 billion.
It’s obviously too early to make a meaningful attempt at guessing how the free trade agreement with the United States will affect different groups of Korean industries and consumers. However, some winners and losers are rather easy to identify.
The biggest Korean winners could be the country’s automotive and electronics firms such as Hyundai and Samsung. Textile companies and shipbuilders are enthusiastic, too.
There is no surprise about the biggest losers: Korean farmers, small merchants and small- and medium-sized firms, except for those involved in auto parts, electronic components, shipbuilding and plastic manufacturing.
The trade deal could also provide a crucial test for Korea’s economic mettle. The country has long enjoyed a surplus in trade with the United States but the expected rise in imports of American goods suggests that the annual $10 billion or more cushion will likely shrink from here on.
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