Korea-US Trade Deal Bogged Down as Clock Ticks
In Korea, Debate Rages over Merits of Free Trade Pact with United States
By Andrew Salmon 
South China Morning Post
December 20, 2006

(Coyner's Comment: Ruminating over the quotes by Overby and Breen at the end of this article, once again my experience with and in Japan comes to mind. 

While it would be unfair to say the Koreans are simply taking a page from Tokyo's playbook in dealing with the US Trade Agency, the similarities are glaring. The consensus-geared Japanese during the 1970's and 1980's could not tolerate any individual standing up against prevailing public sentiment -- even when in fact it was for Japan's betterment. Rather, Japanese politicians and bureaucrats became quite good at setting themselves up to be be plummeted by American bullyism so that they could only whimper in the end they had no choice but to give in. This in turn, in part, lead to Ishihara's famous book, The Japan that Can Say "No!" -- the first rallying point of what one may label as Japan's early neocons. Ishihara, as you may know, went on to become governor of Tokyo and remains an important player in Japanese politics. 

The fact that the Koreans, too, are playing this game reflects as poorly on them as the Japanese for genuinely feckless diplomacy. The Japanese have since moved on to a more assertive and self confident form of diplomacy. In time, theoretically this may happen with Korea -- but, then, Korea is not Japan. Japan is a semi-superpower. Besides local fantasies on both sides of the 38th Parallel, I honestly cannot see Korea reaching Japan's level of influence. For that reason, I wonder if Korean diplomacy will ever eventually mature to the point that Korea no longer feels it has to set itself up as a victim to move forward for its own good when the going gets tough.) 

SEOUL - It is a weekday evening in central Seoul's Wuahanjib restaurant and the fumes of chargrilled beef mix with the heady smells of garlic and kimchi. 

"All Korean beef is eaten within one month," said Manager Han Ju-han of the finely marbled local beef sizzling on the barbeques set into the table tops. "Imported beef comes a long way, so quality is lower."

This is a common local belief – but local beef comes at a price. In a tightly protected agricultural market, diners at Wuahanjib pay 32,000 won (US$34) for a serving of beef ribs, or 70,000 (US$75) for the choicest cuts: Korean beef is the world's most expensive. 

Meat was very much on the minds of negotiators of the Korea-U.S. Free Trade Agreement, or KORUS FTA, the fifth round of negotiations which wrapped up in the Montana beef belt earlier this month. 

The latest session of the tortuous talks were overshadowed by news that Korean officials had rejected yet another shipment of U.S. beef. Once the world's third-largest market for U.S. beef, Korea halted American shipments in 2003 over mad cow disease fears. Imports resumed this October, but the first three shipments, totaling nine tons, have all been halted after minute bone fragments were discovered in the meat – a no-no for Korea.

"We can do more to clarify inspection and rejection protocols," said U.S. Secretary of Commerce Carlos Gutierrez to a group of businessmen in Seoul last Tuesday. "The beef we export to Korea is the same beef as we eat in the U.S." 

With world trade talks in virtual suspension, nations across the globe have been scrambling to secure free trade deals with key partners in recent years. Secretary Gutierrez called KORUS, "the most important FTA in 15 years." Talks started in February, but progress has been slow. In addition to beef frustrations, Secretary Gutierrez noted that there had been no movement on the two key U.S. areas of concern: improved market access for automobiles and pharmaceuticals. 

Korea, meanwhile, has demanded that trade remedies, such as anti-dumping penalties, be included in discussions: Gutierrez insisted that is not part of FTA negotiators' remit, but a matter for Congress. Seoul also wants to include goods produced at the Kaesong Industrial Complex in North Korea in the agreement; Washington disagrees. And the talks have not even started to discuss trade in rice – an enormously emotive issue for Seoul, which wants it off the agenda. But Washington insists KORUS be a "gold standard FTA" inclusive of all sectors.

The stakes are high. According to American data, the U.S is Korea's second largest trading partner; Korea is the U.S.' seventh. In 2005, bilateral trade stood at almost US$72 billion. Studies estimate that an FTA could raise U.S. exports to Korea, the world's 11-largest economy, by half. 

Experts say a deal would grant Korea a critical advantage over competitors China, Japan and Taiwan in the world's largest market and boost to the nation's ambitions to become a trade, finance and logistics hub for Northeast Asia. It would also upgrade Korean companies' competitiveness, and raise national GDP by 2 percent. 

Despite the reported benefits, a heated debate is raging nationwide, in the newspapers and on the streets, from farms to the National Assembly, over the desirability of the agreement. In recent weeks, a surge of demonstrations have shaken the nation, with numbers ranging from 30,000 to 70,000.

President Roh Moo-hyun has championed the FTA. 

