Trade Minister Kim Hyun-chong and his U.S. counterpart Rob Portman will announce the start of bilateral free trade negotiations at 5 a.m. Korean time on Friday. The two countries are expected to start official FTA negotiations sometime in May. That is the earliest date given that the U.S. government needs three months of consultations with Congress, but any later start would be problematic since the deal must be concluded by March 2007, when a special congressional mandate to expedite free trade deals expires.
If concluded by then, the FTA will take effect in 2008 after ratification by both parliaments. The road will be stony since it already faces resistance from the film and agricultural industries here. The trade pact is tipped to benefit export industries such as cars and electronics but confront agriculture and other areas with the need for drastic belt-tightening measures on a par with the painful restructuring that followed the 1997 Asian financial crisis.
Free access to the U.S. market, the biggest in the world, will have an enormous impact on Korea¡¯s economy, society and culture. The government predicts that real GDP will grow 1.99 percent and 104,000 new jobs will be created, especially in the manufacturing sector, three years after the FTA comes into effect. Exports to the U.S. rise by US$7.1 billion but imports from America will increase by W12.2 billion, a $5.1 billion blow to the trade surplus. Domestic agricultural production will decline by as much as W1.97 trillion as cheap U.S. produce floods the market. Moves allowing Koreans to visit the U.S. without a visa are underway, giving Korean companies and people easier access to the country. The free trade pact would also make it easier for Americans to do business in Korea.
U.S. cars will get 9-10 percent cheaper when the current 8 percent tariff is scrapped. Korean consumers favor Japanese or European cars, but the U.S. auto industry is expected to see sales here improve when prices become more competitive. Cheap American clothing and beverages will also force domestic companies to cut prices. Korean consumers are also tipped to get access to better medical and education services as local providers must compete with their U.S. counterparts. The Foreign Ministry expects that the number of Koreans going to the U.S. for study or medical treatment will decline.
The two nations will probably agree to scrap tariffs on manufactured goods completely, a move that is expected to help exports of Korean flagship products such as cars, electronics, textiles, clothing and rubber, with the auto industry the biggest beneficiary. For instance, the current tariff on sedans is 2.5 percent: take that away, and Korean cars become even more affordable for Americans. The electronics industry which accounts for 42 percent of total exports to the U.S. will see its export volume increase by $350 million. Another beneficiary will be textiles and clothing, now burdened with steep tariffs of 28-30 percent in America.
(englishnews@chosun.com )
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