A motion to ratify the South Korea-Chile Free Trade Agreement (FTA) has been presented to the South Korea's Unification, Foreign Affairs and Trade Committee of the National Assembly.
Unfortunately, it remains uncertain whether it will receive parliamentary approval. As it is, over 140 lawmakers have registered their opposition to the pact with Chile.
Despite the obvious benefits of globalization for most South Koreans, a dangerous nostalgia for the Hermit Kingdom is showing its ugly face in opposing FTAs. Besides Mongolia, South Korea is the only other country in the WTO without a single FTA.
Meanwhile, there has been a proliferation of bilateral and multilateral FTAs with the number growing under the impetus of the failure of the Doha Round of WTO talks. At the moment, more than 180 such agreements are in effect that cover nearly 43 percent of global trade.
Passage of the FTA with Chile is a necessary step toward agreeing upon and ratifying similar pacts with other countries. Should it be ratified, the agreement would allow about two-thirds of South Korean manufactured products to enter Chile without tariffs. It appears that the only Chilean agricultural products that are competitive in the global market are a few categories of fruits that do not pose a serious threat to South Korean producers.
Negotiations between Seoul and Japan began this year toward an FTA with a plan to complete the negotiations by 2005. Meanwhile, there is the matter of recent discussions for an Asian FTA to include South Korea along with China and other Asian countries.
And then there is the matter of an FTA with the US. This would offer great promise since South Korea sells more general merchandise to the US than it buys from this important trading partner and strategic ally.
There is no question that South Korea has been a primary beneficiary of economic growth derived from market liberalization. In the early post-World War II period, per capita income was below many countries in Africa. The introduction of markets and the benefits of modernization in bringing an end to centuries of feudalistic conditions are being brazenly overlooked by small but influential interest groups.
Their vocal opposition and aggressive actions cannot change the fact that farmers along with disaffected trade unionists and radical students remain a small proportion of the citizenry. It will be a serious setback for most South Koreans if policy is based upon serving minorities rather than the majority.
Sound policy requires considering long-run effects on most or all people, not simply short-run effects on a few. It turns out that plans for South Korea to become a trade and financial center for Northeast Asia are also being held hostage to the whims of special interests.
The offer of compensation packages to various domestic industries, particularly agriculture, represents a form of democratic extortion. These payoffs require the bulk of the population to pay higher taxes and higher prices to serve the ends of a few. This is democracy gone mad.
One plan would provide 119 trillion won (over US$101 billion) to the agricultural sector over the next 10 years. It would include an extension of tax benefits to farming and fishing villages as well as reduced interest rates for funds made available to them.
It is a fair question as to how effective this aid will be. Surely, it is more important that South Korean farmers become more competitive or they will remain on the dole for an indefinite period causing an unreasonable burden on most citizens. In all events, estimates by farmers of the impact of the FTA are disputed as being wildly exaggerated. And it should be expected that government disbursements involving such vast amounts of money tend to fall prey to corruption.
President Roh Moo-hyun and his economic advisors have finally understood the need to point out that there are many more citizens receiving benefits from free trade than those who face hardships.
In all events, the economic impacts of the FTA and the effects of eliminating tariff and non-tariff barriers between the two countries have been thoroughly and carefully investigated.
One great failing of modern democracies is that special interests are able to capture disproportionate influence over the formulation of public policies.
It is ironic that when business and financial interests seek to impose costs on taxpayers or restrict competition, they are readily and rightly denounced.
Democracy will function better if there are no double standards. Neither non-governmental organizations nor farmers nor any other special interest group should be allowed to manipulate public opinion by characterizing their plight as a matter of national interest.
By ratifying the FTA, South Koreans can make a statement that it has escaped from the trap of special interest politics. And the whole world will be watching.
Christopher Lingle is a global strategist for eConoLytics.com.
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