'The first major hurdle has been crossed, but there is still a long way to go before Korea and the U.S. reach the final finishline of this FTA race.’

Tami Overby
President & CEO, American Chamber of Commerce in Korea

When Korea and the United States first announced their intentions to launch a free trade agreement on February 2nd, 2006, many people doubted the feasibility of such an ambitious idea.

However, just over a year later and after a dramatic finale to the negotiations, the KORUS FTA was successfully concluded on April 2nd, 2007 (Seoul time). The first major hurdle has been crossed, but there is still a long way to go before Korea and the U.S. reach the final finish line of this FTA race.

Once this deal is ratified by both country's national legislatures, Korean products will enjoy preferential access in the largest market in the world and since many experts do not expect this Democratic Congress to give President Bush renewed Trade Promotion Authority, this access could be locked-in for a period of time.

It is vitally important that this race is completed by Korea, for the resulting economic, political and strategic benefits for Korea are beyond the promises any other agreement has ever provided. Failure to take advantage of this once in a lifetime opportunity for Korea would be extremely unfortunate.

The analogy of the FTA process to a race is entirely fitting.

From the start of the FTA negotiations, both USTR and Korean negotiators were working under an important timeframe in order to take advantage of a U.S. trade legislative process called Trade Promotion Authority (TPA).

This is where any U.S. free trade agreement, if submitted to Congress within the designated time period, may either be ratified or rejected by Members of Congress without the possibility of any amendments to be added the submitted agreement.

In the case of the KORUS FTA, this means that once the agreement is presented to Congress, Members will only be able to vote in support or against the agreement.

In order for Korea and the U.S. to take advantage of this TPA, the first challenge was to complete the agreement by April 1st, 2007 Washington DC time and the second is to ensure that both President Roh and President Bush sign the final FTA by June 30th, 2007. If this is not achieved, the KORUS FTA race will be over, with virtually no possibility of restarting a new one since President Bush's TPA will expire June 30th, 2007.

The drama of the eighth and final round of the KORUS FTA negotiations was eventually concluded in the last 19 minutes of the meeting on April 2nd, 2007, (Seoul time) after two missed deadlines and an unprecedented extended deadline.

However, while some have openly criticized this apparent rush towards reaching an agreement, those who have closely watched this FTA process from the beginning know that this is not the case at all.

Before entering the negotiations, both countries conducted a year-long preparatory study to determine whether both countries would benefit from an FTA.

The Korean negotiating team led by Ambassador Kim Jong-Hoon, conducted a thorough research of all past FTAs the U.S. had ever been involved in, and this gave Korea a great advantage at the negotiating table, with Assistant USTR and Chief U.S. negotiator Wendy Cutler describing her counterparts as the toughest, most prepared negotiators she had ever encountered.

Much credit should therefore be directed to both teams for concluding a meaningful, fair and balanced agreement in spite of the difficult time constraints they faced, but which also provided them with a further incentive to focus on reaching a platinum standard agreement.

Due to the release of the comprehensive FTA document on May 25th, 2007, I only wish to touch briefly on what I consider to be two of the most important implications of the FTA for Korea; 1) the emergence of Korea as the hub of Asia and 2) the growing relationship between Korea and the U.S.

The FTA will ensure that Korean products and services have preferential access in the U.S. market, the largest in the world, ahead of is neighboring competitors Japan, the world's second largest economy, and China, the world's fastest growing economy.

Therefore, as the first North-East Asian country with an FTA with the U.S., it will give Korea a much needed economic advantage, both domestically and internationally.

Already, we have seen a halo effect just from the completion of the KORUS FTA. There has been an immediate positive impact on Korea with the successful launch of the Korea-EU FTA talks and also with China eager to begin trade negotiations with Korea.

Also, in America, we have seen Japan asking quietly what they need to do in order to launch negotiations with the U.S., and these reactions merely show that the successful conclusion of the KORUS FTA is helping Korea and U.S. to shape the trade agenda in North East Asia.

The U.S.-Korea relationship will also continue to grow through this FTA and it will spur both renewed interest from U.S. investors into Korea as well as from other foreign investors. This is a very positive and important signal for Korea to send to the international business community, as foreign direct investment into Korea has been lately declining.

