Speeches and Transcripts
Korea-U.S. FTA: A Win for Both Countries
Alexander Vershbow
U.S. Ambassador to the Republic of Korea
Ajou University
Suwon, Korea
November 21, 2006
Thank you for you kind introduction, Professor Kim [Byung-kwan, Ajou University Vice President]. President Seo [Moon Ho], it is a great pleasure to speak to you and the students of this prestigious university about the U.S.-Korean relationship and to visit your beautiful campus.
Today I would like to focus on the United States’ economic relations with the Republic of Korea. Normally when we talk about the economic relationship, we start out with some really big numbers. Today will be no different.
The total amount of trade flow between Korea and the U.S. each year is $72 billion. This makes the United States Korea’s second-largest trading partner, and makes Korea the seventh-largest trading partner of the U.S. The figure I just cited, although huge, is for trade in goods only. Trade in services adds another $16 billion to the total amount of trade flow between Korea and the United States.
Beyond trade, the U.S. and Korea invest heavily in each other. The United States holds roughly $19 billion in direct investments in Korea, and Korea holds roughly $6 billion of direct investments in the United States. It sounds overly simplistic to say that those are the big numbers. What lies behind these numbers – the real meaning of our economic relationship – is the millions and millions of Korean and U.S. citizens that benefit from these economic exchanges.
We all benefit from these trade and investment flows, as consumers, as producers and in other ways – for instance, as patients who need an innovative medicine or a medical procedure that perhaps only one of our two countries has. Or think about the economic activity of the nearly two million Koreans resident in the United States, including major athletes in golf, baseball and other sports. I love giving examples like these because they show how truly deep, varied and dynamic our economic relations are.
Our two countries decided to negotiate a Free Trade Agreement precisely because we see greater opportunities everywhere we look in this dynamic economic relationship. For Korea, the estimated benefits include half a million new jobs and a 2% boost to GDP, according to the Korean Institute for International Economic Policy. Trade was a large part of Korea’s “economic miracle.” By providing Korea greater access to the world’s largest market and to U.S. foreign direct investment, the Korea-U.S. (KORUS) FTA is a way to continue Korea’s economic miracle for the 21st century.
Now, I am aware of the intense debate in Korea about the FTA. Some people are wondering how a comprehensive FTA will affect some of the weaker, less competitive sectors of the Korean economy, and how the KORUS FTA can be structured in a way that enhances the gains while minimizing the transition costs. I am also aware that I am speaking in a region known for its agricultural products, and that agriculture is a particularly sensitive subject when it comes to the FTA. All countries, including the United States, have politically sensitive product areas.
Many critics have argued that as a result of the FTA with the United States, the Korean agricultural sector will be wiped out overnight. But frankly, the notion that the KORUS- FTA will devastate Korean agriculture is way off base. First, no one is saying that immediate free trade in agriculture is a requirement of finalizing this Agreement. Transition periods, in which the market is opened in stages, have been used in past FTAs to address sensitive products and will likely be employed here. Second, history has shown us that FTAs don’t destroy agricultural production. If you look at the North American FTA (NAFTA), for example, Mexican agriculture production increased by 14 percent after NAFTA. Third, under the KORUS FTA, Korea would be gaining access to the world’s most prosperous market, the American market – a market that holds vast benefits for Korean agricultural exports.
I want to dwell on this point for a moment. With all the media attention on how increased U.S. agricultural exports could affect Korea, few have focused on the agricultural export opportunities for Korea under a KORUS FTA. I understand that pears are one of the most important agricultural products in this region. How many of you were aware that the U.S. is the second-largest overseas market for Korean pears? The U.S. imports 10,000 metric tons of pears from Korea every year, and demand is increasing. As our demand grows, more packinghouses can begin exporting pears to the United States.
