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South Korean General Assembly Ratifies KORUS

South Korea’s General Assembly approved the Korea-United States Free Trade Agreement (KORUS) this week in a party-line vote, sidestepping political squabbles and a Congressional stalemate in a closed-door session on November 22.

The ratification came some 50 days after the U.S. Senate ratified the trade agreement (with Republicans backing the pact introduced by President Barack Obama, a Democrat). The U.S. and Korea have been working towards approval since 2006. Korea’s ratification means the new trade agreement will become effective January 1, 2012. However, political opponents are threatening to overturn the approval after next spring’s Korean elections.

President Lee Myung-bak and the ruling Grand National Party have been trying unsuccessfully for several weeks to overcome stiff political resistance from the Democratic Party, the Democratic Labor Party, and three other opposition parties. Myung-bak at one point last week offered to renegotiate KORUS with the United States over the Investor-State Dispute provision which has drawn much of the fire. The president has also charged his administration with addressing the concerns of farmers, small businesses, labor unions, and other groups concerned that KORUS will give U.S. businesses an unfair advantage. However, the opposition – with an obvious eye towards gaining momentum going into the April 2012 parliamentary and presidential elections – refused to budge and negotiations between the two sides failed the morning of Nov. 22.

Later that day, the ruling Grand National Party called South Korea’s first closed-door plenary session in 15 years to force passage of KORUS. Only 170 of the National Assembly’s 295 members were present. KORUS was approved with 151 votes in favor, seven “no” votes and 12 legislators abstaining. The raucous session featured noisy debate, shouting, fighting, a sit-in protest – and a first for the National Assembly, tear gas canister set off by the DLP’s Kim Seon in the main assembly hall.

After the ratification, political opponents vowed to appeal the decision to the Constitution Court, charging that the closed-door vote without advance public notice made the approval invalid. The opposition also vowed they would not participate in further legislative activities, threatening another stalemate that will likely delay approval of Korea’s budget this year. Some politicians also voted to renegotiate the agreement if they win control of the National Assembly in the next election cycle, with one even threatening to reject KORUS outright.

The ruling party responded that it had to act decisively to pass KORUS, as the January 2012 implementation date is approaching quickly. Leaders also said minority parties had no legitimate grounds for blocking the legislation. The Grand National Party had tried unsuccessfully for the preceding 20 days to conduct committee votes on the trade pact.

Ironically, the Democratic Party had backed KORUS under the earlier Roh Moo-hyun administration (just as U.S. Democrats had opposed the proposal when it was negotiation by Republican President George W. Bush). A number of DP legislators actually favored passing KORUS, according to reports. Also, other free trade agreements adopted by the General Assembly have contained the same types of investor-state dispute clauses without generating the controversy that accompanies KORUS. Many observers feel than even if the DP and DLP parties can join forces to take a majority position in the upcoming elections, there is little chance they will be able to stop KORUS.

KORUS to Boost Georgia-Korea Ties

KORUS has strong backing from large businesses in both the United States and Korea. The Korea Chamber of Commerce and Industry, the Federation of Korean Industries, and the Korea International Trade Association released statements this week urging the National Assembly to quickly pass KORUS. The groups predicted the agreement would add 350,000 new jobs in South Korea and boost its GNP by 5.6%.

KORUS approval would also provide ample new opportunities in Georgia for expanded trade between the state and South Korea. Georgia’s exports to Korea directly support 1,849 jobs, according to the Business Roundtable. The American Farm Bureau estimates that direct agricultural exports from Georgia to Korea would increase by almost $39 million annually under KORUS. More than $6 million would come from the poultry industry alone, which has been hammered by protectionism in some of its major Asian markets. Exports of fruits, vegetables, nuts and processed food products would also increase under the proposed free trade agreements, the Farm Bureau stated. In addition to agriculture, KORUS would provide Georgia and the rest of the United States ample opportunities to expand trade with Korea, which is already the seventh largest trading partner for the U.S.

KORUS will also provide more opportunities between the two countries, according to He-bem Kim, South Korea’s new consul general in Atlanta. Speaking this week to the Korea-Southeast U.S. Chamber of Commerce, Kim noted that the number of Koreans in Atlanta has grown from 250 in 1968 to more than 100,000. He said more than 120 Korean firms are operating in the Southeast, led by the Kia and Hyundai automotive plants. KORUS will also offer more chances for U.S. companies to offer services such as legal and accounting consulting to Korean firms, he added.

Concluding KORUS could also be a first step towards more free trade agreements throughout Asia, opening up more opportunities for Georgia and U.S. businesses in the region. “As the first U.S. FTA with a North Asian partner,” the Office of the U.S. Trade Representative stated, “the KORUS FTA could be a model for trade agreements for the rest of the region, and underscore the U.S. commitment to, and engagement in, the Asia Pacific Region.”

Questions or comments? Please email Michael Fenton at mfenton@atlantapacificgroup.com