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Statement of Representative Ed Royce
Ranking Member, Subcommittee on Terrorism, Nonproliferation and Trade
The United States-South Korea FTA: The Foreign Policy Implications
June 13, 2007

The proposed free trade agreement with South Korea is the world's largest of its kind. Given our significant trade with South Korea, and even more significant security relationship, this agreement deserves close attention.

Starting in 2000, and every year since, I have co-chaired the U.S.-Republic of Korea Inter-parliamentary Exchange. The Exchange has always included a panel on trade. I've sat through many sessions in which we pressed National Assembly members to open Korean markets. This FTA has achieved much of what we've pushed for.

There is some dissatisfaction with this agreement's treatment of autos. South Korea hasn't lived-up to previous agreements to end its discriminatory treatment of American-made cars, which has choked off U.S. sales in South Korea. The Administration has now negotiated the elimination of most Korean tariffs on U.S. autos. It has also attacked Seoul's non-tariff barriers, including with a new dispute mechanism, backed by a punitive "snap-back" of U.S. tariffs on the 750,000 Korean cars sold in the U.S. should Seoul be found to be breaking the rules. While sympathetic to those wanting more, calls to tie U.S. tariff rates to the sale of X number of U.S. cars to South Korean consumers would undermine trade. There's a fundamental difference between demanding fair access and demanding market share, which we have never done.

This agreement gives the U.S. beef industry an opportunity to retake the dominant position it held in the South Korean import market in 2003, before mad cow disease. South Koreans, I believe, understand the need to apply science-based safety standards to U.S. beef imports. The beef issue though seems to take a new turn every day.

It is unfortunate that the U.S. couldn't dent South Korea's protection of its rice farmers. The main losers though are Korean consumers, who'll continue paying four times the world market price for rice, just as American consumers lose out to our agricultural subsidies.

I was pleased that the Kaesong Industrial Complex-made goods were excluded from this agreement's tariff benefits. I wrote the Administration a couple of times during the negotiations, warning against their inclusion. It would have been indefensible to include goods produced under the wretched conditions of North Korea, directly benefiting its reckless and dangerous regime. The State Department should go one step further: dissuading South Korea from expanding Kaesong. We shouldn't bolster Pyongyang, including facilitating the release of its ill-gotten gains parked in Banco Delta Asia.

South Korea has entered this agreement to get more competitive. Having built its impressive prosperity through trade, South Korea now faces increasing competition from its neighbors, some of the world's most economically vibrant economies. Seoul has been liberalizing its economy at a quick pace, especially since its 1997 meltdown, but it knows it has to do more, gaining better access to the U.S. market, but also more freely accessing U.S. goods and services. This agreement does that, benefiting us, including many in my home state of California. It's worth noting that Korean tariffs will be lowered far more than U.S. tariffs, which are already low.

The U.S. and South Korea have an important strategic relationship. U.S. troops are stationed on the Korean Peninsula for our mutual security. If we are honest though, in some ways this relationship has been off track. While this agreement appears popular in South Korea now, anti-Americanism has been rising for years, and I don't rule out the possibility of this FTA further stoking it, as IMF-imposed reforms brought resentment against us in 1998. There have been South Korean labor strikes against the agreement. The State Department should prepare outreach efforts to counter this opposition. I look forward to hearing how this agreement will advance our economic and strategic interests.