Go to content


Columns

Opinion pieces on business & economic issues

PARK Hyun-Soo

Korea-US FTA: There Will Be Some Pain alongside Enormous Gain

Apr. 3, 2007

email Print

Negotiation is meant to be a give and take; thus it's impossible to win everything and lose nothing. Some sectors will benefit and others will not - that's natural.

The direct impact of the free trade agreement will be found in easier access for Korean products to the United States, the world's biggest market. Removal of or relief from tariffs is expected to help enhance the price competitiveness of Korean goods exported to the United States. Although some say the lower tariffs will result in few benefits because of the small degree of the reduction, even a minor price cut can have a substantial influence in the huge U.S. market, where products from all over the world compete against each other.

Increased demand for certain goods in the U.S. market is also expected to bolster investment by Korean companies, because stable demand fundamentals will reduce uncertainty and boost capital spending. Obtaining a stable source of demand for high value-added products will induce brisk investments in next-generation growth engines that require large-scale investments. Enlarged investments will in turn create a virtuous circle, revitalizing the local economy.

Meanwhile, imports of U.S. products into Korea will increase in accordance with a rise in Korean exports. That will lower the prices of imported goods, contributing benefits to consumers.

Although the consumer surplus has not drawn attention in the process of negotiations, it could have the biggest impact on the domestic economy. Fighting against imported goods, Korean industries will improve their competitiveness. But it is regrettable that the legal and accounting sectors will have a lower degree of market opening than previously anticipated.

As the agreement aims to enhance industrial competitiveness through intensified rivalry among industries, it will inevitably make some companies or industries suffer in the process.

In the market economy, companies with lower competitiveness will naturally be harmed and fear of liquidation will force companies to enhance their efficiency. Some governmental support will be required for those companies that are too badly affected. Rather than providing indiscriminate and unconditional aid for them, the government will have to introduce strategic policies in a way that can induce them to switch their industrial sectors or increase their competitiveness.

Reprinted from Joongang Daily.

The writer is a research fellow at the global research Department, Samsung Economic Research Institute. Inquiries on this article should be addressed to serihs.park@samsung.com.

Go to list