South Korea Current Issues

Remarks of U.S. Secretary of Commerce Carlos Gutierrez
The American Chamber of Commerce in Korea

Seoul, Korea

December 12, 2006

Secretary Carlos M. Gutierrez

Thank you for welcoming me to Seoul.

I am honored to be in Korea. I want to thank AMCHAM President-Elect Overby and KCCI Chairman Sohn and their leadership for hosting this luncheon and inviting me to speak.

I have been here several times previously, but this is my first trip as Secretary of Commerce. I am pleased to be here for bilateral meetings to further strengthen economic ties with Korean government and business entities.

I know well how Am-Cham is on the front lines of expanding U.S. market access and promoting U.S. economic interest.

U.S.-Korea Relationship

The Republic of Korea is a strong ally of the United States. We have a mutual commitment to peace, security and prosperity, and have a common vision for our citizens. Our historical ties are powerful and binding, and we are proud to stand side-by-side with the Korean people.

Regional security challenges which we have faced together over five decades unfortunately continue. As President Bush has said, “Our goals remain clear: peace and security in Northeast Asia.” 

And while we continue to work together against the destructive forces in our world, we must also continue working toward prosperity for our peoples. Today, I’d like to focus my remarks on the economies of our two nations and how a free trade agreement will enhance our relationship and provide greater prosperity for us all.

The Korean Economic Miracle

Today, according to the IMF, Korea has the world’s 11th largest economy. Last year total trade surpassed the $500 billion mark for the first time. Global exports grew 12% - the third consecutive year of double-digit growth.

Korea’s economic story is an inspiration for nations throughout the world. Forty years ago Korea had an underdeveloped economy and a relatively low standard of living. Per capita national product was a mere $100 in 1964.

Today, Korea has a GDP of over $877 billion year:

• Per capita GDP is up to $16,000.

Korea has become one of the most dynamic new industrialized countries, and the Korean standard of living rivals some EU members. Its companies produce leading global technologies, and it is the most wired economy on earth. Korea is truly a global economic powerhouse.

Engaging in Global Economy Contributed to Growth

Korea blossomed into a successful free enterprise economy by marrying the ingenuity of its workforce with global needs. Korea’s economy now thrives on demand for exports.

The U.S. is Korea’s 2nd largest trading partner. And Korea is our 7th largest trading partner. In 2005, the U.S. exported $27.8 billion to Korea and Korea exported $44 billion to the United States.

U.S. goods from semiconductors to airplanes are a part of Korean’s everyday lives. In fact, tomorrow I will be joined by U.S. Secretary of Energy, Sam Bodman, to learn more about clean air technology from the U.S., which has helped transform Seoul city buses from polluting diesel engines to high efficiency natural gas vehicles.

Technology developed in Illinois, manufactured in Colorado and implemented on the streets of Seoul for a cleaner environment for us all - that’s the global economy in action.

However, 20th Century economic performance is no guarantee for the 21st Century. The question for Korea is how to maintain its competitive edge in an ever-shifting global marketplace. It will take committed partners and an economy that fosters fair and open trade.

I believe a free trade agreement with the United States will help move Korea in the right direction.

Why the KORUS FTA is a Win-Win

It’s time for Korea to complete an agreement with the largest economy in the world. The KORUS FTA is a win-win proposition.

The benefits for Korea are clear. An FTA with the U.S. will lock in preferential access for Korea to the largest, most dynamic economy in the world.

An FTA will produce significant economic benefits for both our countries. Studies estimate that the KORUS FTA could increase the Korean GNP by 2% and lay a foundation to achieve per capita income as high as $30,000.

By becoming the first North Asian trading partner with the U.S., Korea has the opportunity to build a unique trading relationship in North East Asia.

For the U.S., this would be our most significant trade agreement in 15 years. Estimates show it could increase U.S. exports to Korea by 50%.

Additionally, the KORUS FTA would improve competitiveness and benefit our farms and ranchers as well as our manufacturers and service providers.

The U.S. and Korean economies are both moving in the right direction. With a free trade agreement in place, our bilateral trade relationship will flourish and our leadership roles in the global economy will be further enhanced.

Update on the Fifth Round

As you know we launched KORUS FTA talks in February and we just wrapped up the fifth round of negotiations in Big Sky, Montana last week. Let me give you an honest assessment of where we are after this round.

There Were Areas of Progress.

• The industrial market access discussions were marked by good-faith efforts on both sides. We both agreed to improve tariff offers on key products, such as chemicals and electronics.
• On IPR, we made progress on the areas of enforcement, and copyrights.  
• On agriculture, we began to discuss 235 products Korea considers “sensitive” products.  
• On textiles, our negotiators held a positive meeting in Washington, which will set the tone for further advancements in this important sector.

But There Were Also Areas of Disappointment.

• While the areas of progress I just noted are encouraging, we are disappointed we made no new progress last week in our priority areas: autos and pharmaceuticals.
• In pharmaceuticals, we were disappointed that Korea did not constructively address U.S. concerns relating to implementing regulations of the Drug Expenditure Rationalization Plan.
• Korean car taxes continue to discriminate based on engine size. In 2005, Korea sold nearly 800,000 vehicles in the U.S. Yet, U.S. companies sold just over 3,000 in Korea.

Failure to make progress in these two areas is especially troubling for my government and will be intensely discussed between now and the 6th round in January.

But its not just autos and pharmaceuticals:

• Korea’s average applied tariff rate is three times greater than that of the U.S.; an FTA would eventually bring our bilateral tariffs to zero.
• Important market sectors, such as legal services, telecommunications, and broadcasting continue to have limits on U.S. participation.
• American beef does not enjoy any real access.

We must gain full market access and remove these barriers.
We simply cannot convince the U.S. people or our Congress that an FTA is a good deal, if it is not a fair deal.

The Road Ahead for the KORUS FTA

We have a lot of work ahead of us, particularly in the most sensitive sectors. I don’t want to minimize the challenges that remain, but we did make progress last week in Montana in a manner that underscores the political will on both sides to conclude this agreement.

Korea has wisely seen the benefits in fully engaging in the global economy. An FTA would help extend that engagement into other market sectors. An FTA would further sharpen Korea’s competitiveness by introducing greater competition into protected sectors of Korea’s economy.

Korea must address the market access issues, including both tariff and non-tariff barriers, and regulatory and transparency concerns preventing truly fair access to the Korean market.

Clearly, this agreement is complex. These negotiations are aimed at knitting together two advanced economies, each with legal and regulatory systems that literally and figuratively speak different languages. … The challenges are great - but the benefits are significant.

It’s time to roll up our sleeves and get the FTA done.

The clock is ticking. The President’s Trade Promotion Authority is set to expire at the end of June.

And, following the recent elections in the U.S, some argue that the winds may have shifted in favor of protectionism. Indeed, those who espouse protectionism as a legitimate economic policy have a loud voice. They cite specific imbalances that can only be overcome with actions - not rhetoric.

Korea helped make this region one of the most dynamic and competitive in the world.  An FTA will help distinguish Korea from the pack.

As the old adage goes, fortune favors the bold. The United States and Korea must be bold. We must be prepared to make tough political decisions to open our economies to competition.

We cannot allow history to judge that we did not seize the opportunity to raise prosperity to a new level. We owe it to our citizens to address the challenges facing the FTA.

This is a unique opportunity for our nations, our economies, our citizens and for this region of the world. We are proud of our friendship with Korea and believe the best is yet to come.