Free Trade is an idea often touted but sometimes tough to enact. The Korea-United States Free Trade Agreement, now in legislative limbo before Congress, is a chance to tip this balance toward free trade as a broader reality. Enacting this agreement can only be good for America.
The Republic of Korea (South Korea) and the United States have much to offer each other. Korea is one of the world’s fastest-growing economies and has the 12th largest gross domestic product (GDP) in the world. The nation is already our seventh-largest trading partner, and passage of the FTA will substantially expand U.S. access into the vibrant and modern Korean economy.
A dramatic spike in U.S. foreign direct investment is one surefire result of this agreement. By opening its markets to U.S. investors and affording necessary legal and investment protections for U.S. companies, Korea invites much increased U.S. corporate activity within its markets. For the United States, this means economic growth, as the largest market for U.S. exports is foreign-based subsidiaries of U.S. companies.
With strong protections for U.S. intellectual property rights, strong provisions pushing for greater transparency in Korean markets, the elimination of tariff and nontariff barriers to many U.S. exports and investment, and legal protection against unfair expropriation, the FTA is a guarantee of economic opportunity for many American sectors.
American agriculture will benefit under the FTA, with broad elimination of tariff barriers both immediately for some products and over several year phaseouts for others. According to the U.S. Trade Representative, Korea’s average applied tariff on U.S. agriculture now is 52 percent; the U.S. average tariff is only 12 percent. Clearly a broad reduction and abolition of these tariffs makes sense.
American manufacturing will see similar benefits, since 95 percent of all bilateral trade in manufactured goods would immediately be declared duty-free under the FTA. American services such as insurance, banking and telecommunications are also provided greater access to the Korean economy under the agreement, and will find greater economic opportunity as a result.
Agriculture, manufacturing and services are only the beginning of a long list of economic beneficiaries of the agreement. Overall, Korea’s average applied tariff is three times greater than the U.S. average applied tariff. Simply but accurately, the passage of the Korea FTA will increase America’s overall economic well-being and right the balance of trade between the two nations.
The agreement also will benefit Korea’s economy greatly, though this is a positive for America’s political standing as well. It does not take a “policy expert” to understand the importance of fostering good relations with Korea, especially considering its strategic location in the world. Economic interest is a powerful force in drawing nations together and tightening the bonds of allegiance. Linking Korean economic growth to U.S. industry and investment through a FTA is a splendid way to winch our nation’s alliance even closer. By strengthening our ties with Korea, this FTA will strengthen U.S. political and economic influence all through Southeast Asia. It will also provide a firmer platform from which to address the growing U.S. trade imbalances with China.
The Korea-United States Free Trade Agreement is a darn good deal for America. Surely free trade is a policy we should always pursue as a general rule. It will bring greater access to foreign markets — and with this access, greater influence in foreign affairs. The Korea agreement in particular gives us a strategic edge in a region of increasing world importance. It is also projected to bring between $17 billion and $43 billion in income to the United States.
Congress should act now in the best interest of America and approve the Korea FTA.
Alan K. Simpson is a former Republican member of the United States Senate from Wyoming.