ΆΓ  ROK-US Economic Relations Stand at Threshold of New Er

Korea Times 2000.12.22

With the election of George W. Bush as the 43rd President of the United States, U.S.-Korea economic relations stand at the threshold of a new era.

Over the past eight years, during the period of the Clinton administration, the U.S.-Korea economic relationship flourished. Total two- way trade grew from slightly over $31 billion in 1992 to over $54 billion in 1999, and is on a pace to reach nearly $70 billion for 2000. U.S. direct investment into Korea rose from $379 million in 1992 to $3.7 billion in 1999. The United States is Korea's largest trading partner and a larger source of foreign investment than any other single country. The American Chamber of Commerce in Korea has over 2000 members representing over 900 firms.

As the economic relationship grew closer, trade friction initially increased in intensity and frequency. There was a growing chorus of complaints from American firms in a wide variety of sectors about difficulties in selling their goods and services in Korea. Many Americans felt that Koreans had a hostile attitude toward foreign products; many Koreans felt that the United States was overly aggressive in pressing Korea to open its markets. The United States Trade Representative characterized Korea as one of the most difficult countries in the world in which to do business.

However, during the Clinton administration, the United States and Korea made significant progress in easing trade frictions in a number of areas.

In 1993 they signed a Record of Understanding relating to Korean imports of beef and cattle. In 1996 and 1997 the two governments reached agreements dealing with telecommunications trade. And in 1998 the two sides signed a Memorandum of Understanding designed to improve market access into Korea for foreign automobiles. While these agreements did not resolve all the issues between the United States and Korea in these areas, they laid the groundwork for further progress.

The United States also responded quickly and forcefully to Korea's request for assistance when the economic and financial crisis that swept through Southeast Asia in the summer and fall of 1997 reached Korea. The United States played a key role in mobilizing an assistance program for Korea in conjunction with the IMF and with major American financial institutions.

In addition to strengthening their bilateral economic ties over the past eight years, the United States and South Korea have forged a close relationship in a common effort to strengthen the international economic system. Both countries worked closely together to achieve a successful conclusion to the Uruguay Round of trade negotiations, which led to the establishment of the World Trade Organization. Both countries collaborated to make a series of APEC leaders' meetings successful. The United States gave its full support and encouragement to Korea's successful bid to become a member of the OECD, and both countries are now collaborating in the work of the G-20 to strengthen the international financial system.

The United States and Korea have become true economic partners in every sense of the word.

The challenge facing both countries as the Bush administration prepares to take office on January 20 will be to sustain and build on the momentum of the past eight years.

Many of the challenges ahead will be in the bilateral economic arena. As Korea has rebounded from the economic crisis of 1997-1998, many American industries have resumed their pressure on the U.S. government to negotiate improved conditions for access to the Korean market.

The U.S. automobile industry is increasingly concerned about the low level of imports of foreign vehicles into Korea, particularly in light of the rapid growth in Korean automobile exports to the United States. The Intellectual Property Alliance, representing U.S. firms in the motion picture, computer software, film, and book publishing industries, has increased the level of its criticism of the intellectual property protection regime in Korea, and there is a chorus of complaints from other U.S. industries, including pharmaceuticals, telecommunications, and beef.

In addition to complaints about access to the Korean market, the American steel industry is complaining about high levels of Korea's exports of steel to the United States.

Like so many of my fellow Americans, I was deeply impressed by the image of Koreans lining up to donate their family gold in response to the economic crisis Korea faced in late 1997. The progress Korea has made in overcoming this crisis is truly remarkable. Yet most Americans believe that the job of structural reform of the economy is only half finished.

Continued progress in reform of the financial and corporate sectors is essential if Korea is to retain the economic dynamism which brought it to its current level of development. Korea's economic reform process is likely to be one of the central focuses of attention of the new Bush administration as it devises policies and strategies to strengthen U.S.- Korea economic relations in the decade ahead.

Americans want Korea to succeed in its restructuring efforts as it moves toward a knowledge-based economy, and Americans want to assist Korea in this process.

Fortunately, the management of bilateral economic relations is free of the acrimony that characterized it several years ago. Negotiations in recent years have been based on mutual respect and the recognition of the value to both sides of improved relations. A successful conclusion to the negotiation of a Bilateral Investment Treaty would further strengthen efforts to find "win-win" solutions to thorny trade and investment issues.

The remarkable improvement in relations between North and South Korea as a result of President Kim Dae- jung's "Sunshine Policy" offers tremendous opportunities for close cooperation and collaboration between the South Korean government and firms and their U.S. counterparts in promoting economic cooperation and reconciliation on the Korean peninsula.

The United States government has already taken steps to ease long-standing restrictions on American companies which wish to do business with North Korea,. and the American Chamber of Commerce in Korea is hoping to be able to arrange a visit to the North by a group of American companies.

One of the major challenges for both South Korea and the United States will be to coordinate their policies on providing economic assistance to the North as part of the process of reconciliation on the peninsula. This process will raise many questions, such as the appropriate conditions for North Korean membership in the World Bank, the IMF, and the Asian Development Bank. What criteria should be used to assess the economic viability of investments into North Korea? What changes in the North Korean business environment are essential for economic reconciliation to move forward, and how should those changes be encouraged? South Korea and the United States have engaged in frequent and intense consultations on security issues as each side has developed its policies toward the North.

An equally broad and inclusive process might well also be appropriate for economic issues.

In his lecture in Oslo when he received the Nobel Peace Prize, President Kim Dae-jung stated "without democracy the market economy cannot blossom, and without market economics, economic competitiveness and growth cannot be achieved." These are principles, which all Americans can embrace, and which will undoubtedly form a bedrock upon which U.S.-Korea economic relations will be based during the forthcoming Bush administration.

KEI is the U.S. subsidiary of the Korea Institute of International Economic Policy, which is a Korean government public policy research institute-E.D.