Rice versus reason as farmers protest against FTA
IPN Critical Opinion articles
South Korea's rice farmers are not just famous for their unique sticky rice. They are also fast developing a reputation for being politically sticky opponents of free trade negotiations. The amplified rhetoric and vested interest of such groups is holding up a new Free Trade Agreement with the US that would not just be good for their country, but for the whole region. The stunts of these subsidy-addicted farmers make good photo-opportunities (they jumped into Hong Kong harbour at the WTO meeting last year) but they detract attention away from the benefits the other 90 per cent of South Koreans would get from opening their economy. And, as Thailand and Malaysia start FTA negotiations with the US, it is important that vested interests there do not threaten those talks too.
Anti-trade activists present trade as a zero-sum game, in which economic gains for one country are a loss for others. In fact, free trade increases wealth overall by lowering prices, creating jobs, opening new markets and compelling companies to compete by developing better products. In the early 1960s, South Korea was poorer than Ghana _ now, with 70 per cent of the South Korean economy reliant on international trade, it is hard to believe that the country is questioning the merits of free trade.
Despite many restrictions, trade between South Korea and the US in 2005 reached an enormous $84 billion (3.18 trillion baht), but this could shoot up by 13 per cent in the short term alone under this pact. According to the government-backed Korea Institute for International Economic Policy (Kiep), the South Korean economy could expand by as much as 2.27 per cent a year under the FTA.
But the estimated benefits would be slashed by a quarter if South Korean rice farmers succeed in excluding agricultural produce. The rice farmers will be okay, though: They get 63 per cent of their income in subsidies from the South Korean taxpayer.
Pharmaceuticals are another area of contention in Asian FTAs. Many governments impose restrictions on the types of imported medicines that may be reimbursed by their own public health authorities, in order to protect domestic pharmaceutical manufacturers from foreign competition.
Another devastating affliction on poor people in the region are the real barriers imposed by Asian governments in the form of punitive tariffs on imported medicines -- as much as 18 per cent in the case of Thailand.
If these and other barriers can be reduced, not only would it make modern medicines cheaper for consumers, it would expose the sluggish local pharmaceutical industries to competition. Improved IP (intellectual property) protection standards would incentivise these industries to develop useful new drugs themselves instead of relying on state protection to simply copy foreign products -- a process that has already begun in India, which enacted a new patent law in 2005. In this way, the health of the people and the economy would improve in a virtuous circle.
The creative industries are another case in point. One of the more controversial aspects of this FTA is a reduction in South Korea's quotas for local films, allowing more foreign films to be screened. The local industry relentlessly attacks this, claiming its status deserves protection for cultural reasons.
South Koreans are still likely to watch domestic content but a more competitive market would drive South Koreans and the US to invest more in catering to what local people actually want -- instead of what the government thinks they should want.
Put differently, this will finally enable South Koreans -- rather than South Korean bureaucrats -- to choose which movies they watch. The promise of competition has already empowered South Korean directors to take more risks. International blockbusters like Wang-ui namja (The King and the Clown) and Oldboy are the result.
A free market offers South Koreans what years of protection never could: better movies, more valuable jobs and greater choice.
Leaving the convincing numbers aside, there is only one way for the emerging economies of Asia to play a bigger role in the global economy -- that is to compete with the world's best and brightest. South Korean entrepreneurs constantly prove their worth in spheres such as electronics and the automotive industry, but other vibrant industries will never emerge from behind a protective wall of tariffs.
In South Korea, Thailand and Malaysia, FTAs offer the best hope of progress. With the Doha round of multilateral trade talks ending in failure, the World Trade Organization (WTO) may no longer be a relevant forum for trade liberalisation. Any WTO member -- ranging in size from China to Togo -- can scupper an agreement. In contrast, an FTA has only two parties, making a mutually satisfactory deal more likely.
Finally, greater economic and trade ties also make strategic sense. As authoritarian China begins to flex its muscles in the region, it makes sense for East and Southeast Asian nations to seek the stability and interdependence provided by increased trade and prosperity. The pressure will then be on other governments to forge greater ties not just with the US but, at least as importantly, with each other. Bilateral deals are a step in the right direction, but multilateral deals are much, much better.
And the more China can be brought into free trade deals, the more it will find economic freedoms to be in its own self-interest and the more its growth will benefit its neighbours.
South Korea needs this FTA, but the Association of Southeast Asian Nations (Asean) must also achieve real internal free trade instead of just talking about it, as it has for the last 15 years. The whole region needs to boost prosperity and cement strategic alliances with the interdependence of free trade. The benefits for Asia are too important to be derailed by special interest lobbies.