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November 5, 2009
U.S.-Korea Business Council
*As Prepared for Delivery*
"Thank you all for having me tonight. And thank you to Bill Rhodes for that warm welcome. It is my pleasure to be here this evening with so many distinguished individuals, including Ambassador Han Duk-Soo; the president of the Korean-US Business Council, S.R. Cho; your outgoing president, Myron Brilliant; and your incoming president, Tami Overby. I welcome the opportunity to speak with you all about how we can work together to strengthen the economic ties between Korea and the United States.
Opening markets and forging closer trade relationships with our partners in Asia has been an important part of my work since becoming the U.S. Trade Representative. I just returned from a trip to India and China, where we made progress on a number of trade issues. And next week I will join President Obama for the APEC meetings in Singapore.
Our focus on Asia is no accident or coincidence. The Asia-Pacific region has become a worldwide center of economic activity and innovation. And it is a key driver of global economic growth and recovery.
Since 1990, total goods trade by the Asia-Pacific economies has increased by more than 300 percent. Global investment in the region has increased by nearly 700 percent. The Asia-Pacific region now accounts for over half of world GDP and 44 percent of all global trade. In fact, 60 percent of U.S. goods exports are now destined for Asia-Pacific countries.
And we're not just trading more with Asia. We're trading more varied goods and services than ever before. The basket of U.S. exports to the region has diversified. And, increasingly, American exporters are migrating toward higher-value goods and services, such as electrical equipment, machinery, aircraft and parts, medical equipment, and chemicals.
As the region continues to grow, Asia-Pacific economies will only become more important to the United States.
President Obama and I recognize that successful engagement with the Asia-Pacific is a critical part of U.S. trade policy. The President will be traveling to Asia next week, with stops in Singapore for the APEC meetings, as well as visiting Japan, China, and Korea. While in Singapore, he will also hold a summit with the leaders of the ASEAN countries.
America's relationship with Korea is a critical part of our engagement in the Asia-Pacific. Korea is a vital strategic ally. It is a bulwark for stability and security in Northeast Asia, and one of America's most significant economic partners. Over the last 50 years, America's relationship with Korea has expanded and matured. And Korea has reaped the benefits of economic growth and development.
Korea is one of the greatest development stories in modern history. In the span of the past four decades, it has made the transition from one of the world's poorest countries to the world's 15th largest economy by GDP.
I want to take a minute to reflect on how the US-Korea relationship has also grown over that period. In the aftermath of the Korean War, America was a strong partner in Korea's efforts to develop into a stable, prosperous democracy. This took the form of a long-standing security alliance, but it was also the beginning of an economic partnership, as the United States became by far the biggest donor of economic assistance to Korea at that time.
Over time, our economic relationship continued to develop along with Korea's own development. And to be frank, this included a number of contentious trade disputes stemming from Korea's export-led growth strategy and highly protected home markets.
Then, in 1997, the Asian financial crisis struck. In the aftermath, our relationship underwent a profound change and maturation as Korea showed the world it could change the practices that led to the crisis in the corporate sector. Korea implemented new reforms to provide greater corporate transparency and restructured its financial institutions.
In the years since, Korea has made incredible strides. It has implemented reforms to increase corporate transparency and it has restructured its major financial institutions. Korea has also increasingly opened its markets to foreign competition. These pro-market, economic growth-oriented steps have enhanced consumer welfare, introduced new technologies and services, and stimulated innovation among domestic companies.
And the progress continues today. President Lee has embarked on an ambitious course of reform that will help the Korean economy to continue to grow. He is modernizing and streamlining the regulatory system and improving the investment environment. And he has dramatically increased outreach to all stakeholders in the Korean economy, including representatives of foreign businesses operating in Korea, to obtain input on how best to grow and reform the Korean economy.
The Lee Administration has also taken bold steps to strengthen intellectual property protections. New laws have been passed to boost copyright protection on the Internet, which is especially important in Korea's wired society. Those steps are already making a difference. So much so that, earlier this year, in recognition of the significant progress Korea has made in this area, we removed Korea from the Special 301 "Watch List."
Korea and the United States are also collaborating extensively through the G-20. Next year, Korea will take over the chair of the G-20 and will host the G-20 leaders meeting. And we look forward to continuing our close cooperation in this vital forum.
In every forum and at every opportunity, we continue to work with Korea to improve our trade relationship. In a trade relationship as large as ours, it is inevitable that problems will arise, but we can work and are working through our disagreements. In just the past few months we have successfully resolved issues related to product testing, government procurement, food labeling, and technology standards, to name a few.
Now, as much as I know you all appreciate those accomplishments, I also know you're waiting for me to talk about the U.S.-Korea Free Trade Agreement.
This audience knows how important the Korean market is to America and vice versa, but it bears repeating: Korea is America's seventh-largest trading partner. Last year, two-way trade in goods alone totaled $83 billion dollars, and that's on top of $20 billion more in services trade. And if that's not enough, we have also invested $40 billion more in each others' economies.
