KOR-US FTA’s three poisons
The Hankyoreh | 31 March 2009
KOR-US FTA’s three poisons
Column by Jeong Tae-in
Economic Critic and Professor at Sungkonghoe University
Why is the South Korea-U.S. Free Trade Agreement (FTA) an issue again ? The administration of President Lee Myung-bak is trying to use the global economic crisis to force its market fundamentalism on the country. The FTA is the final push. We have talked it about so much over the past three years it is tiring, but this agreement is at its essence about transplanting U.S. laws and procedures to Korea. The financial crisis that originated in the United States shows you just what those laws and procedures can do. History is waving its sickle (which resembles the first letter of the Korean alphabet) in our faces and yet the Lee administration and his ruling Grand National Party (GNP) have forgotten how to read.
Key problem areas are the very areas US Secretary of State Hillary Clinton claims as big accomplishments for U.S. negotiators : the opening of the services market, investment, and intellectual property rights. Former Financial Supervisory Commission Vice Chairman Lee Dong-gull said that if the FTA takes effect, Korean banks would become institutions that merely live off the sales fees of U.S. financial products.
That prediction is already coming true in the form of the power income funds sold by Woori Bank, now judged by a Korean court to have been misselling. How is an old (Korean) lady going to adequately understand U.S. derivatives when bank employees promise her a high rate of earnings ? Financial supervisory authorities in the US were unable to stay on top of derivatives, and even now they are unable to cope with the effects. Do people actually believe Korea’s Financial Services Commission would have been able to prevent that kind of crisis ?
The risks associated with the FTA are great. The three biggest problems with the FTA with the U.S. include : the ratchet clause on market openness (which disallows reverting to earlier levels), automatically conferring the US the same beneficiary status negotiated in future agreements with other countries, and the investor-state claim (ISD, Investor-State Dispute) procedures. The ISD issue is one being taken as a potentially seriously one by the US Congress, however, the South Korean government believes it is absolutely essential to maintain in order to attract foreign investment. The utter ineptitude of South Korea’s team of negotiators is quite something, given how in negotiating the FTA with the European Union our government insisted on a similar ISD clause.
The United Kingdom once privatized its rail system, only to nationalize it again after repeated major accidents. The U.S. city of Atlanta privatized their public water system and signed a 20-year contract with United Water Services only to see water quality deteriorate. Later it broke its contract with the company after the city was unable to use fire hydrants in emergencies. If the FTA with the US comes into force, the problematic clauses will essentially make it impossible to correct situations like these.
The Lee Myung-bak administration is going in the opposite direction of other leaders of the world economy. The president is taking policies declared bankrupt by Gordon Brown, Prime Minister of the country that gave the world neoliberalism, and former Federal Reserve Chairman Alan Greenspan, and selling them as the solution to this crisis. This FTA will, because of those policies, be like a final shot in the head to public services in South Korea that were on the verge of death anyway, and will make it impossible to perform surgery.
In one word of truth, the US-ROK FTA needs to be discarded. Moreover, if you consider the FTA on diplomatic and political grounds, then at the very least, each and every article of the agreement needs to be taken apart and thoroughly examined at the National Assembly level. The only matter the South Korean National Assembly has looked into with any level of seriousness was the beef import negotiations. Instead of hastily ratifying the FTA, parliamentarians need to review everything and decide whether each and every item is something the South Korean people are in agreement with. There is still plenty of time.
All the Lee administration and ruling GNP are doing is moving to hastily ratify the agreement for the eternal interests of the trilateral alliance comprised of : the country’s big business conglomerates, the economic bureaucrats, and the three big conservative newspapers (the Chosun Ilbo, JoongAng Ilbo, and DongA Ilbo). It is clear what the U.S. wants - a noticeable percentage share of the automobile market and the ability to sell beef from cows older than thirty months. Is the Lee administration really ready to toot the whistle on a train that is speeding to its own ruin, by keeping items such as auxiliary agreements from being disclosed to the people of South Korea ? We cannot entrust the lives of our children to the likes of men like these who cannot recognize the truth when it stares them in the face.
