Speeches and Transcripts
The KORUS FTA: Confident of SuccessCongratulatory
Remarks by U.S. Ambassador Alexander R. Vershbow
to the Conference on Advancing Korea's Industry through the Korea-U.S. FTA
Hosted by the Ministry of Commerce, Industry and Energy
and the Korean Chamber of Commerce and Industry
July 5, 2006
Minister Chung Sye-kyun, Chairman Sohn Kyung-shik, thank you for those excellent remarks and that kind introduction. It is a pleasure for me to be speaking before such a distinguished group of people, and to be wishing you well as you embark on a discussion of a very important topic.
As many of you know, I talk about the KORUS FTA every chance I get. In fact, I talk about it so much that I’ve noticed the number of dinner invitations I get has dropped off substantially.
But seriously, I've spoken a lot about the great opportunities the KORUS FTA provides both countries – and I will continue to do so – because successfully concluding a free trade agreement with Korea is one of my government's top priorities.
I am convinced that 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.
I’ve said it many times before, and I’ll say it again today: an FTA between our two countries really is a win-win scenario for our two countries. The economic logic 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.
An FTA is like any voluntary trade: it will not happen unless both parties benefit.
We should all try to approach this negotiation with the right mentality. If you do, the win-win nature becomes obvious. I like to compare it to a market. Picture this: A seller offers something for 10,000 won. A buyer wants to pay only 5,000. Eventually the item is sold for 7,500 won.
Someone with a win-lose mentality might look at that situation and say, "The buyer 'won' and the seller 'lost' because the final price was less than the seller wanted." Or "the seller 'won' and the buyer 'lost' because the final price was more than the buyer wanted to pay."
But that mentality is wrong. Obviously, the buyer and seller both won – otherwise, they would not have finalized the deal. Both are better off, in that the seller has 7,500 more won than he had before, and the buyer has the item he wanted – and he must have decided that item was worth that much after all, or he would not have paid the final price.
As the KORUS FTA negotiations progress, a lot of people will be tempted to get out their scorecards, as if it’s a World Cup match. They will try to keep track of who is getting a point here or a point there – to keep track of "who's winning," in other words. I think in the heat of the moment, even our own negotiators will sometimes give in to that temptation.
But we cannot let ourselves surrender to that "win-lose" mentality. It does not reflect the truth. The truth is that the effects of free trade between Korea and the United States will make both countries better off than they are now.
Giving up a high tariff may feel like a loss to some people. But in the context of an FTA, it isn't. After all, you do not even start an FTA negotiation unless you've already made the basic decision that you are willing to reduce or eliminate tariffs – that's the purpose of an FTA, after all. So cutting a tariff is not a loss, it's part of the win, because it is the increased competition and lower prices that are going to lead to the economic gains.
Of course, I know that not everything is as neat and simple as the basic economic truths that underlie our drive to conclude a free trade agreement. Messy political factors need to be considered as well, and since this is an agreement between the governments of two robust democracies, the political element is indeed very important.
The main goal in this respect, I think, would be to arrive at a final agreement that is both high-quality – in other words, that leads to real liberalization – and politically acceptable to both sides. These two aspects are intertwined. For the United States Congress, for example, in order to be politically acceptable the agreement would have to lead to real liberalization of the Korean market – including in high-profile sectors like automobiles and pharmaceuticals.
What is also important in this regard is that the negotiations need to be carried out in an atmosphere of mutual respect and fairness. That includes respect for each other's real sensitivities. There are areas in both countries that are truly sensitive – I think most people involved in the negotiations know what they are – and we will have to find a way to deal fairly with those areas in the negotiations.
The key to understanding this is that both governments want this agreement – that means they want it to be something that can be politically acceptable to the other side. Since the Korean government wants an FTA with the United States, it therefore has to make sure it meets enough of the U.S. Congress's political needs to make Congress want to ratify it. In the same way, the United States government, since we also want this agreement, needs to take account of Korean political realities. The two sides cannot only be trying to please their own constituencies – they also have to try to accommodate the other side.
Despite these political considerations, however, I also need to support a point President Roh made recently and emphasize that the KORUS FTA is an economic agreement. It will certainly improve overall bilateral ties between the United States and Korea and help modernize our relationship; but the FTA is not the proper venue for discussing political or security concerns.
That means that, while some political considerations are unavoidable, we should still strive to do our best as we negotiate this FTA to focus on the issues that have real economic importance – those that have monetary implications for businesses that are operating in the real world.
I think there are more than enough issues of that type between our trillion-dollar high-tech economies to fill our negotiators' plates. We do not need to unnecessarily burden our negotiators with symbolic, political statements that do not really have much economic importance.
That is where you come in, as leaders of businesses that stand to benefit from free trade between Korea and the United States. It is vitally important that members of the Korean business community – like their American counterparts – figure out strategies for taking advantage of the opportunities an FTA can create.
It is also important that the politicians who will eventually decide the fate of this agreement hear that the Korean business community enthusiastically supports an FTA and will benefit from it.
In democracies like Korea and the United States, policy-makers and political leaders need to hear from supporters – because you can be sure they will hear from the special interest groups that oppose this project.
Therefore, I am very pleased that the Ministry of Commerce, Industry and Energy – with the support of the Korean Chamber of Commerce and Industry – has organized this important conference. The discussion you will have here today could play an important role in bringing this FTA to a successful conclusion.
The good news is that I, along with the rest of my government, am extremely confident that we can meet the challenges the KORUS FTA negotiations present to us and successfully conclude a high-quality agreement that will be economically effective, fair, and politically acceptable.
Both of our governments have made this FTA a top priority, and have assigned the very best people to work on it. The first round of negotiations proceeded very smoothly, with a friendly, productive atmosphere of mutual respect. I am sure this will continue in the rounds to come.
But for now, let me say again that I wish you all the best during your conference today. You have an important task ahead of you, and I wish you an enjoyable, productive and useful discussion.
Thank you very much.