By Emad Mekay
WASHINGTON, Apr 2 2007 (IPS)

The United States and the Republic of Korea reached a free trade deal that its proponents say will create economic opportunities, but which critics charge could lead to the further impoverishment of Korean farmers, violate labour standards and follow the failed model of other free trade agreements.

“This is a historic moment for our two countries. The United States-Korea Free Trade Agreement (KORUS FTA) will provide U.S. farmers, ranchers, manufacturers and service providers exciting new market opportunities in a growing, dynamic country. It will contribute to Korea’s successful transformation to a 21st century economic power,” said U.S. Trade Representative Susan C. Schwab in a statement.

The new Korea-U.S. Free Trade Area, which will remove trade barriers to goods and services between the two countries, is the biggest deal since the 1993 North American Free Trade Agreement (NAFTA) binding the United States, Canada and Mexico. NAFTA has since been the template for most U.S. free trade agreements.

“The KORUS-FTA represents the United States’ most commercially significant FTA in over a decade,” said the USTR office in a statement.

The Republic of Korea is the world’s tenth largest economy, with a Gross Domestic Product of nearly one trillion dollars. The country is already the United States’ seventh largest goods trading partner, with two-way trade in 2006 valued at approximately 72 billion dollars.

The deal includes provisions that ensure that U.S. investors in Korea will have the same rights and enjoy equal footing with Korean investors. Reached on Sunday, the agreement will expand market access and investment opportunities for businesses in a number of service sectors, including telecommunications and e-commerce.

The Korea-U.S. FTA would remove tariffs on 95 percent of consumer and industrial products between the countries within three years.

Korean industrial tariffs average six and a half percent – and many are eight percent – making market access a very important issue for U.S. industries.

In the highly competitive auto industry, the FTA will abolish taxes in Korea on large cars produced in the U.S., which U.S. automakers have long called an impediment to market access in Korea.

With the inclusion of the “yarn forward” rule of origin, the FTA will give apparel products from Korea preferential access to the U.S. market while supporting U.S. fabric and yarn exports and jobs.

The deal includes some staples of pacts like NAFTA, such as the expansion of market opportunities for U.S. audio-visual products as well as the enforcement of intellectual property rights, including trademarks, copyrights and patents consistent with U.S. standards.

Koreans are worried that this will mean more expensive drugs in the pharmaceutical industry as U.S. companies could refuse local Korean producers the right to make generic drugs and choose to sell their products at higher prices.

Thousands of people in South Korea have been protesting the FTA for nearly a year, fearing that it will harm livelihoods, their access to medicine, and their right to food security.

Anuradha Mittal, executive director of the Oakland Institute, who has followed the deal from the start, told IPS that the “U.S. and Korea’s deal on the FTA is a blow to democracy and demonstrates what free trade is really based upon: a few decide what’s best for everyone.”

“This deal ignores the wishes of the 70 percent of the Korean population that is against the FTA. It ignores valid concerns around livelihoods and access to medicines of tens of thousands who have protested over the last 10 months despite criminalisation of dissent,” Mittal said.

The agreement does require both countries to enforce their own labour and environmental laws, and ensures access to legal mechanisms to ensure enforcement. Labour groups and senior Democrats in the U.S. Congress have called for international standards to be applied in such deals.

President George W. Bush notified Congress Monday that he approved the deal. This comes 90 days before his special fast-track Trade Promotion Authority expires Jul. 1.

But some in Congress complained that the agreement didn’t go far enough. Sen. Chuck Grassley, the ranking member of the U.S. Senate Committee on Finance, which oversees trade agreements, gave a mixed reaction.

He complimented the significant benefits to U.S. pork producers and soybean producers, but lamented the fact that rice was excluded.

“On principle, I oppose taking agricultural products off the table in trade negotiations. It just facilitates the continuation of protectionism,” he said.

The committee’s chairman, Sen. Max Baucus, said the deal was hugely problematic because it lacked an agreement to remove Korea’s ban on U.S. beef, which Seoul instroduced after reports of mad cow disease case in the U.S. surfaced in December 2003.

Before the ban, Korea was the third largest U.S. beef export market in the world.

“This is an entirely unacceptable outcome,” said Baucus. “I will oppose the Korea Free Trade Agreement, and in fact I will not allow it to move through the Senate, unless and until Korea completely lifts its ban on U.S. beef.”

U.S. business groups have largely given a positive reception to the deal. While Korea is a 300-billion-dollar import market, U.S. exporters currently have only 11 percent of that market.

“From what we understand, this is a good agreement that will go a long way toward opening the world’s 10th largest economy to U.S. exports and bring substantial benefits for American manufacturers, farmers, and service providers,” said President of the U.S. Chamber of Commerce Thomas J. Donohue.

Still, citizens’ groups worried about transparency, the environment and labour standards say that the deal was deficient as it was agreed on behind closed doors.

The Korean government, for example, has not allowed for open, public debate about the FTA’s impact on the nation’s economy and sovereignty. The Korean Advertising Broadcasting Agency blocked running an advertisement produced by farmers protesting the deal. “Should the FTA become law after an undemocratic process and in spite of mass popular opposition, the FTA will drive the perception in South Korea that America’s democratic rhetoric is merely a cover for profit-seeking behaviour,” said Korean Americans for Fair Trade in a statement.

“We must call on Congress to start a fresh dialogue for a U.S. trade policy that respects international norms that uphold the human right to food, housing, health, education, and dignity. Without these goals as a centerpiece of our trade and development agenda, we will not secure more peace and security in the world,” the statement said.

Excerpt: