By Don Southerton, KoreaLegal.org Editor
Mid summer and the anticipated early July target for signing the KORUS FTA has come and gone. That said, it’s time for an update on both South Korea’s Assembly and the US Congress’ review of the treaty.
South Korea Update: Senior lawmakers of the ruling party reiterated Monday that they would push for the ratification of the Korea-U.S. free trade agreement (KORUS FTA) during the August session of the National Assembly.
“We are aiming to pass the FTA bill by the end of next month,” Rep. Hwang Woo-yeo, floor leader of the Grand National Party (GNP), said.
The four-term lawmaker dispelled growing concerns that the conservative party may use its majority status to ram through the contentious bill without proper deliberations with the opposition.
The GNP, which controls 169 seats in the 299-member unicameral legislature, has unilaterally endorsed a number of major bills after physical clashes with rival parties, including budget proposals and an FTA with the European Union.
When asked what his party would do if opposition parties forcibly block the passage of the trade pact, Hwang replied that his party will likely stick with the democratic process while it also remains pending in the U.S. Congress.
“So long as Washington does not ram the trade deal through the Congress, the GNP will handle the matter through dialogue and negotiations with opposition parties,” he said.
GNP spokeswoman Rep. Bae Eun-hee also noted that the GNP reaffirmed its position that it will push for the passage of the KORUS FTA at a joint workshop of the party’s Supreme Council and policy committee on Sunday.
Last Wednesday, Hwang and the GNP’s new Chairman Hong Joon-pyo expressed their support for a prompt ratification of the much-delayed trade deal at a meeting with presidential chief of staff Yim Tae-hee.
The FTA was signed in 2007, but the government’s move to get the bill ratified has been blocked partly because of strong objections from the main opposition Democratic Party (DP) and the country’s farming industry.
However, Chairman Hong, who is known as a strong advocator of the FTA, hinted that the GNP may have to risk a physical showdown with rival parties, suggesting a division within the ruling block.
Hong reportedly said the GNP has no reason to hesitate in using its majority status to approve the bill as recent polls show some 65 percent of the public support the deal.
Business experts forecast that once implemented, the KORUS FTA may increase the country’s gross domestic product (GDP) by 6 percent over the next decade.
They claim that the bilateral deal could create as many as 34,000 jobs a year.
The fate of the deal, however, remains uncertain as the DP insists on renegotiations with Washington.
Meanwhile, the GNP has announced that it will push the passage of a bill that calls for stricter aid distribution monitoring in North Korea and financial aid to non-governmental organizations that keep records of human rights abuses in the communist country.
Source: Korea Times
U.S. Update: President Barack Obama will soon send a free trade pact with South Korea to Congress for approval despite Republican threats to vote against it because of a retraining program for workers displaced by trade, White House Chief of Staff Bill Daley said on Thursday.
“There is no time to waste fighting politics as usual,” Daley said in a speech at the U.S. Chamber of Commerce to the U.S.-Korea Business Council. “If we do not act before the August recess, American business will suffer.”
Obama faces a showdown with Republicans over his insistence that an extension of the nearly 50-year-old Trade Adjustment Assistance (TAA) retraining program be passed along with the Korea pact and two other pending free trade agreements with Colombia and Panama.
Republicans have objected to Obama’s plan to insert the TAA program into the implementing bill for the South Korea agreement, insisting that lawmakers be allowed to vote separately on the TAA and the trade pact.
The White House believes both could pass separately.
However, Daley said Republicans have yet to offer a “credible” plan that would prevent TAA opponents from blocking a vote on the program, which Democrats see as a vital safety net and many Republicans view as ineffective.
“We can no longer wait. If there’s no agreement on an alternative approach in the very near future, we will move forward to seek passage of the FTA (Free Trade Agreement) with TAA” included, Daley told the audience of U.S. and Korean business officials.
Daley said the White House expects the Korea agreement “to create or support 70,000 American jobs” through tariff cuts that will open the South Korean market to more U.S. exports.
Congress must act soon because a rival deal struck by the European Union with South Korea went into force on July 1, threatening U.S. market share in the longtime ally, he said.
Senate Republican Leader Mitch McConnell has said he would vote against the Korean agreement if TAA is included in the implementing legislation for the deal.
AMERICAN JOBS ON THE LINE
But most business leaders recognize an extension of TAA has to be part of the mix, and don’t believe it is worth holding the agreement up over the issue.
“We can’t let differences over processes and procedures hold back these agreements any longer. American jobs and American standing in the world are on the line,” said U.S. Chamber of Commerce President Thomas Donohue.
The deal was originally negotiated during the administration of former President George W. Bush and business groups have been waiting four years for it to become law.
“We’ve seen first hand what these free trade agreements do after implementation,” said Mike Ducker, chief operating officer of FedEx Express, a division of FedEx.
