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ASIANPERSPECTIVE, Vol. 30, No. 4, 2006, pp. 175-187. KORUS FTA: A MYSTERIOUS BEGINNING AND AN UNCERTAIN FUTURE* Wonhyuk Lim Despite the enthusiasm exhibited by the chief negotiators on both sides on February 2, 2006, the official launch of negotia­ tions for a Korea-U.S. Free Trade Agreement (KORUS FTA) came as a surprise to many Koreans. In their view, it represented at best a puzzling move and at worst an abrupt about-face by South Korea's Roh Moo-hyun government. In 2003 and 2004, the Roh government made efforts to strike "a grand social bargain" between business and labor, combining social cohesion with economic liberalization. The polder model of the Netherlands was held up as a possible benchmark.* 1 More recently, the government made "bipolarization," or increasing eco­ nomic and social inequality, a major economic issue, addressing popular concerns about the impact of globalization. As for trade policy, the Roh government actively participated * An earlier version of this commentary was presented at the inaugural session of the Seoul-Washington Forum, co-hosted by the Brookings Institution and the Sejong Institute, with support from the Korea Foundation, May 1 and 2, 2006, Washington, D.C. The complete transcript of the forum is available at 1. See, for instance, the Blue House Briefing on June 19, 2003 (in Korean). Other European countries such as Ireland and Sweden were viewed in a favorable light as well for actively responding to the challenges of globalization while maintaining social cohesion. 176 Wonhyuk Lim in the multilateral Doha Development Round (DDR) negotiations and pursued free-trade agreements in two directions. First, it negotiated essentially "exploratory" FTAs with smaller countries that had a great deal of experience with FTAs and posed little threat to Korea's vulnerable agricultural sector. As a result of these negotiations, Korea signed free trade agreements with Chile, Singapore, and the European Free Trade Association (EFTA). Sec­ ond, the Roh government also pursued more "strategic" FTAs with a view toward promoting peace and prosperity in Northeast Asia.2 Building on the goodwill generated by the Kim-Obuchi decla­ ration of a new partnership in October 1998, a Korea-Japan FTA received top priority. Most experts in Korea believed that this FTA would be mutually beneficial for both sides, with manageable risks for Korea's manufacturing and Japan's primary sector. By comparison, many felt that a Korea-China FTA would be detri­ mental to Korea's agricultural sector, even though it would give a significant boost to manufacturing exports.3 A Korea-U.S. FTA 2. For details on Korea's FTA strategy as of early 2005, see Wonhyuk Lim, "Economic Integration and Reconciliation in Northeast Asia: Possibilities and Limitations," in Soon-Won Park and Gi-Wook Shin, eds., Rethinking Historical Injustice in Northeast Asia (New York: Routledge, forthcoming), available at pdf. For reference materials on the KORUS FTA, see sub02/subl2.asp and as well as http: //benmuse. 2006 /10 / korusfta.html#more. 3. According to a 2004 study on prospective FTA partners by the Korea Institute for Industrial Economics and Technology (KIET), China ranked first in terms of economic merits, followed by Mexico, Hong Kong, the European Union (EU), and the United States. In August 2005, China expressed willingness to show flexibility with regard to rice and other "sensitive items" in FTA negotiations with Korea, presumably in exchange for a corresponding move from the Korean side with regard to China's sensitive items. Apparently concerned about the geopolitical implications of pursuing an FTA with China ahead of the United States, however, Korea decided to spurn this offer. See "S.K. Nixed Trade Deal with China under U.S. Pressure, Data Reveals," The Hankyoreh (Seoul), August 11, 2006, accessible at edition/e_business/148185.html. Although the Roh government's concern about negative U.S. reaction to a Korea-China FTA is understandable, it does not explain why Roh subsequently pushed for an FTA with the United States and failed to use China's proposed concessions...


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