Korean Job Discussion Forums

[myenglishisno]

Just wondering. My Korean friends/students have been talking about it quite a lot and no one has anything good to say about it.

The prevailing opinion seems to be that jobs will be lost, foreign companies will eat Korean companies, public services like health care, agriculture and transportation will become privatized, the cost of medicine will skyrocket since new trade laws prohibit Korea from using the same formulas as medicine from the US and so on. Basically, they make it sound like the world is ending. I also heard that the FTA is designed to favour the US legally so they will always win in a lawsuit between a Korean company and an American company.

I'm no economist and I really can't say that I fully understand this. Can someone break it down? I see there are no threads on here about it. What are the bright sides?

I remember NAFTA wasn't recieved too well in Canada back in the day and apparently this agreement is much worse.

[northway]

Bright side: Korean companies might have to stop charging exorbitant prices for domestically produced products. I'm not saying this overshadows whatever negatives there are, but it strikes me as a big potential positive. Competition is something the chaebols have never had to deal with.

[FDNY]

I think you should take a first year economics course and learn about comparative advantage. This is where each country has an edge in producing a certain good. If country A produces condoms very efficiently and country B produces lubricant really well, then it makes sense for those two countries to trade each other condoms for lube and lube for condoms. In the end each country will have more condoms and more lube than if they didn't trade. Moreover, technology transfer from free trade agreements is also substantial. In addition other factors such as quality control and management practices are usually upgraded to deal with the increase in competition. Also, the variety of goods available in the market increases, leading to more competition, lower prices and increased quality.

If you don't believe me look at some countries with closed economies: North Korea, Philippines, Cambodia (past), Burma, Albania.

[northway]

[bekinseki]

The FTA will undoubtedly hurt the agricultural industry, but it will probably be great for Korea's biggest corporations, like Hyundai and Samsung, who really have their stuff together these days. Basically, free trade is good for widening the gap between the rich and the poor.

The main reason NAFTA was so hated was the softwood lumber tariff. I can't remember the exact amount now, but the US ripped Canada off about 5 or 6 billion. And when NAFTA ruled that the US had to pay it back, the government just said it was disappointed in the ruling and kept on going. The tariff was eventually lifted to curry favour over something else, but the original money was never paid back. Not a huge amount of money for the US--probably only worth a couple hours of war--but it made quite a dent in Canada's economy. This is the main reason I oppose free trade with the US: ultimately it'll just take what it wants and nobody can hold it to justice.

[FDNY]

[KingMomo]

[bekinseki]

[The Floating World]

Cheaper hot dog sausages and velveta cheese slices.

Should be cheaper rice and veg too, but no way that's gonna catch on wholesale when a lot of elder Koreans still believe 'Food grown on our soil for our bodies.'

The yonger folks will realise though that savings on their bills for things that essentially don't taste too much different is a good deal. One would hope.

[myenglishisno]

A lot of these responses really helped to clarify things, so thanks. I came to some of the same conclusions on my own too but wasn't sure if I was in the right.

I'm actually in a debate club/group that's a mix of Koreans and foreigners and during one of the debates I raised these points. I said that the cost of consumer goods would be cheaper and more competition would lead to more innovation and quality control.

The response I got, to sum up, was two fold:

A) The difference in prices and variety will be pretty small and not worth it given the other catastrophic consequences. Basically, what good are cheaper consumer goods if everyone loses their jobs?

B) Korea is a small economy with no natural resources and it won't be able to survive the competition. Many businesses/companies will fail and the FTA will do more harm than good.

I'm actually going to be using some of the ideas I get here in the next couple weeks in this group so any insight is appreciated.

[jvalmer]

[coralreefer_1]

As was mentioned, there are trade offs in terms of trade. Just like the condom/lubricant example, both would seem to benefit, but both would also suffer a loss due to the fact that assuming that the countries had their own industries for the product they were importing, naturally those industries would see losses. The idea Koreans have that millions of people will lose jobs, and that the agricultural industry will fail...etc etc..is just typical rhetoric from lobby groups out to protect their own interests.

People talk about the "gains from trade"..but these gains are spread over the entire country and populace. For example...lets say 1,000 farms went out of business, but the price of produce dropped 500won due to imports, then 50 million people saving 500won each EVERY TIME they consume produce will equal more savings ("gains from trade") than the monetary value of the loss of those farmers.

