FORUM: Good news on trade with South Korea

South Korean President Lee Myung-bak is visiting the United States this week to meet with U.S. officials and President Bush to discuss a range of issues, including the proposed Korean-U.S. Free Trade Agreement (KORUS). While U.S beef and auto exports have been at the center of the U.S. - Korea trade debate, a lesser-known but critically important area of the proposed accord is the economic benefit to U.S. workers and service providers.

KORUS would eliminate many of the regulatory and economic barriers that have prevented American businesses from achieving their full potential in the booming South Korean economy, the tenth largest in the world with a gross domestic product of nearly $1 trillion. Moreover, the precedent established by KORUS will serve as a model for trade agreements with other growing Asian economies, potentially securing America’s role as a major trading partner throughout the vital Pacific Rim.

Particularly important is the positive impact KORUS will have on the services sector of the American economy. Although often overlooked in the political debates over trade, service industries such as insurance, finance and telecommunications account for nearly 75 percent of total output in the United States. The United States is the world leader in trade in services, with exports totaling $340 billion in 2004.America enjoys a $48 billion trade surplus in services. Eight out of every 10 jobs in the United States are tied to services, and in terms of job creation, service industries provide more new jobs than the rest of the U.S. economy combined.

Looking specifically at the life-insurance industry, KORUS will make it easier for American companies to introduce new and innovative life insurance and retirement security products to South Korean consumers. The South Korean insurance market is the eighth largest in the world with total annual premiums of more than $65 billion. But the market has long been controlled by a government-owned company that sells insurance through the Post Office. This company has enjoyed special privileges that put private-sector companies at a competitive disadvantage. KORUS eliminates these unfair privileges. All providers of insurance in South Korea will be subject to the same set of regulations. Moreover, KORUS establishes a more open and transparent insurance rulemaking process in South Korea, including notice and comment periods. This vital due process protection will also help assure fairness for U.S. insurers in a major global market.

Considering the expertise of America’s insurers in retirement and financial security, KORUS should help spur significant new business opportunities. This will have a major and positive impact on America’s balance of trade. In 2006, U.S. life- insurance companies enjoyed premium sales of $20 billion in South Korea. Once KORUS is approved, more growth can and will follow.

South Korea’s commitment to reforming its financial-services sector will help establish the country as a regional financial center, adding both economic and political balance in the Pacific Rim. Moreover, other large economies, including China, are working aggressively to expand trade partnerships with South Korea and other countries in the region. The United States cannot afford to stand on the sidelines and allow others to take the lead in defining trade relations and business standards in Asia.

KORUS represents what could be the tip of the proverbial iceberg to good economic news. Considering the bad economic news we’ve been getting lately, our large — and growing — trade-in-services surplus provides good reason for hope.

Frank Keating is President & CEO of American Council of Life Insurers.