Is Congress in Deep Kim Chee?
The European Union and South Korea initialed their new Free Trade Agreement, launching the race for ratification. The United States and South Korea did their agreement 2 1/2 years ago, but the U.S.-Korea FTA is held up by the failure of the U.S. Congress to act. The European Union needs ratification from 27 parliaments, but there is every chance they will get it done before our Congress moves. I hope I’m wrong about that, but I have every confidence that our politicians will screw it up. I expect the EU-Korea FTA will be operating by January 1, 2011, with the U.S.-Korea FTA following later. That means lost opportunities and jobs for American exporters and great profits for our European competitors.
EU-Korea FTA
It is hard to measure, but some are saying that the EU-Korea agreement is the largest FTA ever, except for NAFTA. To make that statement, you have to exclude the creation of the European Union itself, but – anyway you measure it – this agreement is huge and great for world trade. According to initial reports, up to 99% of trade moving between Europe and South Korea will be duty free and many nontariff hindrances to trade will be dropped. Word from Korea is that the FTA will pump their GNP by 3% and raise employment by 3.5%.
Of course, there are nay-sayers. We can expect the European auto industry to oppose the FTA, but they will likely be more than offset by food and consumer products sectors, healthcare companies and financial services, all of which stand to be big winners.
So, when will the U.S. Congress get off the dime? Hopefully, while the dime is still worth something.
October 23rd, 2009 at 4:50 pm
Just a quick addendum. The Korea-US FTA and the Korea-EU FTA are quite similar in most respects. According to the Office of the U.S. Trade Representative, the Korea-EU agreement will eliminate 92% of Korea’s tariffs, while the Korea-US agreement will take 94.5% of Korea’s customs duties to zero.