Following is the first in a series of articles on the Korea-U.S. Free Trade Agreement which marks the first year after its effectuation on March 15, 2012. ― Ed.


A year has passed since the controversial Korea-U.S. Free Trade Agreement took effect. But disagreements still exist on whether the free trade deal had a positive influence on Korea’s economy, as the government had guaranteed.

The majority response from experts is that the trade pact has so far been a “half success,” as it has displayed positive effects but also left crucial tasks yet to be solved.

According to the Korea Customs Service and the Korea International Trade Association, Korea’s total exports to the United States since last March up to January this year amounted to $53.8 billion, up 2.67 percent on-year.

The trade surplus during the same period soared 44 percent, from $10.2 billion to $14.7 billion, the data showed.

“While the global economy remained sluggish, the KORUS FTA proved its positive effect by acting as a safety net for Korea’s export figures,” said Choi Won-mok, a law professor at Ewha Womans University.

The increase was especially visible in automobiles, machinery, petroleum products and rubber goods ― all of which benefited from the alleviated tariff system.

However, some industrial sectors, such as semiconductors and wireless communications apparatus, saw a slight decrease in exports.

The agricultural sector, which was the greatest point of concern in the trade pact negotiations, put up a good defense against cheap U.S. agricultural and livestock goods.

Though imports of oranges and cherries soared, total agricultural imports fell to $3.8 billion from $4.6 billion.

In particular, imports of U.S. beef, which triggered nationwide protests in 2008, turned out to be lower than originally expected.

Korean agricultural exports, on the other hand, were strong, boosted by the rising popularity of kimchi, dried laver and red ginseng.

Such encouraging results came against the government’s earlier prediction that imports of U.S. agricultural goods would jump by $424 million.

In the new free trade environment, the level of foreign direct investment also amounted to $16.3 billion last year, 18.9 percent up from the previous year, according to the Ministry of Knowledge Economy.

Another positive result of the FTA is that several firms in high-value-added industries such as jewelry relocated their production units from China back to Korea.

The non-tariff advantage is sufficient to make up for the cheap personnel expenses, a factor which had attracted Korean manufacturers to China over the past years.

The new Park Geun-hye administration, however, is still faced with a series of disputes, the most representative one being the controversial Investor-State Dispute Settlement clause.

As the corresponding clause allows foreign investors to take governments to an international tribunal, opposition parties and civic groups here have demanded that the clause be removed or alleviated.

Also, it has been pointed out that small and medium enterprises are largely excluded from the trade pact benefits, due to the complicated processes required to take advantage of them.

The problem is that the trade department is currently going through a transition period, facing a sudden transfer from the Ministry of Foreign Affairs and Trade to the Ministry of Industry and Commerce.

“The various forums and committee meetings related to the KORUS FTA are facing a delay, due to the government reorganization plan,” said an official of the Trade Ministry.

While Korea’s trade function remained in a stalemate, its key trade counterparts such as the United States, the European Union and Japan have set to speeding up their ongoing trade pact talks, a factor which may reduce the effect of the KORUS FTA.

In order to respond to the rapidly changing world trade environment, it is crucial that Korea picks up momentum in its bilateral FTA with China, as well as the trilateral one with China and Japan, ministry officials said.

By Bae Hyun-jung (tellme@heraldcorp.com)