The free trade agreement between Korea and the United States (KORUS-FTA), which marks its fifth anniversary today, is a “mutually beneficial” deal for both countries, government officials and experts said.
In a recent report, the Office of the U.S. Trade Representative said the free trade deal needs a major overhaul to narrow America’s trade deficit with Korea.
In response, officials here said the U.S. is underestimating its gains from the FTA.
“It’s not easy to open up trade 99 percent. Though it was not easy to begin with, the two countries have both achieved win-win results,” said Woo Tae-hee, vice minister of trade, industry and energy, during a round table discussion with The Korea Times in central Seoul, Friday. “We will highlight that the two countries have both been the beneficiaries and concentrate on boosting efforts for implementation.”
Korean-American Association Chairman Park Jin, who led the ratification of the KORUS-FTA as a lawmaker in 2011, agreed with the vice minister.
“It was made as a win-win model both for Korea and the U.S. I am confident the FTA is not only beneficial to one side,” Park said. “I believe the U.S. government also agreed to the deal because we set the direction for free trade through a model FTA.”
Commemorating the fifth anniversary of the KORUS-FTA, The Korea Times invited trade experts to discuss the past, present and future of the agreement.
Shin Seung-kwan, president of the Institute for International Trade at the Korea International Trade Association, and Korea Institute for Industrial Economics and Trade President Yu Byung-gyu joined the vice minister and Park for the discussion.
The Trump administration has criticized the deal, citing a discrepancy in the balance of commodity trade.
The KORUS-FTA took effect on March 15, 2012. Korea’s trade surplus with the U.S. reached $23.3 billion in 2016, up from $11.6 billion in 2011. But the U.S. recorded a trade deficit of $27.6 billion last year, increasing from $13.2 billion in 2011, according to an estimate by the U.S. government.
Experts pointed out that the gap in trade balance comes naturally due to the different economic structures of the two countries.
“The U.S. is a country with the world’s largest trade deficit as its system must import to make profits,” Yu said.
Shin concurred. “The U.S. basically has a structure that focuses more on investment and spending over saving. And it borrows money from overseas to do so. The U.S. government’s logic of simply comparing trade balances is hardly acceptable,” he said.
The experts also said the U.S. expanded its trade surplus in the services sector following the KORUS-FTA. This reached $14.1 billion in 2015, up from $10.9 billion in 2011.
The trade volume between Korea and the U.S. has also increased 1.7 percent during the last five years whereas Korea’s trade in general has decreased by 3.5 percent. Global trade has also decreased 2 percent over the same period, according to the Ministry of Trade, Industry and Energy and KITA.
The U.S. share of Korea’s import market reached 10.6 percent in 2016, up from 8.5 percent five years ago, the highest since 2007.
“The number of trade issues between the two countries has been halved after the FTA,” Woo said. “We have about 20 committees to continuously discuss matters such as tariffs and intellectual property. Meetings and discussions have resulted in a decrease in trade disputes.”