Experts warn of inflated hopes for Korea-US FTA
Chosun Ilbo | Seoul | May 17 2006
Experts Warn of Inflated Hopes for Korea-U.S. FTA
A free trade agreement between Korea and the U.S. is expected to bring substantial challenges as well as opportunities for the Korean economy, a seminar heard Wednesday. The manufacturing industry led by textiles, cars and electronics will see exports increase, but agricultural, fisheries and the service industry will at the very least have undertake structural reforms to survive.
Trade experts said even the car industry, widely tipped to be among the chief beneficiaries, will not see exports to the U.S. rise on any grand scale. Service sectors like education, finance and legal services should be careful to open their doors gradually with a long-term plan in place to minimize the impact from the FTA. A survey suggests that Korea’s small and medium-sized companies are also too optimistic and underestimate the negative effects of an FTA.
“The Korea-U.S. FTA and the Korean Economy” was organized by a private organization at the Korea World Trade Center in Samseong-dong, Seoul. The organization launched last month is made up of the nation’s four top business organizations including the Korea International Trade Association and the Federation of Korean Industries, as well as research institutes in the manufacturing, agriculture and fisheries and service industry.
The government predicts mixed results for different industries but says the nation’s economy as a whole will benefit from the pact. In support, it cites a report by the Korea Institute for International Economic Policy (KIEP).
Titled “Economic Effects of the Korea-U.S. FTA” the KIEP report produced in March predicts that the pact will boost Korea’s real GDP by 7.75 percent or US $35.2 billion. Production will increase W86 trillion (US $86 billion) and employment by 551,000 jobs, according to the report.
But in January, KIEP estimated the FTA would increase the nation’s real GDP by only 1.99 percent and production by W27 trillion and employment by 104,000 jobs. The institute, in other words, revised expected real GDP growth upwards 3.9 times and production and employment 3.2 times and 5.3 times in just two months. KIEP says the figures in its January report were lower than in March because the former did not take into account production increases brought about by opening the economy and increased competition. But that has not dispelled doubts over the figures, with the Democratic Labor Party alleging that the government pressured KIEP to inflate the figures.
The majority of Korean economists support the bilateral FTA, but some, including former finance minister Cho Sun and Seoul National University president Chung Un-chan, warn against a hasty conclusion of the pact.
