FTA Agreement Reached FTA Talks Near Failure: The Death of an Alliance, Part 66

[Update 2:   Well, as it turns out, the two sides did reach an agreement, although it’s not clear how comprehensive.  Both sides — mainly us — made major last-minute concessions.  Talks were ongoing until minutes before the legal deadline. Beef tariffs will be phased out over  15 years, which is a long time.  (We’ll see if the Koreans actually accept the next shipment.)   Korea also gets to protect its rice market.  There’s really only one bright spot I can see:  “Both sides have agreed to immediately eliminate import tariffs on passenger cars  … South Korea also accepted a U.S. demand to restructure its tax rates based on engine displacements.”  I’m guessing this will be better for Korea than for Detroit.  Now the really bad news:

In what appeared to be an unusual compromise, Washington agreed with Seoul to hold further negotiations on a South Korea-developed industrial complex in North Korea. Seoul has pushed for the treatment of goods produced in the Kaesong complex in the North Korean border city as South Korean-made products, but Washington has been against it.

In the statement, the two sides left room for the country of the origin issue to be solved in their future negotiations by designating it a “built-in agenda.”  [Yonhap]

It’s an outrage that we’re even considering this.  These are slave-made goods, it’s illegal to import them, and we know it. 

I don’t have any other details on the agreement.  I think the deal on cars is significant, and the rest, not so much.  As for how comprehensive this deal is, I’ll wait for more information.  Presuming this has met the U.S. fast-track deadline, the ball is back in the court of the Korean Confederation of Trade Unions and the Korean National Assembly.  It’s an election year, so the fact that an agreement has been reached doesn’t mean the deal is sealed.  We may even see demands to renegotiate, although on balance, it sounds like Korea got most of what it wanted.  All of this presumes that there won’t be significant opposition right here in the United States.]

[Update: As of 8 p.m. Washington time, according to Yonhap, talks are still ongoing, although no one really knows why.  Without some hope of achieving something, you’d think they’d have quit by now.  My guess is that they’re going for some kind of scaled-down  deal that will be an FTA in name only, but which will allow everyone to say they’ve reached “an” agreement.]

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Talks on  a proposed U.S.-South Korean free trade agreement  have failed to reach agreement  after a year of negotiation, and after  being  extended for another 48 hours after the last deadline.  It’s not yet completely clear if this means they’ve failed, period, because the two sides are still talking, but without the most unlikely of concessions from the South Korean side, there will not be a free trade agreement worthy of the name this year. 

Thus has a small radical movement influenced by  North Korea  paralyzed the  trade policy of one of the world’s  largest export economies.

It is the second deadline that has gone by in the search for what would be the largest U.S. trade pact in 15 years. The first was on Saturday and the second 1 a.m. on Monday in Seoul (1600 GMT on Sunday).

“They’re still meeting because there are issues left to be discussed,” a South Korean official told reporters as the second deadline expired. He declined to say if the talks were nearing a deal.  [Reuters, Jack Kim]

South Korea’s discourse on this issue follows each new low with another one, and another. 

One protester against the proposed free-trade agreement set fire to himself on Sunday near the central Seoul hotel which has been the venue for the final round of talks over the past week.

The 56-year-old man was taken to hospital where he was in critical condition with third-degree burns.

South Korean officials have said the most contentious issues were agriculture, including beef and oranges, autos and textiles.

In the past few days, U.S. leaders have been loudly pressing their demands that South Korea open its tightly protected market to beef and autos.   With the increasing likelihood that the FTA will miss the fast-track deadline, you can expect Democrats in Congress to inflict the death of a thousand cuts on any agreement once it’s reopened for amendments.  The failure of this agreement could be of far greater long-term  significance in U.S.-Korean relations than the USFK drawdown or  differences over North Korea.  Trade policy should have filled the gap left by the drawdown of our outdated military presence in Korea.  Still, there will be other opportunities, and I’m actually glad, on balance, that the FTA looks set to fail this year.  We’ll probably get a better agreement a year or two from now, and one hopes that this development will discredit anti-American demagogues in this election year.

Let’s look back at Seoul’s leadership on an agreement that would have been an enormous boon to South Korean manufacturers and consumers, and which it one saw as Roh Moo Hyun’s last chance at some kind of accomplishment to water down his legacy of appeasement, alienation, and national insecurity.  As you read this chronology, keep in mind that most of those opposing the FTA probably supported Roh, a leftist himself, in the 2002 election he narrowly won.

