A letter to Kevin Brady on the Korea-US FTA

The following is the text of a letter I sent to Congressman Kevin Brady of the 8th District of Texas. Brady is a member of the House Ways and Means Committee and serves on the Joint Economic Committee. In the midst of negotiations with Korea regarding a proposed Free Trade Agreement, the US is in a unique position to open markets and facilitate lower costs for consumers.

Dear Mr. Brady:

As an American living in Seoul, Korea, I have a unique vantage point with which to observe the situation regarding the potential for an US-Korea Free Trade Agreement. I would like to provide you with a few key points from my observations in order to facilitate your position on specific areas.

First, the Korean agricultural market needs to be more friendly to US imports. This especially concerns imports of beef and rice. Historically, a punitive quota and tariff system has prevented US beef producers and rice farmers access to the Korean market. Many Koreans consider domestic beef to be a special product, unique from imported beef. As a result, there has been strong resistance to opening beef markets to US producers. Additionally, the highly inefficient and non-competitive Korean rice industry has also been a "sacred cow" to Korean policy makers. This has led to dramatically higher rice prices for consumers. I pay more for rice in Seoul that I would in other countries because of the government protection of farms that lack modernization and the stiff quota and tariff system.

Secondly, the Korean and US automotive market needs liberalization. A removal of tariff on both sides of the ocean would improve the quality of both Korean and American automotive products through enhanced competition as well as providing US auto producers with a larger potential market in which they can compete. Small-scale partnerships such as the GM-Daewoo joint venture are mildly successful, but the Free Trade Agreement should go further, allowing for the full access for US producers to the Korean market as well as lowering import taxes on Korean autos in the US. This will force automakers on both sides to improve quality and lower costs, thus benefiting consumers and ultimately both auto industries.

The current strategic situation with North Korea presents a unique opportunity in trade negotiations that has been previously unexploited. I recommend a strong coupling of US strategic protection initiatives with the approval of the Free Trade Agreement. The Korean side demands better access to the US textile market. The US side wants improved agricultural and industrial access to Korean markets. Both sides should get what they want in terms of market access, but the US should exploit its trump card: assured nuclear umbrella protection in exchange for opening markets.

Without a Free-Trade Agreement, US farmers, ranchers and automakers are spending their tax dollars to protect a Korea that will not allow free access to their markets. Why should the US invest defense capital in protecting markets hostile to their products? In the event of an FTA failure, I would recommend careful study of increased investment in the countries of Central Asia. Their strategic value is equally important and their populations represent a large potential market for American products. The US should take advantage of the defense situation to facilitate open markets. It's through the free market that peace is preserved.

Kindest Regards,

Brian Dear
Seoul, Korea
Registered voter in the 8th Congressional District, Texas
Texas A&M Class of 2002

Rice: Korean trade policy is harming consumers

The economic development of the Republic of Korea is a modern success story of how an agrarian society can transform itself into a technological and industrial powerhouse in one generation. Korea is the 12th largest economy in the world and companies such as Samsung are leading the world in technological innovation, especially in consumer electronics.

One interesting relic of Korea's agrarian past is the excessive taxes and quota system on imported rice. Methods of Korean rice farmers have changed little, despite worldwide advances in genetics and farming mechanisation. Across rural Korea, farmers still do most rice farming with primitive tools and by hand. The rice industry has lagged behind the rest of the country in innovation and modernization.

In a free market, inefficiencies are weeded out through competition. The Pittsburgh steel industry suffered as a result of cheaper imported steel from countries (especially Korea and Russia) with more efficient manufacturing processes. The outdated methods of the huge steel plants were too expensive to compete with leaner and more modern manufacturing facilities in Korea and in other areas of the US. The result, while bad for steelworkers, led to lower steel prices which led to lower costs on finished goods. Competition led to increased efficiencies which ultimately boosted both the US economy and Korea's.

The rice industry in Korea has been a "sacred cow." Protectionist trade practices had saved domestic farmers from the influx of cheaper, imported rice. This led to dramatically higher prices for rice at the consumer level. Korean households were, in effect, subsidizing outdated and non-sustainable farming practices.

Much like Korean steel put old-guard US firms in the red, (forcing modernization) it's time that Korean rice farmers be subject to competition. Ultimately, it will benefit the economy of Korea as it will lower food costs for consumers and force modernization of an inefficient and environmentally unsound industry.