Last June President Obama stood on the world stage and said he would have the U.S.-South Korea Free Trade Agreement sign on this trip to Asia. Last week, he against stood on the world stage on said trip to Asia and was forced to admit failure on this issue. The global trade world was hopeful that this agreement, first negotiated and signed by President Bush in 2007, would finally be brought to congress for ratification. The U.S. Chamber of Congress and other groups are making a good case that the U.S. is falling behind as others nations, like Australia, Canada and even China, have signing FTAs with South Korea.
Though the President says the deal is still just “a few weeks” away from being signed, this seems highly unlikely. If the negotiators couldn’t get it done with the pressure of the President’s visits as a highly visible deadline, what is the likelihood that they will get it done now? Furthermore, the two Presidents reportedly negotiated it themselves for nearly an hour and couldn’t find common ground. If negotiations have failed on the highest of levels I don’t see it going through on lower ones.
The main problem is with U.S. auto and beef imports into South Korea. While the agreement does call for reduced tariffs on actual auto imports, it does not do enough to eliminate non-tariff barriers. South Korea imposes very strict regulations on autos with regard to safety and emissions. These are designed mainly to promote their domestic car market. In fact it is very rare to see a non-Korea car in Korea. Much like the 1970’s in the United States individuals driving a foreign car face ridicule from their friends and neighbors. In the Asian culture based on shame (as opposed to the Western guilt driven society) this type of pressure means very few foreign cars are sold in Korea. These types of non-tariff barriers are very difficult to overcome and I don’t see negotiators being able to reach a reasonable consensus without major compromise on the American part. Whether or not the other benefits outweigh these negative is up for debate (ok – not really – the benefits absolutely outweigh these negatives).
As for beef imports, the South Koreans have long been under the rather bizarre belief that American beef is plaque with mad cow disease. Several years ago there were massive protests on the street when the former Korean President removed a temporary ban on U.S. beef imports. This is no small point as South Koreans are some of the largest consumers of Been per capita in the world. The current leadership in Korea is well aware of how the public reacted last time U.S. beef tariffs were messed with and now see this as a major lighting rod there are wisely unwilling to touch.
The sad reality is that this whole charade is irrelevant. The chance of a free trade agreement passing through Congress, even, if not opposed by the auto and been industries, is hard to imagine. The new congress, made up more than ever by extremists on both sides, seem to agree on only one thing: free trade is bad. The irony is free trade is the one area where the President and Republicans could actually work together. Had President Obama managed to stick to his own deadline and get this deal signed while in Korea, he may have had a chance of bring something home that he could get through a lame duck congress. At this point the USSKFTA is all but dead.
Further Reading:
Foreign Policy Magazine: The KORUSA Catastrophe by Phil Levy
NY Times: U.S. and South Korea Fail to Agree on Trade by Sheryl Gay Stolberg and Sewell Chan
NY Times: Stalled South Korea Trade Deal is Setback for Obama by Sheryl Gay Stolberg
Financial Times: US-South Korea Fail to Agree on Trade Deal by Alan Beattie
