US and South Korea Make Free Trade Deal

It took ten months of rather intense discussions, occasionally interrupted by security crises emanating from north of the 38th parallel, but the US and South Korea have inked a free trade agreement. Since Mr. Bush’s “fast-track” authorization from Congress to negotiate such deals expires on July 1, because any such deal needs 90-days for review, yesterday’s deal came right at the deadline. Unfortunately, this agreement provides for trade that isn’t entirely free.

South Korean rice farmers, who somehow manage to grow the stuff in a less-than-hospitable soil in a less-than-ideal climate, threatened their government if it didn’t exclude rice from the deal. The US has plenty of arable land perfectly suited for rice, and consequently, American rice would steal market share from them. Like a real democracy, South Korea’s government responded to the demands of its people and insisted on excluding rice from the deal.

The US, for its part, sold its rice farmers down the river in exchange for the other goodies in the treaty. Karan Bhatia, the US negotiator, explained, “At the end of the day I think we resolved that the benefits to be gained from this FTA [Free Trade Agreement] were so substantial that it was a deal that was worth doing.” Yes, the American consumer will get access to Hyundai and Kia vehicles at even more favorable prices than before (which should harm US companies GM and Ford, and German-American DaimlerChrysler). Also, cell phone and TV makers in Korea will be able to pick up more market share in America.

The US and South Korea are already big trading partners. In 2005, the two-way trade was worth about $72 billion. Last year, the US trade deficit with South Korea was $13 billion, 80% of which was auto related. This deal, according to analysts, would add $20 billion to the bilateral trade, and most believe that it will not reduce America’s deficit with South Korea. Indeed, according to Usha Haley, director of the Global Business Center at the University of New Haven. South Korean exports to the United States are expected to rise in the first year by 12 percent, or $5.4 billion.

Because of the fast-track authorization, Congress can only vote up or down on the deal. Given the monolithic support from Republicans for this kind of arrangement, it will only take a few Democrats to support it in order for ratification to arrive quickly. There are more than a few Democrats prepared to be “pro-business” and vote for the deal. Free trade is not a bad ideal, but it would be nice if the US negotiated better terms for itself. The world can’t afford its deficit-spending and deficit-trading habits much longer.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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