All this is happening already, even without an FTA. If our past experience with other FTA partners is any guide, I would expect the number of such economic exchanges to skyrocket. In particular, based on past experience, we can expect to see small and medium-sized companies that in the past never even considered exporting to the U.S. start exporting directly to the United States if we conclude an FTA.
This is why we keep referring to the opportunities the FTA will create. Those small and medium-sized companies I mentioned are not exporting to the United States now. The FTA will create exports, and with those exports, it will create additional jobs and economic growth. The KORUS FTA will create a more prosperous future for the children of Korea and the United States. It will also give consumers in both countries greater freedom of choice, at prices closer to world prices.
Real-world experience shows that countries that are open to trade grow and prosper, while countries that close themselves off from trade stagnate. By moving forward with the KORUS FTA, the United States and Korea are demonstrating that our two countries will play a leading role in trade liberalization, and will ensure that this liberalization process meets our needs.
In any case, I hope to have shown you today that the economic ties that bind our two nations are more numerous, and collectively stronger, than ever before. An FTA is the logical next step. This is why Korea and the U.S. share the goal of successfully concluding an FTA.
To change gears for just a moment, I’ve focused on the FTA, but there is more to U.S.-Korean relations than trade and investment. In reality the U.S.-Korea relationship is multi-dimensional. Looking at the educational and personal ties that bind our two countries, more than 87,000 Korean students chose to study in the United States last year, at university and high school levels, making Korea our largest source of foreign students. Millions of Koreans visit the United States each year. Our Embassy is on track to process 480,000 visas this year, making Seoul the busiest nonimmigrant visa-processing post in the world.
We are trying hard to lose this title, because we want Koreans to visit family and friends or vacation or do business in the United States without having to apply for a visa at the U.S. Embassy. As Ambassador I have invested much personal effort in working closely with the ROK government so that Korea will meet the requirements for the Visa Waiver Program, and I hope that before my time in Seoul is concluded, we will celebrate South Korea’s inclusion in the program.
Looking at security issues, our military alliance remains steadfast, but the nature of the U.S.-ROK military relationship is flexible and changing with the times. We are realigning and consolidating U.S. forces, returning dozens of military bases to the Korean people. We have also seen Korean assume responsibility for many military tasks previously performed by the United States, making the alliance a more balanced partnership. Last month, our defense ministers met in Washington and made important decisions on the transfer of wartime operational control from today’s Combined Forces Command to the ROK. The ROK, the third-largest coalition partner in Iraq, has truly become a global player. This was underscored by the election of Ban Ki-moon as the new Secretary General of the United Nations.
Our two countries also face a common challenge in North Korea’s detonation of a nuclear device on October 9. UN Security Council Resolution 1718 rightly expressed the world’s outrage over this act. Our two Presidents met on Saturday in Hanoi and agreed on the need to send a clear message to the DPRK: North Korea must reverse course and return to the September 19, 2005 Joint Statement that offers a better future for the North Korean people if Pyongyang eliminates its nuclear weapons and nuclear programs. At the same time, we applaud the efforts of China, which played a proactive and positive role in bringing together DPRK and U.S. representative for a discussion in Beijing three weeks ago, during which North Korea agreed to return to the Six-Party Talks. Although the process has been stalled for over one year because of North Korea’s boycott of the Talks, the U.S. still believes this mechanism presents the best path for resolving the North Korean nuclear issue and creating the basis for peace and stability on the Korean Peninsula and beyond.
When the Six Party Talks resume in the coming weeks, the key will be to move from words to action. We want to see early, concrete steps by North Korea to dismantle its nuclear weapons and nuclear programs. If they are prepared to do this, the rewards could be considerable: economic and energy support; normalization of relations with the United States and Japan; and conclusion of a permanent peace regime for the Korean Peninsula that would end the Korean War and create a basis for reducing military tensions.
As you can see, our countries have a full agenda, beyond the FTA negotiations that I dwelled on earlier. Thank you very much for listening. Rather than lecturing the whole time, I would be happy to respond to your questions.