" Korea is a country that has grown through opening and competition and is confident of its competitive edge," he said in August. "The United States is the world's largest market. Korea has to win it over there. "

However, he is at odds with many in the ruling Uri Party; party head Kim Keun-tae said this month that Korea should not rush into an agreement.

Korea's farmers – some of the world's most passionate anti-globalization activists - fear they will be submerged if U.S agricultural products flood in. 

"The U.S. wants to monopolize production and distribution of agricultural produce all over the world through economies of scale," said Lee, Young-Soo, Policy Head of the Korea Peasants' League, which claims support from over 100,000 farmers. "Rice is related to sovereignty. I believe that food and agriculture must not be subject to negotiation." 

Although farmers account for less than 4 percent of GDP and only 7 percent of the workforce, most Koreans are only one or two generations removed from the countryside, giving farmers enormous emotional clout. 

Some industrial and service sector unions also reject the FTA, on ideological and anti-competition grounds. They are supported by a mixed bag of anti-globalization activists and anti-American groups; even film makers, angry at increased market access for foreign movies, oppose the agreement.

"The FTA serves the profits of big corporations," said Kim Tae-il, General Secretary of the 570,000-member Korea Confederation of Trade Unions at a recent rally in central Seoul. "Farmers, urban poor organizations and social movements are with us: around 60 percent of people are against the FTA, according to opinion polls."

"If there is an FTA, big educational corporations in the U.S. will enter Korea and undermine the public's right to education," added Lee Byoung-ju, a Korea Teachers Union official. "Education is not for sale."

In this charged environment, FTA proponents speak with care. Officials of the Presidential Commission on Facilitating the FTA, an organization tasked with selling the deal to the Korean public, and KOTRA, the Korean trade promotion organization, called the issue "too sensitive" to comment on. And Korean businesses, which would benefit hugely, have kept a low profile. 

"It's a little surprising the industrial sector does not have a louder voice," said Dr. Hyun Oh-seok, president of research at the Korea International Trade Association, or KITA. "They may think that if some companies benefit, the public, press and politicians might say, 'You'd better compensate affected sectors,' and they worry that anti-KORUS groups could initiate 'no purchase' campaigns."

Although, according to KITA, Korean food prices are among the world's highest, local consumer groups have not joined the debate. 

"For five decades, Koreans were told that exports were patriotic, so now some consumer groups think foreign products are not safe," added Dr. Hyun. "Consumer groups are more focused on safety than on budget."

This is not to say that individual Koreans decline cheaper U.S. beef or rice: According to local media, the most popular black market item smuggled off U.S. military bases is American rice. And steak restaurants on garrisons reportedly do a roaring trade from local clientele.

Meanwhile, the clock is ticking. The next round of talks is scheduled for January, but the expiry of President George W. Bush's Trade Promotion Authority next June creates a de facto deadline for the FTA. And the electoral victories of Democrats are expected to make the passing of a pact trickier in the United States.

"Following recent elections in the United States, some argue that the winds may have shifted in favor of protectionism," Secretary Gutierrez said. "The United States and Korea must make tough political decisions to open our economies to competition."

Korea bureaucrats, however, cannot necessarily be relied upon to make "tough decisions." In the local political climate, those responsible for what the press and the public subsequently consider a bad deal can face retribution. 

In a recent example, former government officials have been detained by the state prosecution on suspicions that they colluded to sell the then-near bankrupt Korea Exchange Bank at below market prices to U.S. turnaround fund Lone Star in 2003. That deal has drawn enormous public ire over the estimated US$4 billion tax-free profits the fund will make.

And with bilateral diplomatic and military relations strained in recent years as liberal administrations in Seoul face off against neo-conservatives in Washington, notably over security ties and North Korea policy, some analysts fear that a failed FTA could poison the alliance further. 

But there are indications that some influencers in Korea are warming to the FTA. 

"The number of rabidly anti media articles is declining," said Tami Overby, president of the American Chamber of Commerce in Korea. "They see that foreign investment and Korea's competitiveness relative to its neighbors is declining, so see an FTA as the best thing they can do."

Other pundits familiar with Koreans' highly emotional national psyche say that the sturm und drang of recent demonstrations and the lack of outspoken support from the elite are simply a cover for a last-minute conversion.

"I think the Koreans have decided they are going to go ahead with this," said Mike Breen, Seoul-based author of "The Koreans." "But their strategy to explain an unpopular caving in on agricultural market opening will be to take a victim posture, that they were pressured by the United States. To do that, they have to negotiate to the final deadline."

The benefits certainly argue for a signing next year. 

"I remain cautiously optimistic," said Overby. "Once they get beyond the emotion of the issues, there is so much for both sides to gain."