Question

1. Which of the five levels of regional economic integration does KORUS represent? Briefly explain your answer.

2. While trade theories generally support free trade, political realities ensure that trade barriers still exist. Briefly identify three examples of important ways in which KORUS addresses the realities of trade between the US and Korea.

3. President Trump called the original KORUS a "terrible agreement" and insisted on new negotiations. Do you think it needed to be renegotiated? Why or why not?

4. Which do you think is better for encouraging global trade, agreements organized by WTO and intended to cover all nations, or regional agreements like KORUS? Explain your answer.

Answer 1

1. The conclusion of the Korea-US FTA (KORUS FTA) became the greatest event for Korea in its trade policy history. The FTA was concluded with high expectations of increased trade in the future, and it should mean substantial economic benefits for both countries, but likely with substantial gains for Korea but with only modest gains for the US. The Korea-US FTA will provide the US with a stronger economic foothold in East Asia, while at the same time enabling the US to participate more actively in regional economic integration in East Asia. The high-quality Korea-US FTA could also be used as a model for an East Asian FTA, and should provide to East Asian countries some incentives for promoting a region-wide FTA in the region.

Free trade area. This is the most basic form of economic cooperation. Member countries remove all barriers to trade between themselves but are free to independently determine trade policies with nonmember nations. KORUS is an example of Free Trade Agreement between Korea and US.

2.  These are three examples of important ways in which KORUS addresses the realities of trade between the US and Korea. Significant concessions were granted to the United States on trade in automobiles: tariff reductions for Korean automobiles were delayed for five years, and U.S. autos were granted broader access to the Korean market. At the same time, the negotiators agreed to set aside disagreements over U.S. beef exports for the time being.South Korea provides Korean farmers with levels of subsidy considerably higher than farmers elsewhere in the world.

3. Yes, it needs to be renegotoated because the trade policy is too biased to Korea and US is making just negligeable gains from the trade, The U.S. think-tank Economic Policy Institute predicted that it would lead to the loss of 159,000 jobs. Immediately following the passage of KORUS in October 2011, certain companies and industry groups voiced their concern for the deal. According to the United States International Trade Commission, the American textile industry is expected to lose jobs as South Korean manufacturers make the same products at 15 to 20 below the cost to American manufacturers.

4. Trade agreements negotiated by WTO is much better compared to regional arrangements like KORUS. A free trade agreement stipulates free (cero tariff) trade between countries/states. In contrast, a preferential trade agreement is much less broad covering preferential (i.e. low or lower other countries) tariffs for a set of products or services. When we sign a treaty with a particular country, we are closing down the doors of open trade to other countries. That is against the spirit of free trade and competition.