Category Archives: Politics

JusFTA

Hot on the heels on the Korea-US FTA (KorUS), Japan has reluctantly admitted that it might have to consider its own FTA with the US as well. Reflecting their ambivalence, Japanese Trade Minister Akira Amari compared KorUS to the black ships that forced Japan to open up to the outside world back in 1850. An FTA between the world’s largest and second largest economies, which account for nearly 40% of world trade, would have immense global effects. Economic effects aside, the FTA would also place additional pressure on their mutual strategic rival, China, which is still relatively new to the free trade (let alone FTA) game.

Without doubt, the biggest opponents of such an FTA would be the agricultural sector in Japan. The reduction, if not elimination, of most agricultural tariffs would be demanded by the US, although the KorUS example (where rice was excluded entirely) could offer some light in a long and very dark tunnel.

Korea-US FTA

The world’s largest FTA was signed today between the US and Korea, the world’s largest and 11th largest economies.

This would be a significant development for both sides. Korea has to date only concluded a couple of FTAs (with Chile and Singapore), while this would be the US’ biggest FTA since NAFTA. The negotiations were reportedly arduous, with numerous domestic opponents on both sides. According to preliminary reports, rice has been entirely excluded from the FTA, Korea would resume beef imports (pending a favorable ruling by the WHO), and tariffs on vehicles under 3000cc would be eliminated with immediate effect.

The fate of the FTA remains up in the air, however. With presidential and parliamentary elections coming up, a promise to scuttle the ratification of the FTA would be an easy way to win the votes of the anti-US sectors in Korea. A similar fate could await the FTA in the US, where the automobile industry would feel particularly threatened by the tariff elimination.

Japan would likely watch forthcoming developments, particularly on the US side, with great interest. Recent strains in US-Korea and Japan-Korea relations have perhaps led to the impression that Korea is moving further away from its alliance with the US, in favor of closer ties with China. The successful approval of the US-Korea FTA would hopefully re-energize the relationship beyond a mere military alliance. However, the successful ratification of the FTA would probably also lead to pressure for Japan to open negotiations with the US. And would Japan really want an FTA with US, with all the attendant tariff reductions an FTA necessarily entails? It would perhaps not be too forward to suggest that Japan would hope that the FTA meets an unfortunate death in the US Congress, providing it with a convenient way to delay any progress on the issue.