Korea-U.S. Free Trade Agreement: Challenges and Opportunities

As we meet on this idyllic island, I would like to take a moment to express my sympathy to the people of Korea, who for over a week now have been battered by torrential rains and flooding. Besides viewing the truly horrific scenes on the news every night, I witnessed some of the devastation first-hand last weekend as I traveled between Seoul and Mount Seorak. On returning to Seoul, I used my authority as Ambassador to request funds from our Office of Foreign Disaster Assistance to be given through the Embassy to the Korean National Red Cross. This money will be used to purchase relief items and assist with emergency shelter activities in Gangwon Province and other affected areas. This gesture on our part may be small relative to the overall need; but we wanted to express our concern and also our enduring gratitude for the generous assistance your country extended after Hurricane Katrina last year.

Turning to my principal topic, as you know, we completed the second round of negotiations toward an FTA one week ago in Seoul. While it is difficult to summarize the outcome of that round in a single sentence, I believe the title of the speech I was asked to make captures it well: ‘Korea-U.S.-FTA: Challenges and Opportunities.’

We made progress in the second round; but the second round also illustrated the challenges we face moving forward to successful completion of an FTA. I will focus in turn today on three such challenges. The first of these is the challenge of reconciling the need for citizen involvement in the talks with the negotiators’ need to hold private discussions in a peaceful environment. The second challenge is the negotiators’ task of producing a comprehensive, balanced package that is greater than the sum of its many, highly technical individual parts. The third challenge, particularly relevant to this audience, is to maintain momentum in the talks through increased efforts to promote the FTA.

As to the opportunities, I will speak not only about the potential economic benefits of an FTA, but also about turning each of the challenges I mentioned into opportunities. As an example, I appear here before you today as a committed FTA supporter, taking this opportunity to counter some of the negative and often misplaced concerns about the FTA that represent one of the major challenges we face in getting to an agreement.

I will start with the first challenge, reconciling the need for citizen involvement with the need for a quiet and sedate negotiating environment. Both Korea and the U.S. are democracies that cherish the hard-won rights of freedom of speech, freedom of assembly and freedom of the press.

A week ago, I was stuck in my office for about four hours because of the anti-FTA demonstrations in and around the Embassy. Yes, I had to miss my dinner engagement at Foreign Minister Ban’s residence and subsist on yogurt and Diet Coke. But through all this, even if I did not agree with the purpose of this demonstration, it was wonderful to see the open expression and the capacity of Korean society to absorb it all.

There is a legitimate need for citizen involvement in discussions on economic issues that could potentially impact the livelihoods and quality of life of millions of people. Both the Korean and the U.S. chief negotiators have made, and will continue to make, great efforts to keep the press and lawmakers informed as the talks progress. At the same time, a trade negotiator -- in fact, any negotiator -- needs to be able to work quietly, calmly and deliberately with his or her team and his or her counterpart, to produce a package that is optimal for both parties.

In this context, I would like to thank the Korean government for making every effort to ensure a safe and peaceful environment for our discussions, despite the efforts of some to disrupt the talks. The citizens’ right to petition for redress of grievances does not equate with a right to use violence to pressure others to accept one’s position.

Since I have mentioned the challenge regarding citizen involvement, let me also mention the opportunity. We do not know yet what the final package will look like. Until we do, the opponents of an FTA are battling phantoms. Many opponents may find that the draft agreement, once its outlines are clear, is not likely to produce the outcomes they feared. We have an opportunity to allay citizens’ concerns by continuing to inform the press and the legislative branch of our progress in the talks.

I will now turn to the second challenge, the negotiators’ task of producing a comprehensive, balanced, optimal package for both sides. After reading the various press accounts, I am sure you are eager to hear details of what went on in the second round of talks. All I will say in that regard is, don’t believe everything you read in the press, whether it be Korean or international. There were areas in which we agreed, and those in which we disagreed. Your negotiators are very tough and capable, and pressed for concessions. Our negotiators are also very tough and capable, and did the same.

If we are not always agreeing at this stage, I think you may conclude -- based on your business experience -- that we are now negotiating in earnest. "After a rain, the ground becomes firmer," is a Korean saying meaning that, after friends differ, their friendship can become more solid. Korea and the U.S. have a mature relationship in which we can disagree occasionally on various issues but still maintain a rock-solid alliance. The FTA is an opportunity to add a new dimension to this alliance.

