Korea-US FTA talks to start in May
Korea Times
Korea-US FTA Talks to Start in May
By Kim Sung-jin, Staff Reporter
27 January 2006
South Korea Thursday pledged to halve its domestic film quota to pave the way for formal negotiations for a bilateral free trade agreement (FTA) with the U.S.
Although both parties said they have not set a deadline to clinching the agreement, both Seoul and Washington are facing a time crunch to finalize the negotiations.
As U.S. Trade Representative Rob Portman previously said that the Bush administration wants to wrap up as many FTA deals as possible before President George W. Bush’s FTA negotiating authority granted by the U.S. Congress expires in July 2007, it is evident that the two countries are aiming to conclude the FTA before that time limit.
If so, less than a year is allowed for both countries to ink the FTA deal, and concerns are rising over whether Seoul hastily conclude the agreement without sufficient time for deliberation and ironing out conflicting interests between different domestic industries.
As the Ministry of Foreign Affairs and Trade (MOFAT) previously announced that it is holding a public hearing on Korea-U.S. FTA talks on Feb. 2, Seoul and Washington are forecast to announce the start of formal talks in the next week-and-a-half, taking into account the customary practice of bilateral FTA negotiations.
The economic ministers will also convene a meeting to discuss the Korea-U.S. FTA matter on the same day.
Given that U.S. rules require the administration to give Congress a minimum 60-day notification period before it initiates trade agreement negotiations, it is highly likely that the actual formal negotiation between Korea and the U.S. would begin in May, even though the official announcement is to be made in mid-February,'' Korea International Trade Association (KITA) FTA Team head Jeong Jae-hwa said.And considering that the U.S. government has to give Congress a 90-day period to review any resultant deal, Korea and the U.S. should conclude the FTA talks by as late as late April next year. Under such circumstances, Korea has less than a year to conclude the FTA deal with the U.S.,’’ he said.
According to KITA, Bush’s authority to negotiate trade agreements expires in July next year.
Under Trade Promotion Authority (TPA), Congress restricts itself to approving or rejecting a negotiated trade agreement within strict time limits and without amendments.
If Korea fails to meet the time limit, both Seoul and Washington will lose their chances to take advantage of the TPA that eases otherwise harsh scrutiny of the deal by the U.S. Congress, which would be very time consuming,'' said Korea Institute for International Economic Policy (KIEP) senior researcher Lee Kyoung-hee.
When the governments of two countries conclude a bilateral FTA deal, the agreement must then be approved by the legislatures in both countries and signed by the head of state.As the conclusion of the Doha Round of multilateral free trade negotiations pursued by the World Trade Organization (WTO) is forecast to be delayed due to difficulty in fine tuning conflicting interests of developed and developing WTO member economies, the global trend of signing bilateral FTAs is expected to survive for the next several years,’’ Lee said.
In such perspective, the earlier Korea signs the bilateral FTA with the U.S., the greater economic effect Korea will reap from the Korea-U.S. FTA, Lee noted.
KIEP expects the Korea-U.S. FTA to significantly boost Korea-bound U.S. investment, saying that the U.S. foreign direct investment (FDI) into Singapore surged from $530 million in 2002 prior to $6.6 billion in 2004, after the signing of the U.S.-Singapore FTA in 2003.
``The Korea-U.S. FTA is forecast to boost Korea’s real gross domestic product (GDP) significantly,’’ Lee said.
She said the static effect of the Korea-U.S. FTA, which only calculates estimated GDP boost effect from the removal of tariffs in bilateral trade, is expected to reach $2.9 billion, equivalent to 0.42 percent of Korea’s GDP.
The dynamic effect of the Korea-U.S. FTA would reach $13.5 billion, equal to 1.99 percent of Korea’s GDP. The effect takes into account all economic benefits accompanied by the free trade treaty, including increase in inbound FDI and exports to the U.S., technology and business know-how transfer and development of service industry,
Although the Korea-U.S. FTA is forecast to decrease Korea’s trade surplus with the U.S. by $5.1 billion, the trade pact is anticipated to boost Korea’s industrial production by 27 trillion won ($27 billion) and employment by 0.63 percent, meaning that it would create 104,000 new jobs, according to KIEP.
The FTA is anticipated to boost Korea’s exports to the U.S. by 4.3 percent, or $2.82 billion, and U.S. imports by 10 percent or $4.62 billion, it said.
However, Hanshin University economics professor Lee Hae-young denounced the Ministry of Finance and Economy’s move to clear away the only obstacle to Seoul’s beginning formal negotiations with Washington by halving the screen quota from 146 days to 73 days as requested by the U.S.
Lee said the expiration of TPA is also part of Portman’s calculations on submitting as many bilateral agreements to Congress as possible this year.
He said the Korea-U.S. FTA would give the U.S. an important economic bridgehead into the Asian market at a time of growing concern in the U.S. that the recent wave of regional trade initiatives in Asia could jeopardize U.S. commercial interests in the region. Therefore the U.S. should be more desperate in clinching the FTA with Korea as soon as possible.
The U.S. is Korea’s third-biggest export market after China and the EU, and Korea is the U.S.’ seventh-largest trade partner.
