Impacts of the Korea-U.S. Free Trade Agreement on Inter-Korean Relations

Abstract

IntroductionThe KORUS FTA has various effects on intra-Korean relations. The KORUS FTA Document Annex 22-B describes "the effect on intra-Korean relations" as a precondition to be considered in discussing the rules of origin of products from Outward Processing Zones (OPZs). It is a very broad definition, but it is a good example to show that the KORUS FTA is closely linked to intra-Korean relations.There are two perspectives on the KORUS FTA and intra-Korean relations; one is positive and the other negative. Kim, a senior researcher at the Korean Institute for National Unification (KINU), said in favor of the FTA that, "the KORUS FTA can be a strong ground enough to give two Koreas a win-win game."1 He argued that the relationship between the two Koreas, as well as their economic cooperation, will jump up to a higher level through the FTA. On that level, South Korea will be able to strengthen its industrial competitiveness. North Korea will also have a role in developing the KIC, and may gain recognition from the United States for the regime's legitimacy. These will result in stabilizing the Korean Peninsula and will lead to a peaceful process in solving the Korean problem. In this process, North Korea may expect to restore stability to its economy.However, one precondition is necessary to realize all of these nice processes. This is recognition from the United States that products made in Kaesung can be regarded as products made in Korea. Dong, team director at Samsung Economic Research Institute, also takes a similar perspective. He has a broader viewpoint than Kim's. He sees that the KORUS FTA has an effect not only on the security environment of the Korean Peninsula, but also on intra-Korean relations.In a perception that security has a direct influence on intra-Korean economic cooperation, he summarizes the effects of the FTA in three ways.2 First, the KORUS FTA will improve Korea-U.S. relations from a military basis to a combination of the economic and the military. Second, the KORUS FTA could bring about a fundamental change in intra-Korean relations and in policies on North Korea. Third, the KORUS FTA will stimulate cooperation between North East Asian countries. In this cooperation, North Korea will have a chance to develop its economy.There is a view, however, that the KORUS FTA could have negative effects on intra-Korean relations. Chung, ex-secretary to President Roh, said, "President Roh is now going to fail his reform and if he goes on naively driving in KORUS FTA, he would face a difficult situation." Chung regards the FTA as a U.S. hegemonic strategy on North East Asia.3What is the KORUS FTA? The KORUS FTA will drive the Korean people into infinite competition in global markets. In the past, the global economy meant competition among nations. Today, however, it means competition among people, competition among enterprises, and competition among states, all mixed up simultaneously.First of all, from the legal perspective, the KORUS FTA is an agreement that makes trade between two countries free. The KORUS FTA is very meaningful if its purpose is to make trade between Korea and the United States free, without any tariff or non-tariff barriers. However, it can only be valuable if the FTA is mutually beneficial. The United States usually tries to maximize its own enterprises' profit. To accomplish this purpose, the United States demands that other countries modify their laws and institutions through FTAs.4 If the United States chooses to attach importance to modifying Korean laws and institutions, this cannot be a mutual benefit.On the political side, the KORUS FTA reinforces Korea-U.S. relations and confirms that Korea is inferior to the United States in terms of national strength. Many people would consent to this view, even though not all Korean people would agree with the criticism5 that the United States has got everything that it wanted, while Korea didn't get anything that it wanted. …