Telecom vendors cheered the signing of a U.S.-Korea trade pact boasting key market-opening telecom provisions, but the bilateral accord faces an uphill battle in Congress and skepticism about whether wireless and other American high-tech sectors will gain as much as the Bush administration predicts.
“This day is a milestone in the enduring economic and security alliance between the United States and Korea. Today we look ahead to building on a half-century of friendship and cooperation to promote the greater prosperity of the people of both our nations,” said Susan Schwab, the U.S. trade representative and a former Motorola Inc. official. “The United States-Korea Free Trade Agreement is the most commercially significant free trade agreement the United States has concluded in nearly 20 years. I look forward to continuing to work with members of Congress of both parties on the approval of this important agreement.”
The trade pact includes what USTR called “groundbreaking” safeguards on restrictions regulators can impose on telecom carriers’ technology, particularly in the wireless space, where U.S. service and equipment companies have strong competitive advantages. Several years ago the U.S. and Korea came to a meeting of the minds after a dispute in which Korea wanted to force its home-grown Wireless Internet Platform for Interoperability, or WIPI, standard on carriers. Such a policy would have kept Qualcomm Inc.’s BREW downloading software out of a key Asian market that otherwise embraces the San Diego firm’s CDMA technology. In addition, the two countries have sparred over Korea’s indigenous 2.3 GHz portable Internet standard and a proprietary standard for location-based wireless services.
Under the U.S.-Korea trade pact, Korea also has agreed to allow U.S. firms within two years to own up to 100% of a telecom operator in its country.
“This agreement lets the people of both nations continue to use and enjoy the latest in communications products,” said Grant Seiffert, president of the Telecommunications Industry Association. “With the support of Congress we can now work to improve our standing as an exporter to the Korean I.T. and telecom market.” TIA represents wireless and wireline telecom manufacturers.
USTR said Korea is the world’s 10th largest economy and the United States’ seventh largest goods trading partner, with two-way goods trade in 2006 valued at approximately $78 billion.
Matt Flanigan, interim president of the Electronic Industries Alliance, said one-third of those products, or $10.6 billion of that total, was high-tech gear.
“This signing also underscores the need to renew the president’s trade promotion authority,” said Flanigan. “It’s the best thing Congress can do to help U.S. companies compete abroad. Failure to do so would hamstring U.S. employers and workers and hand our foreign competitors an enormous advantage.”
Healthy dose of skepticism
Eli Noam, professor of finance and economics at Columbia University, doubts the U.S.-Korea trade deal will yield the benefits predicted by the Bush administration and the telecom industry.
“Around the world, big telecom and cable television infrastructure firms everywhere have tried and mostly failed to enter other developed countries outside of new wireless ventures. Most telecom infrastructure services cannot be exported from a distance,” stated Noam in a column published by the Financial Times. “They require a major managerial and financial presence and commitment, acquisition of high-cost labor arrangements, the assumption of social and development obligations, and the possession of domestic political capital. Korean domestic infrastructure networks industries are world leaders themselves and do not require foreign control capital or expertise. They will remain mostly domestically owned. The FTA [free trade agreement] will not change that.”
The U.S.-Korea free trade agreement and other trade deals were signed shortly before the June 30 expiration of the Bush administration’s trade promotion authority. The authority forces Congress to vote up or down on trade deals without amendments.
President Bush is anxious to see passage of the trade agreements by Congress, especially in light of the fragile state of global trade talks. “The agreement will also further enhance the strong United States-Korea partnership, which has served as a force for stability and prosperity in Asia,” the president stated. “I call on Congress to ratify this landmark agreement, to the considerable benefit of the American people.”
House Speaker Nancy Pelosi (D-Calif.) and other House leaders said they will not do so, calling the deal a missed opportunity.
“The agreement does not address in an effective manner the persistent problem of non-tariff barriers, particularly those blocking access of U.S. manufactured products in South Korea’s market,” the lawmakers stated.
The House leadership said fast-track trade authority is not a legislative priority and that they plan to pursue legislation to remedy the huge U.S. trade imbalance with China.