Of course, as friends we must seek to minimize rather than exacerbate our differences. In the case of the FTA, this means working together to maintain momentum and a "win-win" spirit of mutual accommodation in the talks. Recognition of mutual benefits, and respect for each other’s sensitivities, are key principles for any successful negotiation.

The final challenge we face is just this: to maintain momentum and keep our eyes on the huge prize that this FTA would represent. Often it is easier to mobilize thousands to oppose a new initiative such as an FTA, which opponents fear might jeopardize their interests, than it is to mobilize its tens of millions of potential beneficiaries.

Study after study has shown that an FTA will have an overwhelmingly positive impact on overall growth and employment in our two economies. Yet thousands remain to be convinced of its benefits. Some who oppose the FTA are concerned with its potential influence on their own livelihoods, or because they fear the privatization of certain services they believe should remain public. Others are worried that the deal will be a detriment to Korea, and that the disproportionate size of the U.S. economy will skew the agreement heavily in favor of the U.S. This last group fails to appreciate the fact that the size of the U.S. market actually magnifies the benefits of the agreement for Korea.

As mentioned before, because we are still in a relatively early stage of negotiations, rumors and misunderstandings concerning the FTA are common. Both Korea and the U.S. have sensitive sectors in these talks. Opponents of an FTA should keep in mind that there will be no deal without both parties’ assent. That means an agreement acceptable to both sides.

It may not be possible to convince hard-core opponents of an FTA to change their minds. There are, unfortunately, many in this world who remain obstinately opposed to free trade in general, despite decades of evidence of its benefits. Strikingly, many of these opponents come from relatively well-off parts of society in countries that have benefited enormously from trade.

The challenge and the opportunity, in this case, lies in reaching out to convince the millions who are wavering, who are unsure about what an FTA would bring, or who have never even heard of an FTA. I see signs that the Korean Government and Korean lawmakers are increasing their activities in this regard. President Roh Moo-hyun has formed a new FTA task force, and the National Assembly’s FTA Forum is visiting Washington this week to talk with their counterparts in the U.S. Congress and with the U.S. Government about the FTA.

Korean business, including KCCI, is engaging too, with events such as this one, as well as the reception at the start of the second round of talks hosted by the KORUS FTA Industry Alliance. I would urge all of you, and Korean business in general, to step up your efforts in support of an agreement that can bring Korean companies -- and consumers -- great benefits through cheaper inputs, faster economic growth, and enhanced access to the world’s largest market.

I have cited these benefits on several previous occasions, but to my mind they bear repeating until the message gets out. The KORUS FTA stands to be one of the most significant developments ever in U.S.-Korea relations and will contribute substantially toward modernizing our relationship and making it more relevant to the challenges our two countries face in this globalized world. The economic logic of an FTA is clear and compelling: liberalized trade and open economies produce more wealth than closed, protected ones. In the final analysis, it really is that simple.

You have all heard the numbers before, but they also bear repeating. Korean economists, attempting to quantify the impact of this FTA, have concluded that in the long term it could create as many as 249,000 new Korean jobs overall, and boost GDP by two percent or more. In terms of overall national welfare, Korean citizens will be over $7 billion richer in the long term because of the FTA.

With such great potential benefits in sight, one wonders why this message does not seem to have reached thousands of people yet, as I mentioned earlier. The answer, I believe, is that, "The meaning of communication is the impact it has on the listener." We need to have more active outreach on this issue.

Public outreach can be vocal and visible, such as my remarks at your event here today, or quiet and behind-the-scenes. I believe businesspeople as well as diplomats regularly apply both approaches in their daily work. We need both in support of an FTA as well, to counter the highly vocal and visible opponents of an FTA.

I have spoken about three challenges to the successful conclusion of a KORUS-FTA, and the opportunities they represent. We have a formidable task ahead of us. But Korea is a country that has made a habit of accomplishing tasks that were once considered impossible, like rocketing to developed-country status in the space of a generation. Many of you in this room experienced Korea’s economic miracle firsthand. You are at another great time in history, a time in which you are faced with challenges, but also with opportunities. You can help add a new chapter to Korea’s economic miracle by lending your support to the successful conclusion of a Free Trade Agreement with the United States.

I’d like to close with another Korean saying: "Determination can move heaven." Let us work together to accomplish this great task, in the shared interest of our two countries and the great Korea-U.S. alliance.

Thank you for listening. I look forward to hearing your thoughts and answering your questions.