Tentative Agreement On KORUS FTA In Seoul

While not resolving their continuing differences, South Korea’s ruling Grand National Party (GNP) and the main opposition Democratic Party (DP) have managed to reach an agreement to proceed with the South Korea-United States free trade agreement (KORUS FTA) ratification process at the same pace as the United States Congress.

It had been feared that, given the DP’s implacable opposition to certain elements within the agreement, there would have been an unwanted confrontation if the GNP had continued with its plans to present the FTA immediately at a parliamentary committee. While the GNP could still use its majority to force its approval, it would not want to do so and leave itself open to accusations of railroading the FTA through parliament.

The DP has already confirmed that, before it could contemplate support to the KORUS FTA, the agreement would need to be re-balanced. The party believes that, following its renegotiation last December, the treaty is now too favourable to the US, and that it should be further renegotiated.

One of the DP’s major points for re-negotiation would be that tariffs on beef imports from the US (the reduction of which was a particular sticking point for members of the US Congress) should be retained for a considerable period, together with stronger safeguards for the South Korean automotive and finance industries.

The DP had also felt that the general official assistance for manufacturing and agricultural producers in South Korea, who would be affected by imports of products following reduced tariffs, would need to be augmented. However, in that respect, the government has already, this month, announced total support of KRW22.1 trillion (USD20.8bn), an increase of a further KRW1 trillion over the previous plan announced in 2007, when the KORUS FTA was originally signed.

The government has already reiterated that any idea of re-opening talks on the FTA with the US is unrealistic, and that the opposition's demands are tantamount to a decision to repudiate the treaty. The government maintains that the KORUS FTA would be of great benefit to the South Korean economy and its competitiveness, and it has been estimated that it would increase the country’s gross domestic product by 5.7% and create 350,000 new jobs.

However, the two parties have now agreed that the GNP will not introduce the FTA into the South Korean parliamentary system until, at least, it is brought before the US Congress later this month, and that the DP will not, at that time, oppose that introduction. It is proposed that the progress of the agreement will then be matched to its subsequent progress in the US.

September 6, 2011

Source: Tax News