The Strategic Benefits of KORUS

May 5, 2020

This commentary is part of the Strategic Trade series supported by the Atlas Network.

Since its initial conclusion in 2007, the United States-Korea Free Trade Agreement (KORUS) has delivered economic benefits to both sides. Key areas include market access for autos, agriculture, and services, along with high standard rules on intellectual property, e-commerce, labor, and the environment. Above and beyond the corners of the agreement, the strategic benefits of KORUS, while difficult to quantify, have proven just as compelling.

These benefits, unlike the commercial gains tied to the provisions of the agreement, did not have to wait until 2012 when KORUS took effect to be enjoyed. They de facto “entered into force” soon after the signature of the initial deal in June 2007, as markets in both countries reacted well in advance. Some came under strain during the subsequent renegotiations of the deal under the Obama and Trump administrations. But, as of today, we have a much more solid, enduring, and deeper partnership with South Korea as a result of the free trade agreement. 

First, KORUS provided an important economic pillar to our already strong security alliance with South Korea. Up until that point, trade tensions dominated our economic relationship, which negatively impacted our overall bilateral relationship. South Korea was considered a protectionist country, keeping its market closed through high tariffs and pervasive and opaque non-tariff measures, while it drove its economic growth through its export machine. As a result, South Korea was frequently cited under the U.S. Section 301 statute, and imports from South Korea were subjected to extensive antidumping and countervailing duty measures. This dramatically changed with KORUS and decisions by the South Korean Roh administration to open its economy, including, inter-alia, its long protected agriculture, automotive, and movie sectors, as well as to carry out regulatory reforms. The U.S.-Korea alliance was upgraded as we became closer economic partners sharing common values of democracy, human rights, and market-driven systems, among others.

Second, KORUS promoted U.S.-Korea cooperation on international economic matters. Having made the tough decisions in KORUS to open and reform its economy and adopt high standards and a transparent regulatory process, South Korea became an advocate of these policies on the international scene. Furthermore, the close working relationships established between the economic teams in both countries paved the way for international cooperation. As a result, U.S. and Korean interests often aligned in the World Trade Organization (WTO), Asia-Pacific Economic Cooperation (APEC) forum, and G-20. For example, South Korea was a strong force in moving a critical mass of WTO members to eliminate tariffs on cutting-edge information technology products in 2015. In APEC, South Korea and the United States jointly promoted the reduction of tariffs in environmental goods, good regulatory practices, and strong intellectual property rights (IPR) regimes. South Korea hosted the G-20 in 2010, a decisive year as the world was emerging from the global financial crisis, with little daylight between the positions of Washington and Seoul. 

Third, once South Korea made its own decision to adopt the high standards that the United States advocated in KORUS, it became a strong promoter of such standards in the free trade agreements (FTAs) it pursued with other countries. Following the 2007 conclusion of the initial KORUS negotiations, South Korea embarked on an ambitious FTA path, concluding more than 15 bilateral and plurilateral FTAs in 10 years, with countries of all sizes and in all regions. It was not unusual for South Korea to press these other partners for comprehensive market access, strong IPR provisions, regulatory transparency, and labor and environmental rules. KORUS FTA also stimulated large economies, such as the European Union and Japan to pursue FTA negotiations with the United States and South Korea to avoid being left behind in these markets. This even was the case in South Korea’s FTA negotiations with China, where the bilateral FTA, which became effective in 2015, included some of the advanced provisions for China in a range of chapters, including environment, transparency, competition, and the IPR.

These are just three examples of how KORUS brought far-reaching benefits to both countries, the Asia-Pacific region, and the world that went way beyond the chapters of the FTA. It’s tempting to think of the benefits of an FTA in strict terms tied to the provisions of the agreement. However, it’s important to look beyond the legal text and recognize the positive and impactful spillover effects that are often hard to anticipate and quantify. 

Wendy Cutler is Vice President at the Asia Society Policy Institute and former Acting Deputy U.S. Trade Representative. Seok young Choi is Senior Advisor at Lee & Ko and Former Ambassador to the World Trade Organization.

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