Reflecting on 2018’s Korean-U.S. trade negotiations, with recent ratification by Korean National Assembly, the KORUS FTA revisions have mitigated, not exacerbated, trade friction between both
Mythbuster – KORUS FTA
The economic planning of Korea and the U.S. has not gone as expected since 2006, when both nations sat down to draft the well-intentioned Korea US Free Trade Agreement, known commonly as KORUS FTA. While the intent for this political partnership was to bring clear bilateral-trade-skies to the two countries, progress and revisions have proven to be much more economically complex than expected.
Nevertheless, South Korea, the U.S.’ seventh-largest trading partner, fought hard to maintain expectations for this agreement, especially after it achieved historical success when it was signed into effect in 2012 as the second largest trade deal since NAFTA. Even with revisions, this in March 2018, the economic trajectories will continue to see growth, should the US and Korea continue ahead with the mutual trade agreement.
Despite common misconception, both parties remain steadfast in their commitment to overcome political distractions and focus on the cultural, historical and social benefits of this agreement. To demonstrate, we have cultivated a list of the most common myths surrounding the KORUS FTA, offering truth in place of the falsities.
Myth #1: The KORUS FTA is superior to South Korean domestic laws and inferior to US domestic laws.
No, the agreement will be upheld equally by both nations. If either country violates the FTA terms, acting according to their national interest alone, the violating country will be held responsible. Additionally, to enforce the terms are upheld, various international organizations, such as the World Trade Organization, have been put into place by both communities to regulate international trade.
Myth #2: Neither the US or Korea will be able to control an influx of capital from the financial markets.
This notion is a bit exaggerated. Korean and US regulators will take all measures to stabilize financial markets on both sides. In the event that either government were to determine that the financial solidity was at risk via FTA implications, balancing actions would be assumed, including short-term safeguard policies against overseas remittance by foreign investors with prepared complementary measures for an opening into a new capital market.
Myth #3: Investor-State Dispute (ISD) is not an international standard and it will become a toxic clause which violates economic sovereignty.
This, fortunately, is also not true. The ISD is a basic, neutral and international arbitration procedure tool that is widely used to protect investors in economic agreements amongst countries. The KORUS FTA-specific ISD clause is a necessary protection from both U.S. investors in South Korea and South Korean investors in the U.S. Additionally, ISD is included in approximately 2,700 bilateral investment treaties (BIT) around the world. Not only is ISD not unique to the KORUS FTA, it is commonly included in most South Korean-involved FTA and BIT deals.
Myth #4: Each district will be designated and determined to Investor-State Dispute.
No. Real estate policies developed for public welfare are not part of ISD. Each country will have complete control over their public welfare policies, including the designating of Greenbelt territories and usage restrictions. The FTA will not impact either country’s rights over set real estate policies.
Myth #5: The introduction of pharmaceutical licensing and pharmaceutical patent transfer policies will drive up drug prices and medical insurance premiums.
Not one bit! It is unreasonable to argue that a boom of new foreign-produced prescription drugs will drive up medical premiums and drug prices as a result of new policies and licensing provisions. Not only is it uncommon for generic drugs to be prohibited by the U.S. government, but there are factors which may lead to lower drug prices, such as a decrease in import costs for drug ingredients due to tariffs cuts.
Myth #6: The privatized U.S. healthcare system will have an irrevocable impact on Korea’s public healthcare system.
A very confident no. The two are quite independent of each other, with a large portion of Korea’s national health insurance policies completely unaffected and untouched by the KORUS FTA. Due to this separation, each country maintains full control over their respective healthcare services.
Myth #7: Korean healthcare prices would skyrocket if U.S. companies attempt to neutralize Korea’s public policies and promote the privatization of Korea’s healthcare system.
Definitely, not. First, it would be wrong for any U.S. investor or entity to disintegrate Korea’s healthcare system. Secondly, as answered in the previous section, much of Korea’s public policies (i.e. national health care services, national pension services, and other public works) will not be affected by the KORUS FTA. Lastly, public policies and prices of public utilities are directly interconnected to the rights to public utility charges (electricity, water, etc.), which will remain exclusive to each country.