However as I have said before in several good discussions about trade on this forum, we will not see vast amounts of farmers going out of business. Regardless of whatever cheaper prices may be available from imported agricultural products, Koreans (like nearly all nations) will pay almost insane amounts of money (either through government subsidies, or higher prices at the market) to help those farmers, because the agricultural/agrarian industry of nearly every nation is a part of its history and culture. All you have to do is walk down the meat isle at emart and see the nearly 400% price difference between Korean beef, and imported beef. If people were really all that concerned with prices, the Korean beef industry would have folded up and disappeared years ago.

Honestly, most of the issue and disdain for the US FTA is simply because it is the US. There were no such protests or uproar over the EU FTA, nor the India FTA, nor the Columbia FTA...all of which have been agreed to within the past year or so.

Also I do take a bit of issue with a previous comment that trade widens the gap between rich and poor. That may be true to an extent, but I think what is more important is that trade widens the gap between stronger and weaker industries (essentially the same thing, but slightly different) Ask any high school kid what kind of job they want, or ask their mother what kind of job they want for their son, and many will reply that they want to work for Samsung, LG, Hyundai...etc.(if they don't say doctor, dentist, or teacher) These are the largest industries in the nation, and the ones that attract most of the brightest and most talented. When the talent pool is being drained by the largest and most successful companies, it leaves less and less of the most talented people who desire/are available to work in industries like pharmaceuticals for example, or other industries that could otherwise grow and become more competitive on a global scale.

Ive been in various universities here studying trade and international economics for several years now, and all of the professors I have had are all very happy to and quite often do, give out case studies concerning successful Korean firms. One of the things they always harp on as to why these firms are so successful is the notion put forth by Michael Porter (I believe) that industries that more competitive at home tend to do better in foreign markets. It makes sense, but to tout "competition" as a large reason of a companies success but they turn around and reject competition flies in the face of everything most of my professors have been preaching to me.

In theory, resources such as labor, land, capital..etc should be devoted to those industries that are the strongest and most able to compete with outside markets. However when notions like "preserving our heritage" as is the case of Korean farmers, or the US automobile industry come into play, the underlying principles of trade in many ways go out the window.

If i could, I would like to ask your students (assuming they are adults) why it is that they are so against the US FTA, but not against other FTA's with other nations. many of which deal with the same types of products and services as the US FTA, but caused nowhere near the uproar.

[nathanrutledge]

as usual, coralreefer hits it out of the park.

If you really want to know about it, why don't you read it? It's not particularly long - 24 sections with some appendices.

As someone with an economics degree, I'll add my two cents. Comparative advantage is the big part. Korea can outperform the United States on a lot of manufactured goods, and the US can outperform Korea on a lot of intellectual property/farm goods. Yes, some people will lose their jobs, but the overall gains to society outweigh those losses. Of course, try explaining that to someone who lost their job - it doesn't work too well.

The BIG thing you have to know is that the opposition groups are full of horshit. First, agricultural products will maintain tarriffs of between 10-800%. Yes, eight HUNDRED percent. Read the FTA - hundreds of pages of charts with the exceptions and tariff rates. American beef will be taxed for 15 years from the date of implementation.

Second, there is ZERO in the FTA regarding healthcare. The national insurance scheme is fine. The ONLY medical stuff in there is regarding pharmaceuticals and prices. US manufacturers complain that the Korean government (the national health insurance!) refuses to pay for drugs AT COST. Not at profit, but AT COST, and so they actually lose money. Considering the amount of money it costs to manufacture that first pill (research, testing, etc), they want more. So an impartial panel of doctors is going to be established to research pricing issues.

Third, Korea agrees to stop changing the law to create barriers, i.e. new smog/emission tests every few months for foreign car manufacturers. That was the big reason American cars don't sell here - they kept changing the smog/safety rules, and each time, required new tests. That is now forbidden. Considering the Koreans have been building factories in the US for quite some time, they don't have to worry about exporting cars - they make them IN the US anyway, union free in the south...

Anyway, really the best way is to read the thing yourself, especially the parts that are marked memorandums of understanding. Those are letters that say "The Korean government recognizes that this section means...." and lays it out in plain language. Like Cliffs Notes for the FTA.

But yeah, mass layoffs won't happen. Consumer goods prices will drop, prices will become more stable, importers will be able to squeeze a nickel a bit more, exporters will be able to send more to the US. Something like another 20% in annual trade is expected. It'll be huge for both countries.

[magni]

Wine will be cheaper

EDIT: American wine.

[fermentation]