U.S.-South Korea Free-Trade Deal Ratified in Seoul Amid Protest
December 02, 2011, 5:38 AM ESTBy Eunkyung Seo and Sungwoo Park
Nov. 23 (Bloomberg) -- A free-trade agreement between the U.S. and South Korea reached more than four years ago will take effect as early as Jan. 1 after lawmakers in Seoul approved the deal over objections from opposition legislators.
The ruling Grand National Party used its majority in the National Assembly to ratify the deal yesterday in Seoul amid violent protests. Local television stations and newspapers showed images of opposition lawmakers shouting and one shooting a tear gas canister in the room where the voting took place. President Barack Obama signed bills for the pact to go into law in the U.S. last month after Congress passed them.
“This is a win-win agreement that will provide significant economic and strategic benefits to both countries,” U.S. Trade Representative Ron Kirk said in a statement. “We look forward to working closely with the government of Korea to bring the agreement into force as soon as possible.”
The accord may help South Korea’s economy expand by 5.7 percent within a decade and create 350,000 jobs, according to the nation’s finance ministry. The biggest trade deal for the U.S. since the North American Free Trade Agreement took effect in 1994 will boost exports by as much as $10.9 billion in its first year of full effect, according to an estimate from the U.S. International Trade Commission.
South Korean President Lee Myung Bak, who must sign the agreement into law, told the U.S. Chamber of Commerce last month that the FTA would create “good, decent jobs” to help spur both economies.
‘Competitive Edge’
The Korea Automobile Manufacturers Association welcomed today’s passage. Yim Eun Young, an analyst with Dongbu Securities Co. in Seoul, said auto-parts makers such as Hyundai Mobis Co., an affiliate of Hyundai Motor Co., and Mando Corp. will be the most immediate beneficiaries.
“The trade deal will help expedite Korean car-parts makers’ efforts to increase overseas orders as the tariff removal will give them a competitive edge,” she said.
Mando rose 1 percent to 195,000 won at 10:28 a.m. in Seoul while Halla Climate Control Corp., which makes car air conditions and vents, gained 0.7 percent to 21,850 won. Hyundai Mobis was unchanged at 313,500 won while the benchmark Kospi index declined 1.5 percent.
The accord, initially agreed to by Presidents George W. Bush and Roh Moo Hyun in 2007, was delayed as Lee and Obama sought to broaden support for the deal.
Stalling Tactics
South Korea’s main opposition Democratic Party stalled the government’s efforts since June to put the bill to a vote, on several occasions physically blocking lawmakers entering subcommittee meetings to prevent its advance to a plenary session, said Kim Wook, a GNP policy coordinator.
The GNP had shown reluctance to push the legislation through after recent electoral setbacks. Independent candidate Park Won Soon won the Seoul mayoral race last month, dealing a blow to the ruling party and Lee ahead of national elections next April.
“It was a decisive move for the ruling party to push this through for the national interest even though they will pay a political cost in coming elections,” said Choi Byung Il, a professor of international studies at Ewha Women’s University in Seoul. “Korea can’t grow without exports.”
Korea’s Democratic Party, which initially demanded further debate on the accord’s impact on areas including agriculture and fisheries, narrowed its objections to the Investor-State Dispute settlement clauses, which it said could let U.S. investors sue the South Korean government.
Chemicals, Medical Devices
Trade Minister Kim Jong Hoon said in a radio interview on Oct. 31 that such clauses were standard in international agreements and had never resulted in South Korea being sued.
The South Korean tariff phase-outs increase market access for U.S. chemical, automobile, medical device and drug companies. The end of duties on a range of agricultural exports benefits producers of meat, dairy, vegetables, fruits and nuts. Banks and communications companies would also gain opportunities through reductions in regulatory barriers.
South Korea’s trade surplus may expand by an average $2.77 billion annually in the first 15 years of the accord, with automobile, electronics and chemical exporters among the biggest contributors, the finance ministry said in an Oct. 13 statement.
--With assistance from Brett Miller in Seoul and Eric Martin in Washington. Editors: John Brinsley, Brett Miller
To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.net; Eunkyung Seo in Seoul at eseo3@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net
