South Korea’s free trade agreement with the U.S. is a key to maintaining growth amid unprecedented economic uncertainty and needs to be ratified soon, President Lee Myung Bak said.
“The only way we can survive is to march toward the world,” he said in a televised address to celebrate the Korean peninsula’s liberation from Japan in 1945. “FTAs are a key strategy for this. If the FTA with the U.S. is ratified, Korea will officially become a hub for FTAs. If we lose time, we could let our competitors get ahead of us. For the future of Korea, the Korea-U.S. FTA must be ratified soon.”
Lee’s comments follow Standard & Poor’s first-ever downgrading of the U.S.’s AAA credit rating on Aug. 5, which triggered a 7.7 percent drop in South Korea’s benchmark Kospi stock index and led its central bank to keep interest rates unchanged last week. The trade deal with the U.S., if cleared by lawmakers in both countries, will build on accords signed with the European Union and Chile.
The push to ratify the agreement comes as South Korea is seeking to begin talks on a similar deal with China that could increase sales of products ranging from Samsung Electronics Co. semiconductor chips to Hyundai Motor Co. cars. Trade Minister Kim Jong Hoon said on Aug. 13 that an FTA with Asia’s biggest nation could be a “win-win.”
The FTA with the U.S. will boost South Korea’s gross domestic product by 5.7 percent while creating 350,000 jobs, Lee said today, citing research commissioned by the government. The accord, reached under President George W. Bush, has been on hold as South Korea awaits ratification by the U.S. Congress before its own lawmakers approve the deal.
South Korea is “very close” to finalizing the agreement with the U.S., which will benefit domestic chemical, petroleum products and electronics manufacturers including Samsung and LG Electronics Inc., Kim said two days ago in Manado, Indonesia, at a meeting of Association of Southeast Asian Nations trade ministers.
U.S. Senate leaders ended an impasse over stalled free-trade agreements with countries including South Korea this month, agreeing to vote after the August recess on benefits for workers who lose their jobs because of overseas competition, and then to take up the trade deals.
War on Inflation
Lee, who declared “war” on inflation in January, said on Aug. 8 that the slump in markets around the world is turning into a “survival game” that has made international cooperation vital in seeking solutions to the global crisis.
China is South Korea’s largest trading partner with total volume between the two nations reaching $180 billion in 2010, Kim said in an interview at the Asean meeting. Korea’s trade surplus against China amounted to $52.84 billion in 2010, a 39.5 percent increase from a year earlier, according to the Bank of Korea.
The nation’s economy expanded 0.8 percent in the second quarter from the previous quarter, when it advanced 1.3 percent as a stronger won and Europe’s fiscal crisis weighed on exports. The economy grew 3.4 percent from a year earlier, the slowest pace since the third quarter of 2009.
While the government won’t cut spending to improve the welfare of its people, it will aim to balance budgets not to repeat the fiscal mistakes made by other countries, Lee said.
S&P cut the U.S.’s credit rating on Aug. 5, criticizing lawmakers for failing to reduce spending or raise revenue enough to narrow record budget deficits.