Korea's ratification of the FTA with the U.S. will also indicate to international markets that the Korean market is competitive and open for business, and in addition, will provide renewed energy for Korea to continue moving forward with its internal economic reforms thereby ensuring Korea's continued competitiveness.

There are other economic reasons as to why Korea should support the FTA.

The Financial Services Chapter for example is one of the strongest in the Agreement and will allow Korea to fully open its market thereby making it competitive and economically prosperous.

I hope that those who have carefully read the FTA document and other initial opponents of the FTA will be encouraged as I have been by the balanced nature of the agreement, and that the economic reasons for supporting the FTA become even more apparent.

So what should Korea do now?

After the signing of the FTA on or before June 30th, 2007, it will be up to Members of Congress and the Korean National Assembly to ratify the Agreement. This means Korea must now start doing everything in its power to increase the confidence of those in the country who may still be opposed to the FTA and also convince Washington through its actions that it is committed to ratifying the FTA.

Currently in Korea, there are several ways in which this message can be successfully delivered.

One involves Korea's reaction to the current controversy surrounding the ``renegotiation'' issue and the second concerns Korea's position on the beef issue.

In the U.S., the FTA has become a casualty of politics with the emergence of the new trade compromise negotiated by the Democrats, calling for higher levels of labor and environmental standards in all FTAs involving the U.S.

However, it must be emphasized that such a compromise will not affect the substance of the Labor/Environment Chapters of the KORUS FTA. Instead, this compromise will merely involve clarification of the language used in the existing text to ensure that the language reflects the standards desired by the Democrats. It must also be remembered that such language is absolutely necessary for any trade agreement to gain support in order to pass through Congress.

Korea must therefore realize that the use of the term ``renegotiation'' is inaccurate or a misunderstanding of what it is the U.S. actually wants from Korea.

Only through this realization will Korea be able to address this ongoing issue with the U.S. with an open and trusting attitude. Korea should also be assured in knowing that it boasts 4 ratified Core ILO standards, while the U.S. has only ratified 2, technically making it a country with higher labor and environmental standards than the U.S. The change of Korea's reactions to this issue will no doubt show the U.S. Korea is willing to go the distance in order to reach the finish line of this critical FTA race.

With respect to the beef issue, it was hoped that the recent announcement of the World Organization for Animal Health (OIE) declaring U.S. beef as ``Controlled Risk,'' would result in the immediate reopening of the Korean beef market to U.S. beef.

Unfortunately however, there seems to be some negativity in Korea towards the OIE decision.

For example, some reports claim that the conclusion of the OIE was a result of the pressure put on the organization by the U.S.

However, such reports are misleading to the extent that the OIE is a recognized organization comprised of several leading international members. It has also been suggested that the U.S. cannot guarantee the safety of its beef or the chances of ``mad cow disease'' from being completely eliminated in the U.S.

However, while this may be true, we should not take such statements literally, for just as it is impossible for a doctor to tell his patient that they will never be infected with a disease again, it is impossible for scientists in any country to rule out any possible reoccurrence of BSE.

However, maintaining internationally accepted and reasonable safety standards can prevent such dangers from reoccurring and the decision of the OIE unconditionally determines that U.S. beef adheres to such standards, making it safe to export its beef to countries such as Korea.

Such reactions by highly influential mediums therefore can often be very dangerous as they serve to cause doubt and controversy in areas where none is necessary.

Korea should therefore honor its commitments to reopen its market to U.S. beef as soon as possible. This is not to say that Korea should disregard the health of its citizens. However, with hundreds of millions of Americans and Koreans eating U.S. beef worldwide, there can be little doubt as to the safety of the U.S. food chain.

We therefore hope Korea will reconsider its position on this matter swiftly. If not, there is a definite possibility that the U.S. Congress will not ratify the FTA.

Korea and the U.S. have bravely dedicated their time to conclude the FTA.

The finish line of this race is within reach. However, one last push is required to ratify the KORUS FTA in both Korea and the U.S. Once this is achieved, Korea will reap the tremendous benefits of being the economic hub of Asia and a stronger economic partner of the U.S.

If the Korean National Assembly were to ratify the agreement first, it would put enormous pressure on Congress to do the same quickly as none of the promised benefits can be enjoyed until both legislatures ratify the agreement.

One last rush of adrenalin and momentum is needed from Korea. The international world is watching and willing Korea to finish the race. Let us not disappoint them.