I heard that the S. Korean president has made some deal with the US. The two countries can buy anything from one another tax free. My Korean friend is afraid SK will become like Mexico within two years. Any houghts?

Someone has really overestimated me with this one. You all do know I studied poetry at university, right?

No. Here's the thing -- economics, and especially global economics, have never been a strong point of mine. I've read book after book about the IMF and the FTA and Mexico and Asia and South America, and I even took a graduate level course on globalization at university (the result of which being one of those high B exams I mentioned before) to try to educate myself, and to some extent it has worked, but not to the point where I would feel comfortable speaking as any kind of authority on the subject. I always end up getting too wrapped up in the social issues involved, and spent most of that grad course turning purple with rage at the back of the class as a room full of college educated artists made tacky comment after tacky comment in regards to poor people, the category.

On the one hand, I love the idea of the transportation and mixing of cultures across the globe -- the more exposure we all have as human beings, the more human we will become. On the other, much bigger and stronger hand, Neocolonialism -- the destruction of small, homegrown businesses and agriculture, the Westernization of entire cultures.... and the people at the bottom who always seem to end up the losers.... I don't know.

This is not an easy question. And I'm far from educated enough to answer it properly. So instead, I'd like to open the comments, because it's something I've also been wondering about. So... what have you got to say about this? Let me know.

Ask me anything

1 comment:

Pang Xiong said...

First I would suggest you to ask your friend if she harbors the same fears regarding the EU-Korea Free Trade agreement. Both the trade structure between Europe and Korea and the extent of the Free Trade agreement are very similar to the KORUS FTA.

What does she mean by stating that Korea will become like Mexico? Mexico has many structural problems and is in the middle of a civil war against drug cartels. I don't expect that in Korea anytime soon.

That Mexico as a whole didn't benefit after accession to the NAFTA is no clear case at all. You would be hard pressed to find an economist who doesn't think that generally free trade is mutually beneficial. It seems trivial, but FTAs are signed because both signees expect benefits for the economy.

Nobody denies though that FTAs can have negative effects on some.
Mexican suppliers took a big hit though because US companies who have their production base in Mexico imported the needed parts instead of buying them from Mexican companies. But since American companies do not use Korea as a production base this just isn't comparable to the Korean situation.

The agricultural sector is expected to suffer the most. And here is where the Free Trade agreement doesn't live up to it's name. E.g. Rice is exempt from tariff reduction, tariffs for other agricultural products will only phase out over the course of several years. Subsidies will be payed to lessen the impact of increased imports of agricultural goods etc..

We should accept the inconvenient truth that we cannot predict the future. So a negative outcome cannot be excluded with absolute certainty. But it's safe to assume that the FTA was negotiated with good intentions and with the best knowledge that was available.

(I hope my ESL skills didn't detract from the argument)