03/12 At long last, a free-trade deal with Seoul

Friday, December 3, 2010; 8:54 PM

FRIDAY’S DEAL between trade negotiators representing the Obama administration and the government of South Korea was a long time in coming – but its arrival, however late, is cause for celebration. The way is now clear for submission of the long-delayed U.S.-Korea free-trade agreement to Congress and the National Assembly in Seoul. This is good news for the U.S. and global economies, a boost to the strategic alliance between this country and a democracy that lives in the shadow of potential North Korean aggression – and last but not least an opportunity to show that bipartisan policy success is still possible in Washington.

President George W. Bush’s trade negotiators inked a deal with Seoul way back in 2007. The tariff-slashing pact enjoyed the support of most U.S. economic sectors. But the Democratic-controlled Congress never voted on it, mainly because of objections from Ford Motor Co. and the United Auto Workers, which feared further Korean penetration of the U.S. vehicle market. Echoing those concerns, in 2008 presidential candidate Barack Obama denounced the pact. To his credit, however, Mr. Obama shifted his position on trade with South Korea this year and began pursuing a modified deal, in keeping with his effort to boost U.S. exports.

In the end, the Koreans accepted two key modifications: more flexibility on safety and environmental standards for U.S. cars coming into their country, and a five-year delay in eliminating the 2.5 percent U.S. tariff on Korean cars, which would have been axed immediately in the original deal. In economic terms, neither change is hugely consequential to either side; fluctuations in exchange rates would probably have more impact on car sales. But if this was the price of moving the deal forward in the political realm, well and good.

All that’s left for the Obama administration is to make sure the revised agreement does, indeed, win approval in Congress – along with equally beneficial pacts with Colombia and Panama. This could yet be a difficult fight, given residual anti-trade sentiment in both parties. But it is a fight Mr. Obama is well positioned to wage. The arguments against this deal, which could boost U.S. exports by more than $10 billion per year and help dent an unemployment rate that has reached 9.8 percent, were always weak. Now even those weak arguments have been answered.

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About Uy Do

Banking System Analyst, former NTT data Global Marketing Dept Senior Analyst, Banking System Risk Specialist, HR Specialist
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