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Meaning of KORUS FTA
The long-pending bill to ratify the Korea-U.S. free trade agreement, or KORUS FTA, was finally passed by the National Assembly on November 22, following its approval by the U.S. Congress. The KORUS FTA is about to take effect more than five years after the two countries began free trade negotiations. The ratification of KORUS FTA is historically meaningful in further speeding up Korea`s economic advancement, and is especially timely considering the threat of a global economic upheaval emanating from the eurozone fiscal crisis.
KORUS FTA has thus far generated considerable controversy and trouble. The process leading to its ratification has been turbulent in both countries. Following the inauguration of the Barack Obama administration, Washington changed the direction of its foreign trade policy, putting the trade pact in danger of being nullified. Anti-KORUS FTA forces at home have persistently spread groundless rumors on the agreement since the beginning of negotiations in 2006.
What are the benefits expected from KORUS FTA? Some people downplay the expected benefits, citing the persistent U.S. economic slump. But the United States is still the world`s largest market and KORUS FTA will provide us with more opportunities to make inroads. In this sense, significant economic effects can be expected. Coupled with the Korea-EU FTA, the KORUS FTA will bring about economic integration with two of the world`s most advanced economies.
In addition to boosting trade and economic growth, the FTAs signed with the advanced economies will increase foreign investment and enhance our service industries. Korea, which has a well-educated and experienced labor force, was already an attractive investment destination for enterprises in developed countries before the FTAs. The trade pacts will further improve the investment environment for them. In particular, investments in the high value-added knowledge-based service sector will increase, helping elevate Korea`s comparatively backward service sector. In the process, the controversial Investor-State Dispute Settlement clause, which KORUS FTA foes call a toxic provision, will help promote foreign investment by better protecting the interests of investors.
Korea is the sole East Asian country that has FTAs with the United States and EU. It will become an FTA hub in East Asia, a future engine of global economic growth, and a pivotal player in global trade. On the other side of the Pacific, the KORUS FTA will help ease the moribund U.S. economy, which is a primary cause of the ongoing global economic crisis.
In the wake of the 2008 global financial crisis, the United States has yet to fully recover private consumption, its main economic engine. In contrast, U.S. corporations have rebounded, raising the possibility of an export-led economic recovery. KORUS FTA will help broaden American enterprises` export opportunities, thus contributing to boosting U.S. production and investment and speeding up its recovery. That would be welcome news for emerging economies` exports that are heavily dependent on the American market. It will also be helpful in easing instability in international financial markets that has been caused by the eurozone debt crisis.
The Korean economy, which is heavily dependent on international trade and sensitive to emerging market demand, will be the biggest beneficiary of U.S. economic revitalization and subsequent global economic recovery. In addition, U.S. economic recovery and subsequent stabilization of international financial markets will also contribute to Korea`s sustained economic growth. To sum up, KORUS FTA is quite meaningful, as it will contribute to boosting global economic recovery and stabilizing global financial markets.