KORUS to Enter into Force March 15
Four months to set the date: pretty fast by FTA standards
by Bill Armbruster, blog anchor
Like many free traders, I was part of the chorus singing “Hallelujah” when Congress passed legislation last October approving the free-trade agreements with Korea, Colombia and Panama. It had been more than four years since Bush administration officials and their Korean counterparts concluded negotiations, but the agreements were stalled, primarily because of opposition by Congressional Democrats and President Obama’s insistence that key provisions be renegotiated.
But even after Obama signed the legislation on Oct. 21, heaven would still have to wait. Only now has an effective date for the Korea FTA – known as KORUS – been announced: March 15.
What the wait? The Korea FTA also had to be approved by Korea’s own bitterly divided legislature. It took a fight – literally – with most opposition members walking out and one even tossing a tear gas canister at the speaker’s podium before the majority approved the deal on Nov. 22.
With legislative approval on both sides, there followed more negotiations before US Trade Representative Ron Kirk and Korean Trade Minister Bark Tae-ho announced on Feb. 21 that they had reached a final deal.
Even though the four months between Congressional passage of the legislation and setting a date for implementation seems like a long time, KORUS has actually moved faster than most FTAs, according to Troy Stangarone of the Korea Economic Institute.
“The implementation process is often long and difficult as both sides certify that all necessary steps have been taken to implement the agreement. It was always a little overly ambitious to think that this could be done in one or two months,” he wrote me.
Korea is the US’s seventh largest trading partner, with bilateral merchandise trade last year totaling $100 billion, according to the US Census Bureau. US exports totaled $44 billion last year, while imports totaled $56 billion.
Under the deal, almost 80% of US manufactured exports to Korea will become duty-free on March 15, as will almost two-thirds of US agricultural exports, according to the US Trade Representative office’s announcement.
The agreement includes significant commitments related to non-tariff measures that will also take effect immediately, including strengthened protections for intellectual property rights and the opening of Korea’s $580 billion services market.
But it will take 15 years to phase out tariffs on beef, which had been one of the most contentious issues. And the Korean market will open more slowly for US autos, which is laughable considering that the huge presence of Korean automakers in the US market. But at least the US won some concessions that will benefit the US car companies.
The Korea accord is the second-largest US FTA, trailing only the North American Free Trade Agreement.
The deal is expected to increase US goods exports by approximately $11 billion, according to a White House fact sheet. Moreover, the pact will put the US on an even keel with the EU, which entered into an FTA deal with Korea last July. The US used to be Korea’s top foreign supplier, but now it’s in fourth place, trailing China, Japan and the EU.
Some details still have to be wrapped up before March 15, according to Korea’s trade minister. “We set the date because companies in the two countries will need some time to prepare,’’ he told reporters.
The FTA could still face some trouble. The opposition Democratic United Party, which is favored to win parliamentary elections on April 11, has warned that it might repeal the agreement. Experts think that’s unlikely, even though the DUP is expected to win the presidential election in December. “I think it’s more smoke than fire,” said Jack Pritchard, president of the Korea Economic Institute, adding that the DUP supported the FTA when it was in power.
Next: The halting progress of the Colombia and Panama FTAs.
Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
Date posted: February 24, 2012