February 7, 2006:   A key House staffer suggests that without an FTA, South Korea could be drawn into the economic orbit of China, already Korea’s largest trading partner.

fta.jpgApril 9, 2006:   FTA talks get off to a bad start.  Before a media  audience, the leaders of South Korea’s negotiating team tell junior team members to watch out for clever flying CIA microphones made up to look like dragonflies.  Yes, this is  for real.

April 10, 2006:   Leftist opposition to the FTA begins to coalesce in earnest, despite analyses showing that if the FTA passes,  “[o]verall U.S. GDP is expected to increase by 0.2 percent, while Korean production is expected to increase by 0.7 percent….”  Radical firebrands compare a proposed FTA to a treaty used by Japan to occupy Korea, and claim that the FTA would make Korea “the 51st state.”  The radical and often violent  Korean Confederation of Trade Unions, whose rhetoric is often indistinguishable from North Korea’s,  emerges as the core of opposition to the FTA.  Despite its long history of violence, the KCTU receives government funding.

April 16, 2006:   Anti-FTA protest draws 8,000 protestors carrying signs heavily laden with anti-American and nationalist slogans.   A former Roh economic aide says, in reference to the United States, “it is no use making peace with a scoundrel.”  I predict that the FTA talks  will fail:

Under these circumstances, let me humbly suggest that the FTA is as good as dead for this year. The question is how badly this whole thing will end ….  The long-term interests of the United States might just be best served by quietly ending the FTA talks now, or maybe in a couple of weeks after the issue is fully joined, but before things get too ugly.

May 5, 2006:   Polls show that most South Koreans still support a free trade agreement with the United States.

May 9, 2006:   The far-left, anti-American, North Korean-infiltrated Korean Teachers’ Union tours Korean schools, telling the kids that an FTA means that they will be “brainwashed” by American ideology in the form  of such films as “Batman” and “Superman.” 

fta-protest.jpgJune 5, 2006:   South Korean protestors hold a small and rather silly anti-FTA protest in Washington, but at least no one gets hurt this time.

July 10, 2006:   Roh’s government  privately concedes that products made in North Korea’s Kaesong  Slave Labor Camp will never be  accepted as “South Korean” for FTA purposes.  (The State Department has applied the term “forced labor” to Kaesong, and the Tariff Act does not permit such goods to be landed in U.S. ports.)

anti-fta.jpgJuly 13, 2006:   25,000 violent  anti-FTA protestors  take to the streets of Seoul, wielding iron pipes and bamboo poles, and hurling paving stones.  The mob turns its fury upon a group of “Americans,” who turn out to be Swiss.

July 15, 2006:   ROK government’s approval rating hits 14%, mostly because of the lousy economy, high housing prices, high unemployment, and the government’s failed North Korea policy.

July 27, 2006:   The Trade Ministry tries to hold a town meeting on the FTA, only to be shouted down by an anti-FTA mob.

July 29, 2006:   Too late, the ROK government realizes that Ameriphobes have dominated the FTA debate, and does too little to promote the agreement’s potential benefits.

August 21, 2006:   Kaesong seems to be the issue that just won’t die, so U.S. Trade Representative Susan Schwab speaks bluntly on the idea of including Kaesong products in the FTA:  “It won’t happen, it can’t happen.”

October 27, 2006:   The Chairman of South Korea’s National Intelligence Service resigns following the exposure of a well-connected North Korean spy ring that had infiltrated the vehemently anti-FTA Democratic Labor Party, maneuvered itself into a leading position in the anti-American protest movement, tried to influence the Seoul mayoral election, plotted violent attacks against political opponents, and put  at least one  likely agent onto a U.S. Army base.  One of the arrested spies is a former senior KCTU official.  Some opposition newspapers suggest that  President Roh replaced the Chairman to stop the investigation from  coming too close to his own  administration. 

November 23, 2006:   Another big anti-FTA rally.

November 29, 2006:   Kang Soon-Jeong, who had led violent anti-American and anti-FTA protests, is arrested on suspicion of being a North Korean spy.