In 2007, the independent and bipartisan U.S. International Trade Commission reported that if the U.S.-Korea FTA were put into effect, annual American exports to Korea could rise by $10-11 billion annually. And that's just the increase we could expect to see from the KORUS tariff cuts. When you factor in the benefits of a more open market for services and the elimination of non-tariff barriers, the impact could be far greater. As you know, the ITC's reports are the gold standard for weighing the economic benefits and costs of an Agreement.
The expected economic gains for Korea are equally impressive. Some suggest that the FTA could increase the Korean GDP by up to two percent.
But the potential effects of this FTA extend far beyond the economic realm. This Agreement will help to strengthen our bilateral alliance at a crucial time in global political affairs. While some Congressional leaders have continued to voice concern over specific elements of the FTA, they have told the President time and again that they are interested in expanding America's strong and proven partnership with South Korea. And they see this Agreement as one way to do so.
So, some may ask, with so many potential benefits so close to hand, what is taking the United States so long?
After all, the recent initialing of a free trade agreement between Korea and the European Union has made that question more relevant for any business that competes directly with European firms in the Korean market. And I know that many of you are in competition with those firms, in major sectors like electric machinery, chemicals, pharmaceuticals, medical devices, meats, and many others. So I understand that you may be concerned if the Korea-EU FTA is implemented while the KORUS FTA awaits Congressional consideration.
But I can tell you this, we are not standing still. President Obama has charged me with finding a way to address our substantive issues of concern and move the Agreement forward.
I am taking this charge very seriously. We have been conducting a thorough review of the KORUS FTA, along with the other two pending FTAs. Because in order to realize the full potential of this Agreement, it is absolutely crucial that we get it right. Precisely because our political and economic relationship is so important, we have to get this right. And we need the broadest possible political support to move forward.
But our review is about more than moving a single piece of legislation forward. This review, and others like it, is about keeping a promise to the American people, even as we work to respect and enhance our relationship with key trading partners, such as Korea.
President Obama has promised the American people that in this Administration, trade is going to work for America's working families. We've promised to consult with stakeholders and with the U.S. Congress as we craft and implement trade policy. We've promised that when we close trade deals on behalf of the American people, we're going to be looking for jobs just as hard as they are.
We owe the American people - and our trading partners - our best effort to make our country's trade policy as fair and effective as possible.
That's why we sought public comment on the KORUS FTA. We received hundreds of thoughtful and detailed responses, and we are taking those comments seriously.
I know that some of the strongest supporters of the FTA are in this room. I know you have deep interests in this Agreement. I know that many of you are anxious for it to come into force as soon as possible, so that you can take advantage of the benefits it holds in store. And you're not the only ones - a significant majority of the comments we received also expressed strong support for approving the FTA as soon as possible.
However, we need to be mindful that important stakeholders have real concerns with this Agreement. We owe it to all of you, and to Korea, to make sure that we understand fully these concerns and work hard to address them.
For a long time, the Korean playing field was far from level. And we are still dealing with the legacy of Korea's long-closed market, especially with respect to autos.
As all of you know, the American auto industry is working through a period of difficult transition. This Administration is working hard to encourage them to become leaner, greener, and more innovative. And we are also working hard to ensure our workers have the skills they need to compete in a global economy. Both the auto industry and our government know we need to become more competitive, and we are taking steps to make that happen.
Our market is open to Korean autos. All we are asking for is for our own auto companies to be able compete on a level playing field in the Korean market.
We believe that a level field is possible and within reach. And we are now developing proposals that will enable us to address concerns with respect to automotive trade. We are also looking at concerns with respect to beef and non-tariff measures more broadly to see how they can be addressed most effectively. As we move forward, we will consult closely with members of Congress and with American stakeholders to ensure that any proposals we make to Korea have broad political backing here at home.
It is important to emphasize that as we move forward with this process, we will also be working closely with Korea. We look forward to working respectfully and creatively with Korea, being mindful of Korean concerns and interests as well.
To that end, I have had a series of productive meetings with Trade Minister Kim over the past seven months. We both reiterated our commitment to seeing the FTA through to conclusion, and we talked about ways that we can work together to bridge our remaining differences. I look forward to seeing Minister Kim again in Singapore next week.
President Obama and President Lee have now met several times as well, and after the Singapore APEC meetings President Obama will visit Korea.
In their discussions, President Obama and President Lee have both reiterated the need to avoid protectionism and economic nationalism. They have agreed to broaden and modernize the U.S.-Korea alliance, and - crucially - they have also discussed the tremendous potential of the KORUS trade pact.
There is no question that the U.S.-Korea FTA has the potential to bring significant economic and strategic benefits to both countries.
I am committed to working together, so that we can find the path to an even stronger, more robust trading partnership between the United States and Korea."