Seattle Post Intelligencer | September 19, 2007
Washington a winner in Korean trade deal
By ANDREA JAMES
P-I REPORTER
When Chile and South Korea signed a free trade agreement four years ago, the management at Washington's oldest winery, Chateau Ste. Michelle, paid sharp attention -- acutely aware of how world economics touch Washington.
The Woodinville winery, 20 miles outside of Seattle, had to drop its prices to compete with Chilean wines and maintain its annual $1 million in South Korean sales.
So when a free trade agreement between the U.S. and South Korea became a possibility in the past year, the winery was eager to cite its case to lawmakers, said Alan Portney, vice president of international sales.
"All these wineries are doing business in Korea right now," he said. "The northern Asia markets are a growing part of our business."
That free trade agreement, called KORUS, is now inching toward congressional approval, and economists say a clear winner would be Washington state, perfectly positioned to benefit from trade. The state's economy is playing a crucial role in a contentious debate over a deal that would knock down trade barriers such as tariffs between the U.S. and its seventh-largest trading partner.
Labor leaders from both countries oppose the way the deal was reached, but big labor's protests fell flat in June when the countries signed the agreement. Critics say that the deal would put thousands of South Korean farmers out of work, and that the environmental provisions are weak.
"There was no public airing of the issues, no public hearings, no documents let out for people to mull over," said Jeff Johnson, research director of the Washington State Labor Council, AFL-CIO. "It's time for us to stop doing trade deals like that. They don't work."
Thanks to globalization, opponents in the U.S. and South Korea have united, he said. When the U.S. and South Korea signed after 10 months of negotiations, it was hailed by some as a measure that would promote economic prosperity. Despite its small size, South Korea's annual buying power is $1.2 trillion, more than Mexico or Canada.
Under the agreement, South Korea would import $1.91 billion, or 64 percent, of U.S. agriculture exports duty-free. Other tariffs and quotas would be phased out over a decade.
"We want to see businessmen happier than ever with the free trade agreement," South Korean Consul Pok-Keun Yuh said. He has prepared some of the strongest national arguments in favor of free trade in his Seattle office.
A large map of Washington hangs on the wall and stacks of business publications cover his desks. There, Yuh gathers the statistics and graphs that provide compelling reasons to lift trade barriers with his country, home to Samsung, Kia Motors, LG Electronics and Hyundai.
To the South Koreans, the U.S. is home to The Boeing Co., Microsoft Corp. and Starbucks Corp. -- all popular brands there, Yuh said.
Boon for companies?
At a Seattle business luncheon last month, South Korean Ambassador Lee Tae-sik pointed out that both countries are already working together on terrorism, human rights and nuclear issues with North Korea.
"The Korea-U.S. FTA is big," he said. "Specific industries may face short-term hardships -- but the overall growth in trade and financial flows should offset these perceived costs."
The agreement has the support of many Washington business groups, including the Greater Seattle Chamber of Commerce.
"Issues like this are lightning rods for a number of different opposition perspectives," said chamber President Steve Leahy, who counts himself among those who "think that free and fair trade is the way that you not only grow the economic pie worldwide, but is also the way that you develop productive mutual relationships and global peace."
The agreement enforces the preservation of U.S. intellectual-property rights -- an issue that Microsoft holds dear. It would also strengthen ties between South Korea and Boeing, eliminate a 29.5 percent roasted coffee tariff -- thus helping Starbucks to compete there -- and eliminate a 24 percent tariff on sweet cherries.
"On the whole, the agreement should be beneficial to the whole country and to the state of Washington," said Kar-Yiu Wong, a University of Washington economics professor and international trade expert. "Most of the goods from Korea would pass through Seattle and the West Coast."
The agreement would also encourage South Korean investment in the U.S. economy. Already, more than 400 South Korean investors have put $550 million into Washington, Yuh said.
Business could grow 20 percent at Seattle's Pacific International Bank, President Soon Ko Paik said. Korean-American businessmen opened the bank six years ago, and it has grown to $250 million in assets. "A lot of Korean businessmen will visit here," Paik said. "That will definitely increase our international trade business."
But other local businesses won't be so lucky. One pro-trade white paper lists Seattle-based Jorgensen Forge Corp., which makes precision-machined forgings, as a company that would benefit from free trade with South Korea.
But when the Seattle P-I contacted Jorgensen Forge's vice president of sales and marketing last week, he said that the company no longer imports from South Korea "for quality reasons." Free trade could allow South Korean products to undercut the company's, Mark Twete said.
"I don't know of very many forging companies in the U.S. that look at imports as being a positive thing to their business," he said. "Most of it, it's negative."
Where's the beef?
KORUS falls alongside trade agreements with three other countries awaiting congressional approval -- Peru, Colombia and Panama.
While the South Korean deal is the most significant, it is also the most contentious, said Clark Sorensen, chairman of the UW's Korea Studies program. U.S. auto companies and beef exporters say that the agreement doesn't open up South Korea's economy enough, creating another pitfall.
"The significance, I think, is going to be more diplomatic than economic," Sorensen said. "From the U.S. point of view, the Bush administration needs the success. ... They don't have too many achievements right now."
But most agree that no policy is good for everyone, particularly for groups that lose trade protections.
"You can't just look at economics to decide if this kind of major interaction from country to country is right," said Marina Skumanich, a board member of the Washington Fair Trade Coalition. "If (the South Koreans) want to have a small-scale farming rice sector, we should respect that. We shouldn't dump our 'more efficient' rice on them."
The coalition does not oppose trade -- but wants more discussion about consequences before agreements are reached. Skumanich said that members feel like the "nerdy kids at the party," jumping up and down and trying to get heard.
U.S. left behind?
The South Korean deal draws a wary eye from some Democrats, including those who represent the auto manufacturers and auto unions unhappy with the deal. Just hours after South Korea and the U.S. signed off earlier this year, Congress stripped President Bush of his power to "fast track" trade agreements.
But Washington politicians are generally pro-free trade, because this is such a trade-dependent state and because Seattle has been a gateway to the East for more than 100 years, said Paul Guppy, research director for the Washington Policy Center.
"Virtually 80 percent of Washingtonians recognize that our opening to the world is good for the region," he said. "We have never had, as far as I can remember, a strong protectionist ethic in this part of the world. Free trade has always served us very well."
The deal could get mixed up in 2008 election politics, said Kate Wilson, interim president of the Washington Council on International Trade, and Chateau Ste. Michelle would be hurt by the lost opportunity. That's why Portney, at the winery, is hoping for Congress to act quickly.
"Not only is it important for our business in Korea," he said, "this would set some very serious precedents with other countries that we're trying to negotiate FTA agreements with. You can never please 100 percent of the people under one agreement at one time."
