Trading With Korea, Checking China
By Doug Bandow
The People's Republic of China (PRC) is ever more confident, challenging U.S. naval ships in the South China Sea and the U.S. dollar in international forums.
China has displaced America as the number one trading partner with leading East Asian states. And Beijing is creating a military capable of deterring armed U.S. intervention in the region.
How do the Obama administration and Democratic Congress respond? By retreating economically from the region, then-Sen. Barack Obama termed the U.S.-South Korean free trade agreement (FTA) ``badly flawed" and urged the Bush administration not to even submit it for ratification.
U.S. Trade Representative Ron Kirk calls the agreement ``unacceptable." Although increased trade with the Republic of Korea (ROK) is ``one of the biggest opportunities we have," he affirms that the administration ``will step away from that if we don't get it right."
This policy is remarkable for both its economic and geostrategic folly.
Washington should be expanding American investment and trade opportunities in East Asia. The starting point should be to ratify the FTA with the ROK.
Total U.S.-ROK trade ran more than $80 billion in 2008 and the South is the seventh largest merchandise trading partner of the U.S. Even a small expansion of U.S.-ROK trade would offer significant economic benefit to both nations.
Jeffrey Schott of the Peterson Institute for International Economics reported, ``The U.S.-Korea pact covers more trade than any other U.S. trade agreement except the North American Free Trade Agreement" and ``opens up substantial new opportunities for bilateral trade and investment in goods and services."
Obviously, the FTA does not eliminate all economic barriers. Sen. Obama was one of many U.S. critics to point to continuing limits on the sale of American autos and agricultural products.
But the pact offers important progress. Writes Schott: ``The FTA outcome on autos makes both sides better off than they would be in the absence of the bilateral deal."
Moreover, further concessions for Washington will be hard to come by. ROK President Lee Myung-bak already has been attacked for easing restrictions on American beef imports. Trade Minister Kim Jong-hoon declared simply: ``There are [to be] no renegotiations or additional negotiations."
The likely increase in U.S. exports, perhaps $20 billion annually, would be particularly helpful to the Americans in the midst of today's deep recession.
Moreover, since the South's per capita GDP today is well below that of the U.S., South Korean demand would likely increase even more over the longer-term, especially if the two Koreas eventually reunite.
Strengthening trade ties is also one way for Washington to ensure continued American influence in East Asia as China rises.
The U.S. remains the globe's sole superpower, with the ability to project power into every region. But Washington will find it increasingly difficult to achieve its objectives in East Asia with military force.
Washington's economic dominance in East Asia, too, is waning. China's rapid growth has naturally led to expanded investment and trade throughout East Asia.
American companies have been pushed into second and even third place in South Korea and Japan. Observed Robert Kapp, a long-time president of the United States-China Business Council: ``The growth of Korean-Chinese economic action has been even more impressive than China's expanding ties with other trade and investment partners."
Beijing is not content to rely on osmosis. The U.S.-China Economic and Security Review Commission warned: ``China has linked its growing economic power with strong diplomatic initiatives throughout Asia."
Indeed, Beijing has been negotiating or discussing free trade agreements with Australia, Japan, South Korea, and Taiwan, among other countries. All are current or former military, as well as political, allies.
South Korea is not waiting for the U.S. The ROK has negotiated FTAs with the member states of the Association of Southeast Asian Nations (ASEAN) and several European countries. Moreover, Seoul has just concluded trade negotiations with the European Union.
Yet the U.S.-ROK FTA sits unratified in Washington.
Washington's influence in East Asia is slowly ebbing. The U.S. should expand trade and investment ties throughout the region. Washington should pursue FTAs with Japan and Taiwan. But first Congress should ratify the accord with South Korea.
The primary benefit of the agreement is economic but expanding trade ties will offer geopolitical advantages for America as well. Failing to ratify the South Korean FTA is likely to result in permanent damage at a time when China is rapidly expanding its influence throughout East Asia.
Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is the author and editor of several books, including ``Foreign Follies: America's New Global Empire" (Xulon). He can be reached at ChessSet@aol.com.