Dram Man

I have gotten a flood of visitors from my recent post on the FTA (thanks Korea Liberator). In that deluge, somebody left a comment I thought in all fairness should be put as a post:

Do you suppose that if the FTA agreement with the US dies ... that maybe the US should impose duties on Korean goods? Right now, it seems to me, that things are very one-sided (guess whose). I realize that Korea seems to never want to play fair. It seems to be all about buy my stuff, but ... I'm not buying yours.  - Brett

First thing to say is no, personaly I think any tariffs as a reaction to the breakdown in talks. In fact it would be pointless and counterproductive in my opinion.

However the reason I want to bring this out is that being a hardass in this negoitations is a two way street. Long ago I was going to a detailed post on each parties goals and postions. However the US side just got longer, and longer, and longer as I started to enumerate the US problems with Korea's trading system. Even being very general on the issues I ended up with twenty pages of a dense Word document, and that was only on the easy issues! In the end, I punted and posted this. The party who got shafted in that decision was the ROK, since Korea has trade issues with the US that many are unaware of or ignore.

One can too easly romanticaly (or nefariously) look at the US side as some sort of trade knight, galloping in on a horse, leaping over a tarriff barrier, avoiding the quota, and slaying the non-tarriff barrier dragon since most changes are made by the the other party given the US rather open trade policy since WWII. However, the US side has their own 3000 lbs. dragon to bring out for the invading nights.

Among the major issues for the ROK is the US system of anti-dumping and mesures. "Dumping" is a trade practice of importing goods below cost, in the hopes of driving out local competition. It is the international equal of "preditory pricing" which some might recognise more. As an aside, both concepts are somwhat theoretical, practicaly speaking its hard to prove and debatable if the practice works or is knowing employed. For more information on this look up the Matsushita v. Zenith case.

Getting rid of anti-dumping mesures are important to the ROK side since it would allow more efficent business planning. Around the world Korean compaines have entered into many markets, for many goods, and were successful, only to be unexpectedly slapped with an emergency anti-dumping tarriff by a govrenment. In the end it creates a headache for both the company and the ROK government.

The Korean govrenment may also be pushing for other matters that make sense in an FTA, but are rather prickly domesticaly for the US. There is talk of liberalizing banking laws in the US to allow more Korean banks into more areas, such as retail banking. Unfortunatly there are state banking laws that may come into play, and it is hard for the US side to change things that are normaly a state concern.

Another possible Korean position the US would have problems with either some agreement, or perhaps understanding not in the FTA, regarding the use of state-owned/controled banks for loans and other subsidies. The idea here to is to head-off some sort case as the Hynix subsidy trade dispute (note, this is mainly my conjecture). 

Finaly there are a whole host of issues which the US may still want to maintain for political reasons. Things such as the US current auto import restrictions ( a mix of tarrifs and quotas). Also steel matters can be tricky, and Korea might be trying to break those trade restrictions down. Steel is a problem for the US, it is notable that most, if not all, the countries the US has an agreement or talks with are not big steel exporter such as Korea.

A lot of this is merely conjecture, the US side has done much to sheild its poker hand and Korea does not crow about the victories gained, only things lost. However as you can see there are things Korea may be asking for in the spirt of free trade that the US does not want to compromise on.