BERNARD GWERTZMAN: Greetings. This is Bernard Gwertzman. I'm a consulting editor at the Council on Foreign Relations in New York, and we're going to talk about U.S. relations with Korea, both North and South, today. We have two very well-plugged-in speakers. One is Edward "Ted" Alden, who's the Bernard L. Schwartz senior fellow at the council, and who specializes in trade, investment and immigration issues.
And the other is Scott Snyder, who is a well-known expert in Korean affairs. He is the -- Scott, what is your title? I can't even --
SCOTT SNYDER: Senior fellow for Korea studies and director of the program on Korea policy.
GWERTZMAN: That's right -- senior fellow for Korea studies, director of the Program on U.S.-Korea Policy. And he's an expert really on what's going on as best as we can tell in the -- in Pyongyang, the capital of the North Korea, and in the sort of never-ending effort to deal with nuclear issues with North Korea.
Let's start with Ted.
The Senate is supposed to take up this free trade agreement with South Korea tomorrow, I believe. And this was signed back, I think, in the late years of the Bush administration, 2007. Why has it taken so long to get this through the Senate?
EDWARD ALDEN: Thanks very much, Bernie. You know, the plan at the moment is that both the House and Senate will vote on the FTA with Korea tomorrow, as well as two other outstanding free trade agreements with Panama and Colombia, both of which were concluded in the second term of the Bush administration.
The delay has a couple of reasons. The Bush administration tried to submit the Colombia FTA to the Democratic-controlled Congress before they left office, and it was blocked in the -- in the House by the Democrats largely over human and labor rights concerns.
And then during the campaign, Obama had raised concerns over the direction of U.S. trade policy and hinted that he wanted to see each of the agreements renegotiated. So essentially it's taken the time since Obama came to office -- so, you know, three -- nearly three years now -- to renegotiate those deals. There were changes made in the deal with Korea specifically regarding the provisions on auto trade, and there were changes made to both of the other two agreements with Colombia and Panama.
So the administration is finally now comfortable with the substance of the agreements.
And then there was some last-minute procedural maneuvering having to do with a program for assisting workers who get -- who lose their jobs as a result of trade competition. So there was a back-and-forth with the Republicans in Congress over making sure that that program was renewed at the same time that the votes on the FTAs went through. So that now all appears to have been ironed out, and it looks like the three agreements will pass both the Senate and the House fairly easily this week.
GWERTZMAN: And will these trade agreements do anything to increase employment, which of course is a major issue in the United States?
ALDEN: I think the impact will be modest. The International Trade Commission, when it evaluated the Korea agreement, said the aggregate U.S. employment changes would likely be negligible.
Korea is obviously a significant trading partner of the United States, but its tariff protection is not high on most products. The major exception is agricultural products, where we'll see a real boost in U.S. agricultural exports. The two other economies, Colombia and Panama, are very small economies.
And so the most -- the most optimistic forecasts I've seen say that maybe as many as 200,000 jobs could be created. I think probably half of that is a more realistic number. You know, in the last month's employment figures, we saw a hundred and some thousand -- 103,000, I think it was, new jobs. So that's barely one month's employment growth. So this is not going to do anything significant to address the employment challenge. The hope, however, is that this will open up the opportunity for future trade negotiations, which could have a larger -- a larger impact.
GWERTZMAN: Now, even though it's passing the U.S. Congress, it's not going to be law, I guess, until it -- is there some procedure in South Korea that's still necessary?
ALDEN: Scott, you want to take that one?
SNYDER: Yeah, well, the South Korean National Assembly also has to ratify the agreement. And thus far on the South Korean side, a committee looked at it and ratified it a few years ago, but it needs to go before the entire National Assembly. That national assembly is controlled by the ruling party, but we are moving closer to the political season in South Korea with legislative elections coming up in April. And so I expect there will be a lot of noise surrounding the issue of passage as it is taken up following the ratification in the U.S. Congress but that in the end it should be possible for the Lee Myung-bak administration to push it through.
GWERTZMAN: Now, what is the main issue? The sale of U.S. autos in South Korea?
SNYDER: Actually, on the South Korean side, the main potential losers are in the agricultural sector -- (inaudible) -- (come from ?).
GWERTZMAN: Ah, OK, because their tariffs would be reduced.
GWERTZMAN: I see. Right.
