On June 30, 2007, United States Trade Representative Susan Schwab and South Korean Foreign Trade Minister Kim Hyung-chong signed the proposed U.S.-South Korean Free Trade Agreement (KORUS FTA) for their respective countries. If approved, the KORUS FTA would be the largest FTA that South Korea has signed to date and would be the second largest (next to North American Free Trade Agreement NAFTA) in which the United States participates. South Korea is the seventh-largest trading partner of the United States and the United States is South Korea’s third largest trading partner. Various studies conclude that the agreement would increase bilateral trade and investment flows.
The final text of the proposed KORUS FTA covers a wide range of trade and investment issues and, therefore, could have wide economic implications for both the United States and South Korea. The KORUS FTA includes issues on which the two countries achieved early agreement, such as the elimination on tariffs on trade in most manufactured goods and the partial liberalization in services trade. The agreement also includes provisions on a number of very sensitive issues, such as autos, agriculture, and trade remedies, on which agreement was reached only during the final hours of negotiations.
If the agreement is to enter into force, Congress will have to approve implementation legislation. The negotiations were conducted under the trade promotion authority (TPA), also called fast-track trade authority, that the Congress granted the President under the Bipartisan Trade Promotion Act of 2002 (P.L. 107-210). The authority allows the President to enter into trade agreements that receive expedited congressional consideration (no amendments and limited debate). The White House has not indicated when it will send the draft implementing legislation to Congress. (The TPA sets no deadline for the President to do this.)
While a broad swath of the U.S. business community supports the agreement, the KORUS FTA faces opposition from some groups, including some auto and steel manufacturers and labor unions. In addition, the agricultural community and some Members of Congress have withheld support for the agreement until South Korea lifts its restrictions on imports of U.S. beef. Some U.S. supporters view passage of the KORUS FTA as important to secure new opportunities in the South Korea market. Opponents claim that the KORUS FTA does not go far enough in opening up the South Korean market and is a lost opportunity to resolve long running concerns about South Korean barriers. Other observers have suggested the outcome of the KORUS FTA could have implications for the U.S.-South Korean alliance as a whole.
Differences between the White House and the Democratic leadership in the Congress over the implications of the KORUS FTA have made the timing and even the likelihood of the President’s submission and the Congress’s subsequent consideration of implementing legislation uncertain. This report will be updated as events warrant.