Following is the third and last in a series of articles featuring the Korea-U.S. Free Trade Agreement which marks the first year after its effectuation on March 15, 2012. ― Ed.


This year is a special year for the American Chamber of Commerce in Korea for two reasons. Established in 1953, we celebrate our 60th anniversary this year. Today also marks the first anniversary of the implementation of the Korea-U.S. Free Trade Agreement.

Over the years, AMCHAM has helped bring about some important changes that have been of mutual benefit to both Korea and the United States, such as Korea’s inclusion in the United States’ visa waiver program in 2008. None of these, however, can rival the successful passage and implementation of the FTA because it is a win-win agreement that, if used wisely, can help achieve our two nations’ key policy goals: economic growth, job creation and creating a fairer and more open economy.

Early signs show that the FTA is, as predicted, helping create new export opportunities (and much-needed jobs) in both countries through tariff reduction. According to the Korea Customs Service, Korea’s goods exports to the U.S. that were given tariff concessions under the trade pact rose by 8.1 percent, while exports of goods that were given no concessions decreased by 2.8 percent year-on-year between March 15 and Dec. 31, 2012. A similar trend has been noted for American exports to Korea. Korea’s automobiles, auto parts, and general machinery sectors have been significant beneficiaries; for the United States, agriculture and advanced technology sectors have benefited the most so far. Consumers on both sides now enjoy a greater choice of goods at more affordable prices. This comes at a time when the Korean government is working to control inflation and help Korean families better meet the challenges of daily life.

Lower tariffs are just one of the FTA’s many strengths. It is dubbed the “gold standard agreement” because of its comprehensive scope and detailed rights and obligations with regard to market access commitments such as regulatory transparency, intellectual property rights protection and services liberalization. Despite opposition from some, Korea’s leaders had a larger vision, and saw that the Korea-U.S. FTA (and Korea’s subsequent FTAs) could be harnessed to speed up the nation’s transformation into a more open and advanced economy, attracting more foreign investment and assuring a higher level of economic growth.

Their judgment proved prescient. By signing a “high standard” agreement such as the KORUS FTA, Korea sent a strong message to potential investors around the world that they wanted Korea to be a more open and transparent market place that allows foreign companies to compete fairly. From my personal experience, I can testify that in the past year, I have received a lot more emails, phone calls, and visits from American companies who are now newly considering entering the Korean market. To ensure that new companies do invest here, Korea needs to maintain this path of openness.

Moreover, third-party countries such as China and Japan now view Korea as a launching pad from which to expand to Korea’s FTA partner countries. According to the Ministry of Knowledge Economy (January 2013), total foreign direct investment to Korea (actual arrived figures) reached $10.4 billion in 2012, a 57.8 percent increase from 2011. Of this, U.S. FDI stood at $1.2 billion, increasing by 181.2 percent compared to 2011. Foreign-invested firms in Korea employed over half a million workers in 2011, making up 6.2 percent of Korea’s total employment, so through FDI growth, the FTA is helping create new jobs in Korea.

In addition to attracting more FDI, the market access commitments in the Korea-U.S. FTA help Korea become a more innovation-focused economy. As underlined by President Park Geun-hye, innovation and R&D will be crucial for Korea to achieve higher economic growth, create more jobs and foster stronger, more competitive small and medium-sized enterprises. Now, the key to creating a truly innovative economy is to ensure that there is an enabling environment for innovation. Creating an environment in which people can take a new promising idea and turn it into a successful product or service requires many things. Two key elements are: sufficient reward and protection for innovative ideas, and government policies that encourage new ideas into becoming a reality in the marketplace.

The Korea-U.S. FTA requires that a strong system is in place that provides adequate rewards for innovation as well as protection and enforcement of intellectual property rights. This will create necessary incentives for innovation, as well as help ensure that innovative companies, including SMEs, can compete fairly and continue to invest in R&D without fearing IPR infringement. When innovative ideas are rightly rewarded and protected, more Korean companies will put real money into R&D. Further, more foreign businesses will set up R&D centers here and partner with Korean companies.

The FTA also calls for improvements in the transparency of government policymaking. Among others, this would mean that policies need careful designing and feedback opportunities from all stakeholders before being implemented. In a nation known for speed and change, taking these steps will take time and effort, but it will ultimately help prevent unintended consequences that may occur from the exclusion of affected parties. It will also improve the business environment by giving both domestic and foreign firms greater security in planning their business strategies and pursue new investments. There is clearly room for growth in this area: according to the World Economic Forum Global Competitiveness Report 2012-13, Korea ranked 133rd out of 144 countries for “Transparency of Government Policymaking” index (far below its overall ranking of 19th).

To reflect the continued focus on innovation, AMCHAM has also embraced “promoting innovation” as one of our key goals in the coming years. We plan to work with the advisors of the new “AMCHAM Innovation for the Future Council” (launched in October last year) to develop new events and provide ideas that help improve Korea’s private and public sectors as well as enhance opportunities for future collaboration between Korean and U.S. business communities.

Last, the FTA is truly a “gold standard agreement” because it is an evolving “living agreement.” The agreements have established 19 committees and working groups to discuss and resolve issues that may arise during implementation. We are confident that the on-going dialogue and coordination between the two governments will continue to ensure both sides benefit from the FTA.

AMCHAM and our members are honored and proud to have been a partner to Korean consumers and businesses in the last six decades, and to have been a part of Korea’s miraculous transformation into an economic powerhouse. At our 60th anniversary “Hwangap” reception on May 14, 2013, we will be celebrating our long standing partnership, and KORUS FTA will certainly be recognized as an important third pillar to the United States and Korea’s already strong political and military alliance. 

By Amy Jackson

The writer is president of AMCHAM Korea. The opinions reflected in the article are her own. ― Ed.