How much of the -- now, the South Korean president, Lee, is going to be here for a while. How much of the discussion, particularly in Washington with the administration, will be over South Korean-U.S. issues? How much will be over North Korean issues?
SNYDER: North Korea is a perennial favorite and a necessary topic of conversation between the U.S. and South Korea. And so I'm sure that that will draw the lion's share of attention. There's a need to coordinate in terms of steps on engaging North Korea right now. There's also the sensitive issue of trying to continue to move forward on contingency planning in the context of any potential instability in North Korea. But there also is a set of issues in the U.S.-PROK relationship related to global cooperation that I think should also be a subject of attention between the two presidents.
GWERTZMAN: Like what?
SNYDER: Well, South Korea does have a provincial reconstruction team in Afghanistan, a nuclear security summit coming up, and a set of bilateral issues related to nuclear cooperation between the U.S. and South Korea, you know, that are important and may be touched on as part of the discussion.
All right, Operator, I think we're ready to have other people ask questions.
OPERATOR: (Gives queueing instructions.)
First we have Jayshree Bajoria with CFR.
QUESTIONER: Thank you. Good morning, everyone.
Scott, I have a question for you. How would you describe the U.S.-Korea relations since the Obama administration in U.S. and the Lee Myung-bak administration in South Korea? How has this relationship been for the last three years? And what have been the major accomplishments of this administration?
SNYDER: This has really been, I think, a high point if we look at the history of the U.S.-South Korea alliance. And one of the factors that has been significant in, I think, making it so has been that there's apparently a very good personal relationship between President Lee and President Obama that has sustained cooperation.
Another factor is that there is a growing set of shared interests between the U.S. and South Korea that extend beyond the peninsula itself. It certainly has been important that both countries have emphasized denuclearization as their priority related to North Korea. But we've also seen South Korea emerge as an actor on global issues, and that has had the effect of making -- essentially expanding the agenda for what American and South Korean leaders can talk about as it relates to global interests.
You know, the G-20 hosting last year was part of that. South Korea's own growing capacity to contribute on issues like climate change, international development, nuclear issues, et cetera, is expanding the agenda where the two countries can cooperate. And in that respect, I would say that, you know, South Korea as an emerging leading economy might be a little bit different from, for instance, some of the BRICs countries, which are also rising but don't seem to have necessarily taken positions on international issues that are as much in consonance with the United States as has been the case with South Korea.
GWERTZMAN: Right, thank you.
QUESTIONER: Thank you.
GWERTZMAN: Next question?
OPERATOR: (Gives queueing instructions.)
Bernard, do you have any other questions at this time?
GWERTZMAN: Well, Scott, let's review the current nuclear situation. The six-party talks ended really at the end of the Bush administration and they've not really been revived at all. I mean, is there -- this is to denuclearize North Korea. What is the situation right now?
SNYDER: Well, you know, the Obama administration was greeted by a set of provocations in 2009, North Korea's missile and nuclear tests. Then we saw an apparent opening for moving back toward dialogue at the end of 2009 that was reversed by an additional set of South Korea-focused provocations: the sinking of the Cheonan in March of 2009; and then the shelling of Yeonpyeong Island, South Korean territory, that involved the killing of two civilians in November of last year.
Only within the past few weeks and months have we seen an inching back towards the resumption of a dialogue approach. The North Koreans have been signalling that they went to have a dialogue, and actually there has been a set now of two meetings among nuclear envoys from South and North Korea. In addition, there was a meeting at the end of July in New York between Ambassador Bosworth and North Korean counterparts.
And so it does appear that there is a move back toward talks. There's a very strong emphasis on coordination between the U.S. and South Korea to make sure that neither side gets out in front of the other as we move back toward diplomatic engagement with North Korea.
However, you know, one big issue as it relates to that engagement is the fact that North Korea hasn't shown much interest in the topic of denuclearization. Instead they seem to be more interested in, you know, locking in their gains and finding forums through which to try to insist on implicit recognition of their status as a nuclear-capable country.
GWERTZMAN: So in other words, North Korea is really not interested, you think, in denuclearizing?
SNYDER: That's right. They've indicated a willingness to come back to the dialogue table but so far they haven't committed in a tangible way to the agenda for dialogue that had previously existed in the context of the six-party talks.
