firmly in place has been confirmed through an abundance of historical evidence.
The Korea-US FTA for economic growth and distribution
It is good news for the nation's future that the Participatory Government has decided to go ahead with the Korea-US FTA. However, as an FTA is typically a right wing policy, Korea's left leaning government is experiencing an eruption from within the platform it is based on. The anti-FTA offense has been relentless in arguing that Korea will become the 51st state of the US under the FTA, an economic crisis more serious than the Asian currency crisis will devour the nation, the government has distorted the estimated level of the FTA impact or the economic polarization of the population will worsen.
Among the anti-FTA arguments, that the FTA would intensify the polarization problem is more or less groundless political rhetoric. According to a survey on the urban household economy by the National Statistics Office, the top 20% earned 40% of the total national income in 1985, 40.2% in 1999 and 39% in 2005: No increase in the income of the top quintile has been observed so far. The real problem lies not on how much the top earners make, but how poor the bottom quintile is becoming. For the past 3 years under the rule of the Participatory Government, the income of the bottom 20% has been steadily decreasing.
The reality of the bottom 20% income group's continuous impoverishment shows how hallow the distribution policy is when it is not accompanied with economic growth. It is difficult not to see the polarization issue as politically orientated. Perceiving the Korea-US FTA as a wedge that will enlarge the gap between the bottom 20% and the rest is too far fetched. We need to adjust this view first and then reframe the question to examine how the Korea-US FTA will affect Korea's poor: Will it make the life of the lowest quintile more difficult?
An FTA with the US is good news for all of us, as long as we can establish a more effective social safety net so that the affected groups may be able to survive through the waves of liberalization and unlimited competition. Is this an overly ideal proposition? Not at all. Without the FTA to link us to the mega US market, allowing us to utilize its technology and capital as a catalyst for our economic development, the future of Korea's bottom 20 % will only worsen. What could be more irresponsible?
An FTA is a restructuring project to minimize inefficiency and improve productivity by applying shock therapy -- by adopting competition and market liberalization. Past experience tells us that shock therapy itself cannot completely restructure the Korean economy. An FTA may trigger the restructuring process, but unless we overcome adverse public sentiment and organized resistance from the affected industries, and steer away from a political storm that could confuse us between the means and the ends, we may wind up paying the costs without reaping the benefits of this opportunity.
As we have witnessed during the ratification process of the Korea-Chile FTA and WTO rice negotiation, tempering international trade agreements with domestic politics is a dangerous formula. We have seen the government implementing policies to please everyone, from which interest groups realized that the more pressure they put on the government the more they could get: after one bad example followed by another, a trend has been set so that the government has to continuously come up with compensatory measures for affected industries for every FTA entered. It is time that we recall the axiom; "Give a man a fish and feed him for a day, teach a man to fish and feed him for a life time."
The significance of the Korea-US FTA lies on not how much the trade with the US will increase but how much Korea's trade will increase with the world. What is even more important is how efficient Korea's economy will become and whether it can establish a structure for sustainable growth. Although the Korea-US FTA might reduce Korea's trade balance surplus with the US, Korea's trade volume as a whole will expand and the trade balance with the world will increase too, and the economy will grow based on the continuous increase in export --- a big picture that most of the economic experts have agreed with. This is the raison d'etre of the Korea-US FTA for Korea.
There are arguments that Korea should not enter the agreement because the time given for the negotiation is too short. But Korea has already achieved a certain degree of liberalization in the service sector in the process of joining the OECD as well as the restructuring process during the Asian financial crisis. Going through the Uruguay Round, FTA with Chile and the rice negotiation of 2004, agriculture sector liberalization has begun and restructuring is already underway. We are not starting from scratch for the Korea-US FTA negotiation. The Korea-US FTA is in line with the overall restructuring and liberalizing process the nation has been committed to. There may not be much time, but there is enough.
Some claim that the more anti-FTA resistance Korea displays the stronger our position will be in the negotiation. But what if an escalated public sentiment based on anti-Americanism happens to bring down the negotiation itself at this time of self-feeding antagonism? It will be a disaster for Korea. The Korean market is consolidating with one that is 12 times larger. Isn't this obvious who will have more opportunity?
Byung-il Choi (Professor, Ewha Womans University)