The US Congress needs to pass the Korea free trade agreement just to give American firms a level playing field. If it can’t, US rivals will shape the region.
For most of the summer, Congress has seemed dysfunctional and unable to make decisions as it debated ways to raise the debt ceiling and cut spending. The deadlock in Washington also stalled pending free trade agreements with South Korea, Panama, and Colombia as Democrats and Republicans have fought over how to handle the renewal of trade adjustment assistance.
Now that the two sides have reached a deal on the debt ceiling, it’s critical that the agreement hold and Congress move quickly to pass the three agreements, and the Korea-US (KORUS) Free Trade Agreement in particular, as they are directly linked to US strategic interests and future prosperity.
Because broader trade initiatives have been at a standstill over the last four years, the KORUS FTA has grown in significance. An agreement that originally would have provided the United States with an advantage in a key Asian market is now essential for US producers just to maintain a level playing field with their competitors as Korea pursues one of the most aggressive trade liberalization agendas of any country.
As recently as 2003, the United States was Korea’s largest trading partner, but it has fallen to fourth in the Korean market. In less than a decade, the European Union, China, and Japan have all passed the United States in importance with South Korea. The EU’s lead on the US is likely to grow with the EU-Korea FTA now in effect, giving European producers a competitive edge over the United States in most of America’s top exports to Korea. Early results showed EU exports to Korea up by 45 percent over the first three weeks of July, and the United States losing ground in terms of its overall share of the Korean market.
Perhaps more important, the ability of the United States to pass the KORUS FTA has become a litmus test for US leadership on trade in the entire Asia-Pacific region. As Asia has grown in economic importance over the last decade, the US has found itself in a competition of ideas with China over how Asia should be ordered in the 21st century. If the US is unable to pass an FTA with a close ally such as the Republic of Korea – one that most of the United States’ competitors and partners consider to be in its interests – it will undermine US credibility on trade in the part of the world expected to lead global economic growth.
The loss of US credibility would be detrimental to the Trans-Pacific Partnership (TPP) talks. A United States that can’t resolve its own differences to pass the KORUS FTA would be seen by prospective partners as unable to follow through on its commitments, likely leaving the TPP talks stillborn or with the United States on the outside looking in. This would have a direct impact on US interests in Asia.
The TPP is envisioned as a stepping stone to a 21st-century free trade area of the Asia-Pacific, and perhaps the US best tool in a contest with China over the standards, rules, and norms of trade and investment in the region. The consequence would likely be a trading system in Asia that excludes the United States to the detriment of America’s economic interests.
Photo Credit: White House
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!!!!!!!!!!!sarra
wat is going on in the economy
Leonard R.
@SimonSays: “SimonSays August 18, 2011 at 4:17 pm
It would contribute to the debate if you could elaborate as to why you disagree with FTAs with East Asian countries.”
__
If that’s directed at me, you have my position wrong.
The US would not benefit from trade agreements w/S. Korea, Japan or China.
Case closed. Tariffs should be increased – not lifted.
There are several East Asian countries I’d favor trade agreements with.
Philippines, Vietnam, Mongolia among others.
It’s just important that the US benefit. That’s all.
Yang Zi’s point is interesting. China’s a big economy.
A free trade agreement w/China on paper would make more sense
than an agreement with South Korea.
The problem is – there would have to be some kind of lasting peace
between China and the US to even start down that road. And that’s
impossible under the present circumstances.
If the little emperors put a leash on the dogs* in the PLA,
China & the US could probably get along.
But in the near term, that’s not going to happen.
____
(NB: A Chinese entertainer who lives in New York, performed
a song in which American soldiers were called ‘jackals’ & wolves
at a White House State Dinner this year. So my reference to domesticated canines should be viewed as a step forward in Sino-American attitudes.)
John Chan
What USA needs is producing competitive products, everything else is secondary, but lawyers and Wall St. control USA, therefore USA cannot produce competitive products, because producing competitive products is not their cup of tea or their IQ can cope.
kuldeep
free trade agreements with major economies like india china russia and brazil would benifit US rather than to insignificant small nations like columbia, panama or south korea.
Tom Tran
The reason for the reluctance to opening a new market is that the US no longer holds its dominant position as a tech supplier. Other countries have been catching up very quickly. So there is little chance for US’s firms in Korea, while the threat of outsourcing American jobs overseas is real. Used to be the forefront of globalization, now it has fallen into victim by itself.
Leonard R.
America does not need this. And it won’t give US firms a ‘level playing field’.
The Colombia & Panama deals should be passed. But the US needs to make sure that China does not benefit by using Panama or Colombia as a hub.
The US should have free trade with its Latin American neighbors but not S. Korea or China.
James the Australian
No nations want to trade with the USA now, as it is broke.
Better for the rest of the world to forget, that the USA exist and move on.
That way, Financial market will not be spoof.
US and Australia trade is just 4% of our nation total.
yang zi
actually a free trade with China benefit US more because of Chinese market potential. but South Korea is different, it is a small market eventually, US will not benefit much, South Korea will.
Free trade with Latin America is a good idea.
SimonSays
FTAs with only Brazil and Mexico would be economically significant in some way. However, Brazil is a BRIC country and Mexico is already in the NAFTA.
Other Latin American countries’ economies are too small(er than SK) and trade even smaller. It would only be for political gain but then again, the US has already decided to move on from Middle East and focus its foreign policy on East Asia for the next century.
Kyoo Ho
You does not seem to know what is going on thr world market.
How many countries does China has free trade agreements with? Probably some of communists or dictatorship countries in Africa and Latin America such as North Korea have free trade agreement with China. Why not other countries?
But, South Korea has free trade agreeements with EU, India, Singapore, Chile and more countries are coming into Korea for free trade. Why? If you have free trade agreements with South Korea, it means that you hace market access to not only Korea but also countries that signed free trade treaties with Korea. If they are all combined together, the size of the market that Korea can provide to free trade partners is bigger than Chinese market itself.
Do not forget that the market that Korea can provide is larger and better than the Chinese market in terms of how high ends products can be sold. Still China is a low income country with many domestic discriminatory restrictions but Korea and its free trade partner countries are high income countires with more open, transparant and nondiscriminatory business rules.
SimonSays
It would contribute to the debate if you could elaborate as to why you disagree with FTAs with East Asian countries.