Are there any questions out there, Operator?
OPERATOR: Yes, our next question comes from Greg Robb with MarketWatch.com.
QUESTIONER: Hello, thanks for holding this call. I had a question about the -- on the economic sphere, I guess. Is this visit now just like a celebration of the free trade agreement? Or are there other deliverables, or are there other things that the U.S. -- the two sides or the U.S. wants to nail down this week?
ALDEN: You know, I think -- I mean, in terms of the economic agenda per se, I think the free trade agreement was the main accomplishment, as it was clearly accelerated to try to get it through both houses of Congress before the president's visit. This was one potential deadline. The other was the APEC meeting that was coming, and it's coming up in Hawaii in November.
I think from the U.S. side, however, this potentially represents the most serious engagement we've seen by this administration on trade- and export-related issues. The administration came into office pretty suspicious about the contribution of trade to its overall economic program. But if you look at the current job situation in the United States, you look at the depressed consumer market in the United States, there is a recognition that deeper engagement with the international economy is going to be vital to generating jobs and growth in the near future, particularly engagement with the fast-growing emerging economies. Korea's one, obviously -- you know, China, India, Brazil and others.
I worked with Senator Tom Daschle and former White House Chief of Staff Andy Card on a big task force report that the council released last month on U.S. trade and investment policy. And there's a series of recommendations in there about how the U.S. should be engaging more fully with the international economy, and there appears to be some progress on that front, not just the trade deals moving this week, but President Obama is meeting today in Pittsburgh with the Jobs And Competitiveness Council, the GE-led business group that advises the president. And they've come out with a report that's very focused on the international aspects of U.S. economic growth.
One of the key ideas that they've released today is a call for a national investment initiative, which was one of the major recommendations of our report -- for the first time, talking about the need for the United States to have a systematic effort to attract and retain foreign investment, which the U.S. has been losing at a rather prodigious rate over the -- over the past decade. The report lays all this out.
So I think, you know, the other thing that will -- that will be on the agenda -- and the choice of Detroit is not coincidental here -- will be, you know, how Korea can help contribute to U.S. economic recovery. The agenda of the administration is very much, what's in it for U.S. jobs and growth. And so I think there will be talk about Korean investment in the United States, and what are the possibilities for job-creating Korean enterprises here.
GWERTZMAN: Scott, what's the economic situation in South Korea?
SNYDER: South Korea has been on track to achieve around about 4 percent growth. The problem, I think, that Korean policymakers see in that 4 percent is related to the extent to which South Korea is integrated with the global economy.
And essentially a lot of the growth in the South Korean economy is being driven by exports. And you know, one of the side effects of that has been perceived income inequality in South Korea. And so even though the South Korean economy, you know, at 4 percent sounds like a great performer from a U.S. perspective, you know, there are some internal issues related to income inequality and social welfare that are cropping up as part of the political discussion in South Korea.
GWERTZMAN: All right.
Operator, any questions?
OPERATOR: Next we have April Brown, PBS NewsHour.
QUESTIONER: Hi, good morning. Thank you for holding this discussion. My question has to do with what you think the two sides will be discussing regarding coordinated efforts to address potential instability, for example, if Kim Jong-il dies and the uncertain succession, whether his third son will actually in fact take over. Could you address that, please?
SNYDER: Yes, I mean, that is definitely a discussion that, I think, has been going on between the two governments at various levels. I think most of that discussion has been centered on defense planning between the U.S. Forces-Korea and the South Korean ministry of defense. Much of that discussion is not necessarily, you know, public, so it's a little bit difficult to make a clear judgment. And it's also complicated by the fact that a lot of the potential issues that one would have to deal with are path-dependent. But you know, I think that both sides have clearly identified some specific issues: refugee flows, food and security. You know, private studies have suggested, you know, the challenge of restoring order in North Korea.
And also both governments back in June of 2009 affirmed a shared objective of seeing Korean unification occur on a democratic and market-oriented basis. But you know, one of the -- there's actually two components to this. One is anticipating what sort of instability might occur in North Korea and being prepared to deal with it.
Another set of issues that I think is likely to be on the agenda is related to response to North Korean provocation and managing conflict escalation. And following the Yeonpyeong artillery-shelling incident past -- this past November, you know, we have seen, I think, political pressures in South Korea for South Korea to take a much stronger response in the event of any future North Korean provocations.