January 17, 2007:   FTA talks are still bogged down over exceptions the South Koreans demand:  antidumping laws, automobiles, beef, rice, citrus fruit,  and pharmaceuticals.  Kaesong intermittently reemerges as an issue.

dance-little-piggy.jpgMarch 31, 2007:   FTA talks miss their first deadline for fast-track approval.  Anti-American presidential candidate Kim Geun-Tae goes on a hunger strike to protest the FTA.  (Here’s a scene of Kim dancing for the amusement of the North Koreans at the Kaesong Slave Labor Camp a few days after North Korea’s nuclear test.)   In the United States, where the FTA has been off the political radar screen, Nancy Pelosi begins calling South Korea’s trade policies “one-sided” and compares Korean protectionism to an “iron curtain.”

April 2, 2007:   Talks miss their second deadline, which had been extended for 48 additional hours.  A protestor sets himself on fire to protest the FTA.

11 Comments

  1. An eloquent chronology. It does make the reader wonder why Washington didn’t write this effort off as futile a long time ago . . . or why the Korean majority mentioned in the May 5, 2006 entry didn’t find a way of asserting itself more effectively.

    I think you have a typo in the sentence after the first blockquote: should “now” be “low”?

  2. “These are slave-made goods” –

    same in China factories, ore miners in Africa, lumber workers in S. America etc., girls from Samar, Phil that sell sex in Angeles City and Manila?

    I agree, but “slave made?” Economic Exploitation is rampant around the world-is the situation that different in North Korea?

    You often sound like Marx. Do you believe in his Labor Theory of Value?

  3. No, actually there’s an emerging labor market in China, and wages are rising there as a result.

    http://freekorea.us/2006/04/03/nyt-labor-grows-scarce-in-china/

    Chinese workers don’t have the right to organize, no, but they do actually RECEIVE THEIR WAGES. That’s not the case in Kaesong. If they pay you in food, you’re a slave in the most traditional sense. Similar distinctions apply to all of the other examples you cite. In each of those cases, there is at least a semi-free market in labor that allows workers a choice of employment, conditions, and wages. I discussed that more fully in this post:

    http://freekorea.us/2006/02/28/koreas-arbeit-macht-frei-bubble/

    Please do tell me where I’m hawking the labor theory of value, if only for my own amusement.

  4. We may even see demands to renegotiate, although on balance, it sounds like Korea got most of what it wanted.

    So, what else is new? The United States has to be the absolute worst negotiator in the history of international relations, and nowehere is this more clearly demonstrated than in how we react whenever the South Koreans throw temper tantrums, lay down a list of demands, and storm out of negotiating sessions. We always end up giving them exactly what they wanted with little to show in return. Kinda like we do with the North Koreans, or pretty much anyone else who wants something from us.

    “Katchi kapsida.” We’re Good Neighbors.

    Remember the 2001 SOFA Revisions? Or the Environmental Governing Standards? Or the Land Partnership Program? Or the Yongsan Relocation cost division and time table? Or the “acceptable alternative” air-to-ground range due upon closure of Koon-ni? Or the biannual SMA “burden sharing” talks? How’d any of those work out?

    Why did anyone expect this time to be different?

    Ironic that now we’re dependant on Nancy Pelosi to salvage a little dignity for Uncle Sam.

  5. Funny, that’s what I was thinking.

    I have to say that what surprised me the most about this is how much we were prepared to give up at the last minute. My expectation that there wouldn’t be a deal proved wrong, but that’s because I really didn’t realize just how flexible we were willing to be. Once again, the Koreans knew something about us that I didn’t.

    Now, I don’t want to overstate this. I don’t think this deal is flat-out terrible, like a certain other deal we signed recently (other than leaving a crack open in the door to Kaesong, which really is terrible). I understand that you need to give a little to get. I just don’t think this opens Korea’s markets nearly as much as it opens ours.

    It also bothers me that yet again, Korea successfully uses anti-Americanism to its advantage, and we reward them for yielding the debate to it at best, or inciting it at worst. It will be interesting to see if Koreans protest this agreement as much as the Democrats do.

  6. At Kaesong, the minimum wage for the 48-hour week is $57.50. But $7.50 is deducted for “social charges” paid to the North Korean government. The remaining $50 is paid to a North Korean government labor broker. None of the South Korean factory managers interviewed would guess how much of the $50 salary ends up in the pockets of workers.

    “The exact amount is determined by North Korean authorities,” said Kim Dong Keun, a South Korean who chairs the Kaesong Industrial District Management Committee.

