The Significance And Benefits of Entry into Force of KORUS FTA

The United States went to war with Great Britain anew, less than 30 years after the end of the American War of Independence in 1783. The War of 1812 was touched off primarily for the desire for economic independence from Britain. The United States saw trade volumes soar after gaining political independence, but American ships and crewmembers were frequently forcibly taken into custody by Britain, which was still in control of the sea, so the United States, which couldn’t stand this, declared war on the British Empire.
Exactly 200 years later, the Korea-U.S. Free Trade Agreement (KORUS FTA) went into force in March 2012. Both sides were able to see the fruit of their efforts, capping a long journey of negotiating for six years. The two episodes? °™? the War of 1812 and the KORUS FTA? °™? were common in a goal of expanding their own economic interests, but with different means. Hostility and hatred changed into mutual confidence, while guns and knives were replaced with a fair pact between nations. The opposite side of each war was different. In the war 200 years ago, the one side’s gains led to the other side’s loss, whereas in the trade war of today, nations with FTAs become allies with one another, while those who have no such pacts stand in opposition.
Such a trade war is mounting vehemently as countries around the world are painstakingly scrambling to sign regional FTAs as alternatives to break stalemates in multilateral agreements under the World Trade Organization (WTO)’s regime. Even though Korea is a latecomer in the race, the nation is now standing out with the KORUS FTA in place. Korea has steadily built a trade alliance network penetrating the whole of the globe by effectuating the KORUS FTA following the FTA with ASEAN in 2007 and the pact with the EU in 2011.
Why did Korea select the United State as a nation complementing the initial version of its trade alliance map, then?
First of all, the KORUS FTA is expected to serve as a foothold for Korea, which is seeking $2 trillion in annual trade after surpassing the $1 trillion trade threshold. Korea became the ninth country to achieve the feat of surpassing the $1 trillion trade barrier. Korea exported $10 billion in 1977, but only 35 years later the nation is now able to export more than $10 billion every week. The U.S. market, which accounted for a 10.1 percent share of the Korean exporting industry last year, is essential for Korea’s sustainable growth.
The KORUS FTA may become a breakthrough for overcoming the global economic crisis. The trade pact will allow Korea, a trade-intensive country, to get a jumpstart in the American market and raise its capabilities to respond to economic crises.
The FTAs with advanced economies will also have an effect of upgrading the whole of the economic and social systems in an incalculable manner. The expanded introduction of new technology and management methods, coupled with the acceleration of competition, and improving of productivity through the advancement of systems will bring about more than meets the eye °™ trade effect, caused by the elimination of tariffs. Furthermore, the trade pact will evolve the Korea-U.S. partnership into one with a pluralistic strategic alliance covering national security and economic sectors.
These days, Korean companies are active on the global stage by building production networks around the world. Once the global FTA network is completed, Korean companies will see their production and value creation network further widen and their competitive edge go higher. An increasing number of foreign companies are expected to make investments in Korea, an FTA hub, so that they can take advantage of the nation’s FTA network for exporting goods without tariffs.
Surveys conducted and released by 10 Korean research institutes last August showed that the implementation of the KORUS FTA will boost the nation’s gross domestic product (GDP) by 5.66 percent in the long-term perspective and bring in economic benefits, including the creation of 350,000 jobs. The government and corporate Korea should make concerted efforts to make the most of the expected benefits. Steps to ramp up the competiveness of the possible loser industries are also required.
The U.S.-British War of 1812 ended with a peace treaty about two years later without a convincing winner. I expect the KORUS FTA to serve as a win-win strategy for Korea and the United States, sending the news of victory to both sides.

By Kim Ik-joo, assistant minister of the FTA Promotion & Adjustment Authority at the Ministry of Strategy and Finance (MOSF)