At the same time, there's an obvious concern, you know, that a response could escalate the situation and possibly allow it to spin out of control. And so those are very sensitive issues on which I think the U.S. and South Korea thus far have been doing a very good job of coordinating, but my impression is that there's still a feeling that there's more work to be done in that area.
GWERTZMAN: Thank you.
OPERATOR: Next we have Eric Martin with Bloomberg News.
(Gives queueing instructions.)
QUESTIONER: Thanks for taking my question. There has been a perception among a lot of organized labor leaders that the free trade agreement with South Korea will increase imports to the U.S., or imports from South Korea much more than it will increase U.S. exports. I was wondering if you could comment on that and if there were any particular industries that are a focus of the -- of the trade agreement.
ALDEN: Well, the -- you know, the biggest concern here, Eric, was obviously with respect to the auto industry. And that was the issue in which the Obama administration did succeed in demanding and getting from the South Koreans a rather significant renegotiation to the agreement from the one that had initially been concluded under the Bush administration.
And the main changes were ones that will protect the U.S. domestic auto industry somewhat longer than under the initial set of negotiations and will open a little more access for U.S. autos and auto parts into South Korea. The problem -- the argument that labor unions have made -- and there's certainly a lot of evidence to this effect -- is that the barriers to U.S. sales in countries like South Korea -- and there are certainly other Asian countries where this is true as well -- are not primarily overt barriers like tariffs. They're subtle barriers, sometimes regulatory barriers, sometimes just market sentiment. You know, there's a lot of pressure in these countries not to buy foreign vehicles.
So I think the concern is that in manufactured goods, autos is by far the largest area of Korean-U.S. trade. And the concern is that by eliminating some of the U.S. tariff barriers -- in particular, the tariff on light trucks, which remains reasonably high -- that that's going to open the U.S. market further for South Korean imports.
You know, the best -- the best estimate -- the best economic estimates from the ITC and elsewhere are that the U.S. will gain more in exports and will see less in terms of increase in imports. But it varies with sectors. A lot of the increase on the export side will be in agricultural markets, less so on the manufacturing side. So from the perspective of the labor unions -- again, where the primary representation is in the manufacturing sectors -- the deal does not look as attractive. So I think that explains some of the opposition.
That said, the United Auto Workers has agreed to support the deal as a result of the changes that were negotiated by the Obama administration. So it at least has split the labor unions on this deal, rather than having a united front of labor opposition against the agreement.
GWERTZMAN: Are there labor unions still opposed to it?
ALDEN: Oh, yeah. I mean, the AFL-CIO, the umbrella labor organization, is strongly opposed to all three agreements.
GWERTZMAN: (Oh, really ?)?
ALDEN: Organized labor on the whole remains united in opposition to all three of the FTAs, not just with Korea but with Panama and Colombia. So you know, getting the UAW to at least be sort of quietly supportive of the deal if not actively supportive was a big coup for the Obama administration.
GWERTZMAN: One other question if I may. The -- was it -- was it difficult getting the Democrats in the Senate to support it?
ALDEN: You know, generally speaking, you know, there are -- there are enough pro-free-trade Senate Democrat moderates that, coupled with the Republicans, it's tended to historically -- even for very controversial agreements like NAFTA, the Senate has not been the big problem. The problem has been in the House.
And so, you know, one of the reasons that it's possible for these agreements to move now is that the last election brought the Republicans firmly into control of the House. And there had been some uncertainty about where the new tea party members would be on trade issues, but they have turned out to be very solidly pro-free-trade. In fact, there's -- a bill that's now moving through the Senate will be voted on today, which would make it easier for the United States to slap tariffs on Chinese imports as a result of an undervalued Chinese currency. That bill will pass the Senate. Its prospects look very uncertain in the House.
Grover Norquist, the conservative activist, who's a very important figure for the tea party, has said that any increase in tariffs is tantamount to a tax increase. And the tea party is very strongly opposed to any sorts of tax increases. So the House now under Republican control is quite solidly pro-free-trade, which is one of the reasons that these agreements will move through easily, even with fairly minimal Democratic support.
GWERTZMAN: That's fascinating.
Next question? Hello?
OPERATOR: Our next question comes from Jayshree Bajoria with CFR.