“Not only does it create new commercial opportunities for our customers and greater demand for our services, it allows us to continue growing our operations and our work force around the world,” Ducker told Reuters in an interview.
Critics, including the AFL-CIO labor federation and Public Citizen’s Global Trade Watch, say tradedeals endanger U.S. jobs by cutting U.S. tariffs and encouraging companies to move their operations overseas.
A study by the left-leaning Economic Policy Institute says the Korean trade agreement could displace about 159,000 American jobs over seven years.
But Harrison Cook, vice president of international government affairs for Eli Lilly and Company, said the rival EU-South Korea agreement puts U.S. pharmaceutical companies at a disadvantage in a major market.
“All those tariff preferences are going to go to our Europeans competitors, not to us. That’s a significant consideration in this sector, where you do long-term contracting,” Cook told Reuters in an interview.
Source: Reuters
2012 Trends and Expectations—A Korea-facing Commentary
Sunday, January 1st, 2012By Don Southerton
Each new year, I share thoughts for the upcoming months in an executive-level commentary. Looking back at 2011, South Korea’s export economy saw a robust year—familiar names like Samsung, Hyundai, and Kia continuing to grow global market shares—demand driven by a mix of product quality, value, and design appeal, along with Japanese brands suffering set-backs from the devastation of the tsunami and threat of catastrophic nuclear meltdown.
Tempering the demand for top Korean cars, electronics, and consumer goods were deep concerns over the EU fiscal crisis—worries that still linger.
On a positive note following an amended agreement for the Korea-U.S. Free Trade Agreement (KORUS FTA) and ratification both by the U.S. Congress and Korean Assembly expectations are that the treaty will be implemented in the first quarter of 2012. Advocates and critics alike see the FTA boosting annual commerce between the two nations into the billions of Dollars.
Looking forward to 2012, first, the succession in North Korea will continue to be a concern. Issues include the stability of the Kim regime, threats of more border clashes, and an unchecked nuclear arms program. I’ll continue to monitor and share news as it unfolds.
Next, building on the momentum of the past 3 years, expect Korea’s export-driven firms to push their organizations to carve out greater global market shares. Look for even bolder announcements and sales targets than in the past. For example, Hyundai Motor Company, along with their sister firm Kia Motors, announced their global goals for 2012—targeting sales of seven million units. This is a significant increase from estimated sales of between 6.5 and 6.6 million the group expects for 2011.
Not to be outdone, Samsung Electronics, with record 2011 cell phone sales, intends to increase their total by as much as 15%. This translates to approximately 374 million phones, including 150 million smartphones for 2012.
One change from the past 2 years…., I expect few new foreign brands to enter the Korean market in 2012—part saturation, part concerns by the major Groups over the euro-zone fiscal crisis and a stalling U.S. economy undercutting global demand that in turn has an impact on the domestic economy. Two exceptions. One will be services benefitting from KORUS FTA such as U.S-based international law firms wishing to expand into Korea. The second are highly successful brands and products that bring with them strong appeal and a ready market—for example, Chipotle.
For those foreign businesses and brands that do plan to enter the Korean market or partner with Korean firms, I suggest they take efforts to understand not only the culture, but also business norms and expectations. For example, your key management needs access to coaching and someone to answer their questions on topics ranging from strategy to the impact of routine management changes within their Korean partner’s organization. It’s a small upfront investment and less costly than the consequences, which can include lawsuits, local and expat employee turnover, and months of missed goals and low productivity—not to mention tensions between you and the client over expectations. I know this area well—most recently handling the negotiations for a major brand launch in Korea.
Finally, expect further growth in Korean Green technology (wind power, solar, eCars, batteries), along with Korean overseas acquisition of energy related firms. With regard to Green, most of Korea’s major Groups have boldly entered the renewable and sustainable side of the market with plans to expand sales and distribution globally. This includes state of the art manufacturing facilities for wind turbines, solar cells, next generation batteries, and electric power trains. In particular, Hyundai and Kia introduced hybrid models in 2011, with the group aiming to launch a variety of eco-friendly models in 2012.
To conclude, understanding the dynamics of Korea’s economy, markets, and major business groups is vital. It is critical to take into consideration Korea’s past and current trends. Culture, global influences, and a 24-hour virtual workday add to this complexity. I’m dedicated to providing much needed research, analysis, and critical thinking to provide you with answers and insights 24-7-365.
Please feel free to share this commentary across your organization and teams.
If needed, I can also provide more details on specific market sectors, etc.
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Tags: Chipotle, Don Southerton, Don Southerton Korea consultant, Hyundai Kia Automotive Group, Korea consuting, KoreaPros, KORUS FTA, Samsung Electronics
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