firmly in place has been confirmed through an abundance of historical evidence.
Yes: Free trade means greater prosperity (Korea Herald debate)
Out of a curious sense that Korean companies deserve special government privileges at the expense of Korean consumers ― specifically, immunity from competition ― hardline members of the opposition Democratic Party did their best to torpedo the free trade agreement between Korea and the United States.
These DP legislators, additionally believing that no man is ever too old to indulge his childish instincts, finally resorted to physical violence after failing to nitpick the deal to death. Fortunately, the benefits to both countries from this agreement will ultimately overshadow such shameless antics.
The Korea-U.S. FTA was passed in the National Assembly on Nov. 22 in a chaotic session during which Democratic Labor Party lawmaker Kim Sun-dong (center) set off tear gas.
Korea's political left has lately been in a state of pique over a technical little corner of the FTA known as investor-state dispute settlement, which allows a private investor from one country to seek compensation for damage the investor suffers as a result of policies enacted by another state which are not consistent with the terms of the trade agreement.
Dating back to the North American Free Trade Agreement, ISD provisions have come under fire for their lack of transparency, which critics say undermines democracy and national sovereignty. The ISD provisions contained in NAFTA were based on commercial arbitration models, which typically operate free from public scrutiny and which undermined public support for the process. Beginning in 2006, however, the International Center for the Settlement of Investment Disputes amended its rules to allow greater public participation, in particular by accepting amicus curiae briefs. As a result, private citizens and NGOs who are not directly party to a given case may now submit their own opinions to assist the arbitrator in reaching an informed and transparent decision.
As in Korea, however, political opposition to the ISD settlement procedure is typically premised not on any high-minded defense of political ideals but rather on politicians' ability to dole out goodies to favored constituencies. No wonder, then, that Mexican politicians were miffed when, in the mid-2000s, three U.S. producers of corn syrup had the gall to challenge a Mexican tax on soft drinks made with corn syrup but which did not apply to those sweetened with sugar cane. A NAFTA tribunal agreed that such a tax was plainly a policy intended to protect a powerful local interest group, even as it punished consumers, and awarded the American companies a combined total of $169 million in damages. DP members in the National Assembly obviously knew that the same could happen to their plans to coddle favored patrons if the KORUS FTA was approved, and said as much in the local press.
As expected, once their protestations against ISD lost steam, and when the KORUS was finally brought to a vote, DP lawmakers instigated the latest "Rumble in Yeouido," wherein National Assembly legislators found themselves on international television behaving like adolescent boys. Such violence, of course, is a poetic commentary on the matter at hand, specifically trade restrictions. After all, as the writer P.J. O'Rourke has noted, a restriction is hardly a restriction unless coercion ― that is, violence, real or threatened ― is involved. For years, Korean consumers have been coerced into aligning their purchasing decisions with the whims of the political class, a power which certain politicians will not relinquish without a literal fight.
The KORUS FTA is far from a perfect document ― to be sure, it does not go far enough in liberalizing Korea's markets ― but it is a step in the right direction. If the Democrats had been serious in their critique of the ISD resolution procedure, they would have offered an alternative model of neutral dispute resolution, one that would protect investors of both nations against injurious policies and governmental breach of contract. Their unwillingness to do so merely underscores their fear of a predictable rule of law to which they themselves would be subject.
Since at least the times of Adam Smith and David Ricardo, economists have understood the practical benefits of free trade. In the same way that cooperating with people outside of your own home makes you more prosperous than you would be if you tried to live a life of total self-sufficiency (imagine the poverty!), trade between people of different nations allows humans to more fully exploit the benefits of specialization and become wealthier than if they insisted on producing everything within their own borders.
This is especially pertinent in a resource-poor area like South Korea, which would quickly revert to a primitive standard of living were its citizens to insist on complete autarky. Indeed, beginning the early 1960s, Korea's entrance into a rapidly expanding global market allowed it to embark upon a path that has led to unprecedented levels of prosperity for all Koreans. The KORUS FTA, which in tandem with the Korea-EU FTA gives Korea improved access to the world's two largest markets, will be one more step along this road.
Aaron McKenzie is a research fellow at the Center for Free Enterprise in Seoul.
This originally appeared in the Korea Herald on November 29, 2011.