South Korea Finally Approves FTA With US

South Korea’s ruling Grand National Party (GNP) has lost patience with the continued opposition of the Democratic Party (DP) and has pushed the South Korea–United States free trade agreement (KORUS FTA) through parliament using its absolute majority.

Despite chaotic scenes in the National Assembly, with a tear gas canister being exploded and a surprise vote being called, the GNP used its absolute majority to pass the various bills needed to enable the government to bring the KORUS FTA into effect. As the US Congress had already approved the agreement in October this year, it is now hoped it will enter into force on January 1, 2012.

The government has always maintained that the KORUS FTA, which was originally signed in 2007, would be of great benefit to the South Korean economy and its competitiveness, and it has been estimated that, by reducing tariffs, it would increase the country’s gross domestic product by at least 5.6% in the long-term.

However, the DP became implacably opposed to the FTA following its first renegotiation last December at the insistence of the US, pronouncing that the treaty had become too favourable to the US, and that it should be further renegotiated.

Initially, one of the DP’s major demands was that official assistance for South Korean farmers, traders and small- and medium-sized enterprises, which would be affected by the lower tariffs and the opening up of the local market to US investors, would need to be augmented. When the government complied with that, the DP then insisted that the investor-state dispute settlement clause should be dropped from the legislation completely, before its passage through parliament.

The GNP had wanted to avoid going ahead with the approval of the KORUS FTA without, at least, the tacit support of the opposition, as it has not wanted to leave itself open to accusations of railroading the agreement through parliament. However, both the GNP and the government, obviously, decided that they could delay no longer.

Its action has received an immediate and positive response from the US Trade Representative Ron Kirk who welcomed the National Assembly’s approval of the FTA, confirming that “this is a win-win agreement that will provide significant economic and strategic benefits to both countries. We look forward to working closely with the government of South Korea to bring the agreement into force as soon as possible.”

Source: Tax News