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As South Korean President Yoon Suk-yeol arrives for his state go to to the US, it’s exceptional to mirror on how sturdy and multi-faceted the South Korea-U.S. bilateral alliance has change into. Over the previous 70 years, Washington and Seoul have successfully labored via tough points, whereas establishing mechanisms to deal with future challenges. The financial pillar of the alliance is a living proof.
Till 2007, the alliance primarily centered on safety, political, and people-to-people ties, whereas financial issues, notably commerce, have been largely contentious. The South Korean market remained largely closed to overseas rivals as Seoul imposed excessive tariffs, carried out Korea-unique requirements, and nurtured nationwide champions in key sectors like autos and semiconductors. Consequently, South Korea-U.S. commerce negotiations have been usually marked by acrimony and infrequently resulted in lasting success.
The tide started to shift when South Korea signed its first Free Commerce Settlement (FTA) with Chile in 2003, adopted by an formidable imaginative and prescient for extra FTAs. By 2006, the US topped South Korea’s FTA negotiation record, with each international locations, for their very own causes, prepared to have interaction in complete commerce talks.
Surrounded by highly effective financial neighbors, Seoul acknowledged that to remain aggressive, it wanted to reform and liberalize, together with its protected agriculture market. After efficiently concluding a sequence of FTAs, the US sought further agreements in Asia. South Korea’s eagerness to have interaction and reform made it a lovely companion.
Whereas the FTA held the potential to interrupt necessary new floor within the South Korea-U.S. alliance, it additionally carried important dangers. It was unsure whether or not Seoul had the political muscle to tug a deal off, notably when it got here to taking up its agricultural sector. Furthermore, given the excellent scope of FTAs, it was not a on condition that South Korea might make the in depth legislative and regulatory changes to adjust to the settlement’s mental property, technical requirements, transparency, and labor commitments.
On the U.S. aspect, opposition from labor and the auto trade forged doubt on whether or not the Korea-U.S. Free Commerce Settlement (KORUS) might safe Congressional approval.
The dangers of failure have been excessive, however failure was not an possibility. A collapsed settlement would have been a large setback to the alliance, as financial frictions would undoubtedly spill over to different areas, with each international locations probably taking part in the blame recreation. This stress drove negotiators to search out widespread floor on seemingly intractable variations, with sure issues elevated to the leaders of each international locations for decision.
Regardless of reaching an settlement in April 2007, KORUS was nonetheless not out of the woods. It underwent a troublesome renegotiation throughout 2010-2011, securing congressional approval in March 2012. Later, it confronted one other critical problem when U.S. President Donald Trump threatened to withdraw from the settlement.
With regards to the financial leg of the alliance, KORUS is only the start of the story. Its tenth anniversary final yr was marked by sturdy development in commerce and funding flows, highlighting the financial and business advantages supplied by the settlement. Since KORUS took impact, whole commerce between the 2 international locations has elevated by over 60 p.c and Korean overseas direct funding in the US has greater than tripled.
Importantly, KORUS established a basis for bilateral cooperation on financial safety issues, together with provide chain resiliency, cooperation on superior applied sciences, and export controls – all subjects that are anticipated to be a key of the Biden-Yoon summit.
First, KORUS helped to foster nearer relationships between American and Korean firms, together with larger provide chain connectivity. The surge of Korean funding in the US, notably within the auto, semiconductor, and battery industries, can hint its roots to KORUS.
Second, KORUS established quite a few authorities committees overseeing implementation and developments in particular problem areas, together with a Joint Committee on the ministerial degree. These common conferences supply a platform for discussing and coordinating on rising points, reminiscent of clear applied sciences, technical requirements for superior applied sciences, non-market economic system practices, and provide chain connectivity.
Lastly, KORUS has produced a cadre of American and Korean authorities officers who now view South Korea-U.S. financial relations with the artwork of the doable, paving the way in which for expanded cooperation and contemporary considering.
For alliances to stay sturdy and related, they should be refreshed, expanded, and reshaped to deal with new challenges. With KORUS offering the financial basis of their alliance, the US and Korea have a powerful foundation for main and cooperating on financial safety issues. Presidents Biden and Yoon have an necessary alternative to step up collaboration on these consequential issues for the months and years forward.
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