    Under labor contracting arrangements in Russia and Eastern Europe, North Korea’s government often withholds half of their workers’ salaries.

    ____________________________________________________

    In your own post—you even admit that they are paid, but contend that if you are paid in food you are a slave. They are paid and even with the deductions the wages are higher than most working in the North. They have a waiting list for these jobs. The jobs for the standards in the North are very good. The pay is considered good—and I doubt a “slave” would apply for a job.

    I don’t agree with what is going on, but sometimes colorful language misleads. Also, some of your statements-such as the pay are just untrue.

    Much of the “exploited workers” in rural China, sub-saharan Afr, S. America etc., India. Many of these workers are much worse off than those in Kaesang. Talking about pay must be put in context. In the Phils $500 per month is a decent salary, In rural China $200 is quite good, in parts of Afraica $100 is a fortune. In Kaesang where housing, food, clothing is provided—-$50, even with the deductions, is a good salary that is mainly used to help the family.

    Also, yes in many mining companies they only pay workers in food and housing. The mined ore is used by us. In Kaesang the pay is enough to take care of the family. This is not true for a good deal of the other “exploited workers” in the world.

    Sure S. Korea shouldn’t have funded this nonsense—-but the colorful language is inappropriate and will lead many to question your other points.

    I agree with a great many of your posts and ideas, but your point is sometimes ignored by the manistream when you engage in creative coloralization (Bushism).

  7. I don’t think this deal will make it through Congress. You can already read articles that quote influential Congressmen and Senators (Sen. Max Baucus and Rep. Sander Levin) promising to kill it and influential lobbying groups withholding support.

  8. Sean, Rather than mischaracterizing my arguments, please read the posts I linked. I’m not going to rewrite them here in my comments section. And please, stop already with the UniFiction Ministry’s party line on what the workers are paid. Assuming even that they did receive this paltry sum, how much value do you think it has after conversion through the “official” exchange rate North Korea uses? Do you suppose Kim Jong Il accepts anything but hard currency? Or perhaps you think they’re paid in South Korean won? As I said before:

    These figures almost certainly come from converting North Korean won to South Korean won at the highly inflated official exchange rate, versus the actual market value of North Korean currency. How inflated? This calculator will [http://coinmill.com/KPW_calculator.html] tell you that 10,000 North Korean won are worth over four million South Korean won, or $4,544.77 American(!). At that rate, $63 is equal 138.62 won. However, the actual market value of North Korean currency is falling like a stone due to hyperinflation. Recently, the Daily NK reported that 1,200 won buys 1 kilogram of rice. Presuming that the North Koreans pay the workers that entire amount, which we already suspect they don’t, a person simply can’t live on 2.2 pounds of rice for nearly a year. So where does this leave us? With more questions than answers.

    In fact, you don’t really know, Unifiction doesn’t really know, and neither do I. The LA Times thinks it’s closer to $8 a month. Then later, after I wrote that post, Unifiction trotted out this guy …

    http://freekorea.us/2006/11/07/s-korean-defense-of-kaesong-raises-more-questions-than-answers/

    From whom we learned that the S. Korean companies spend $600,000, of which 45% ($270,000) is immediately skimmed off for the nerve gas and Hennessey fund, leaving $320,000 of which our star witness accounts for the majority:

    According to a copy of an account statement, obtained by the Unification Ministry, from Song’s joint company with North Korea, the communist state paid over US$219,000 to Song’s company in March to buy goods from overseas.

    Goods? What goods I wonder? It’s obviously not consumer spending.

    The amount accounts for over 74 percent of the total of about $295,000 paid to North Korean workers that month, according to Goh Gyeong-bin, head of the the ministry’s office in charge of the joint industrial complex project.

    Or, stated more succinctly, “the wages paid to North Koreans working in the industrial complex are mostly spent buying goods sold by the joint trading company.” Now divide whatever’s left 6,000 ways.

    So much for your $57. Assuming that this Song fellow is telling the truth, I can only assume that what’s left over is spent on large sacks of corn. Of course, we’re all pretty much guessing. No one has ever been permitted to see any evidence of what or how these workers are paid. We do know that rights to choose one’s job, organize, or strike are nonexistent.

    As for the essential question of wages, Kim Jong Il says we should take his word for it. South Korea is willing to do that, and so are you. I’m not. I think we have a right and duty to see the books.

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