Today marks the five-year anniversary of the start of the Korea-U.S. Free Trade Agreement (KORUS). With the growing anti-trade sentiment in the United States and elsewhere, KORUS is a counterpoint to the view that trade is to blame for job losses, low wages, and growing inequality.
As the chief negotiators representing our respective governments, this is a natural time for both of us to reflect on the negotiations themselves, as well as what has been achieved through this historic deal.
Up until KORUS, trade tensions between the United States and Korea used to be commonplace. From the auto sector to telecommunications to agriculture, the two countries often found themselves in tense arguments, full of acrimony and void of trust.
The U.S. believed that its exporters and investors were being shut out of Korea, while Korea felt that American companies didn’t try hard enough to understand and adapt to its market.
KORUS changed all of that. For different reasons, it brought both sides to the table with a shared objective. Korea, feeling sandwiched between China and Japan, wanted to chart an economic future for its citizens distinct from the rest of East Asia.
The U.S., after focusing its trade efforts elsewhere in the world, wanted to conclude a free trade agreement (FTA) with a large Asian country that was serious about reform and opening its markets. Both were strongly determined to succeed when they embarked on the negotiation.
This didn’t mean that the KORUS negotiations were easy. As expected, we both fought hard for our own nation's interests. We experienced frequent breakdowns in the talks, exchanges of sharp words, and even, at times, a feeling of doom. Nevertheless, we didn’t give up, recognizing the high stakes involved.
Against the odds, we concluded a high-standard, comprehensive bilateral trade agreement that addresses tariff and non-tariff measures, includes the strongest intellectual property protection provisions of any U.S. or Korean trade agreement and features enforceable provisions on labor and the environment. Though updated on a couple of occasions, KORUS has withstood the test of time.
The deal faced strong domestic opposition in both countries. Korean farmers, in particular, were concerned that their lives would be totally devastated by open competition. Others asserted that Korea would be subjugated to the world’s largest economy. In the U.S., some believed that the deal would lead to the closing of manufacturing plants, while not addressing the real barriers companies faced in the Korean market.
Five years in, the reality has been quite different. KORUS has been a win-win deal and is bringing benefits to both sides. As global trade has stagnated in recent years, two-way trade between the United States and Korea has recorded solid increases.
Exports from both countries have grown steadily in manufacturing, services and agriculture, including from small and medium-sized businesses. Ties between U.S and Korean companies have strengthened and foreign direct investment has grown in both directions.
Top Korean companies have increased their investments in the United States to record levels in 2016, creating tens of thousands of high-paying U.S. jobs. According to data compiled by the Bureau of Economic Analysis in 2014, the annual wage for American jobs created by majority Korean-owned firms in the U.S. averaged over $90,000.
The success of the deal goes well beyond these numbers, however. With the mechanisms in the agreement, both countries are able to work together at early stages to head-off potential trade disputes. Furthermore, we have expanded our economic cooperation to other areas and institutions, including the G20, the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC).
The strategic benefits are also considerable. We have added an important economic pillar to our already strong security alliance. This has served us well as we cooperate to bring peace and prosperity to our respective regions of the world.
KORUS, like other trade agreements, is not perfect. Some critics point to the U.S. bilateral trade deficit with Korea as proof that this agreement is not working. Bilateral trade deficits are not the correct measure of success or failure for trade deals, however.
The trade deficit has much more to do with macroeconomic factors than provisions in a trade agreement. Over the past five years, Korea’s GDP growth has been sluggish, dampening its appetite for imports from all over the world. Even in this environment, U.S. exports to Korea have fared better than exports from most other countries to the republic.
The U.S. and Korea have come a long way in their economic relationship. We are confident that, with KORUS as an anchor, the strong ties between the two countries will only deepen as we look to the future.
Wendy Cutler is the vice president of the Asia Society Policy Institute. She is a former diplomat and negotiator in the Office of the U.S. Trade Representative. Kim Joon-hoon is the former minister of trade for Korea. The two were the chief negotiators of KORUS.
The views expressed by contributors are their own and not the views of The Hill.