QUESTIONER: Thanks again.
Ted, you said that there have -- there has been some opposition from the unions. Today's New York Times talks about how the textile industry is opposing the Korea-U.S. free trade agreement, and the report quotes a new study by the U.S. International Trade Commission, which singled out the textile industry as the one likely to face the largest blow in terms of jobs. How fair do you think is that assessment? And is that going to change anything?
ALDEN: I think I have every reason to believe that is a fair assessment. If you look at the experience of the textile industry since the mid-'80s, the textile and more particularly the apparel industry, which is more labor-intensive -- textiles tends to be somewhat more capital-intensive, and therefore more textile operations have managed to survive in the U.S. But the apparel industry has basically left the United States.
And you know, there were millions of jobs associated with textiles and apparels in the United States in the 1960s, 1970s, 1980s. One of the big trade-offs that was made in the huge Uruguay Round world trade negotiations was to eliminate quotas on textiles and apparels. And the United States did that because it thought it would gain in many other areas -- high-technology manufacturing, pharmaceuticals, other sorts of intellectual property.
But the experience for these industries is that trade agreements have increased foreign competition and made it far, far more difficult for them to operate in the United States. The industries that have been successful in keeping operations in the United States are ones that have set up supply chains that link more capital-intensive operations in the United States with low-wage apparel operations, often in Mexico and in the Caribbean countries in the region. And there are a number of U.S. programs set up to try to make it easier for that to happen.
But the opposition to these trade agreements from the textile industry has been consistent, but it has not been enough to prevent these agreements from being passed by the Congress.
QUESTIONER: Thank you. May I follow up with a question for Scott?
Bernie, is that OK?
GWERTZMAN: Yeah, go ahead.
QUESTIONER: But what are the South Koreans looking for in terms of Lee's visit to the United States? Besides the free trade agreement, what is it that they would like to see come out of this visit?
SNYDER: While I actually think that the FTA has been sold as the primary deliverable, on the government side, the other issue that is always sensitive is, you know, this issue of coordination regarding North Korea. And I think that the Lee Myung-bak administration finds itself in a somewhat awkward position right now as it relates to its policy toward North Korea, in part as a result of the fact that the leading conservative candidate for next year's presidential race, Park Geun-hye, has actually written an essay in Foreign Affairs that outflanks the Lee Myung-bak administration. It implicitly seems to suggest that the current administration's approach to North Korea has failed, and it suggests that any next administration in South Korea is likely to be more active in trying to engage with North Korea diplomatically.
And so as a result, I think that there is a certain type of pressure on South Korea to show that it's interested in engagement with North Korea but not at the expense of sacrificing the principles that the current South Korean administration has laid down in terms of the objectives that should result from that engagement. And that essentially means keeping the nuclear issue front and center.
GWERTZMAN: Well, what do the polls show in South Korea on whether the public supports better relations with North Korea? Or after the shellings, are they not so interested?
SNYDER: Yeah, well, following the shellings, there was a strong South Korean public sentiment that the Lee Myung-bak administration did not respond strongly enough to that particular provocation. And so -- and the question is, you know, was that a kind of paradigm shift in South Korean public opinion, or are the -- or is there still an interest in some form of engagement. And I think the dilemma for the South Korean public is essentially that while they feel that it's necessary to respond strongly to provocations by North Korea, they also recognize that they have the most to lose in the event of -- that conflict escalates.
And so it really presents an interesting dilemma, I think, for any responsible government official. You know, on the one hand, it is clear that the South Korean defense ministry has been emphasizing its readiness and willingness to, you know, respond very strongly to any future North Korean provocation. You know, at the same time, you have this political debate going on, which implicitly suggests that the direction of South Korean policy in the mid- to long term -- you know, that the only possible direction for South Korean policy is going to be to have some form of process that involves diplomatic engagement.
Next question? Is there one out there?
OPERATOR: (Gives queueing instructions.)
GWERTZMAN: I have a feeling we've covered the waterfront, guys.
ALDEN (?): OK.
GWERTZMAN: All right. Now, why don't we call it -- why don't we call an end to the call-in show?
SNYDER (?): OK. Thanks, Bernie.
ALDEN (?): Thanks very much, Bernie -- appreciate it.
GWERTZMAN: Right. Thank you both.
All right, Operator. Goodbye.
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