Free Trade Agreements: This Year and Next
As part of the two year anniversary special issue of the World Current Report, ISC Editor Dae-Han Song interviewed ISC Advisor Haeyoung Lee, a professor in the Department of International Relations at Hanshin University. Professor Haeyoung Lee has played an important role in providing expertise, analysis, and understanding in the struggles against free trade agreements.
Dae-Han Song: Despite all the opposition – from farmers, workers, consumers, small business owners – against the FTA, the only victory in struggles against free trade agreements has been in Latin America when social movements managed to stop the US led Free Trade Area of the Americas. So my first question is what will it take to block FTAs? And who is pushing these FTAs so strongly?
Haeyoung Lee: If we look at it from a global perspective, like you said other than the Free Trade Area of the Americas which Bush Senior failed to pass, blocking big FTAs have been rare. FTAS, trade liberalization, opening of the markets, privatization, flexibilization of the labor force – they are all core elements of neoliberalism. Domestically, there have been instances where privatization and deregulation have been defeated. However, if we look at the fight against trade liberalization, in particular the larger agreements, there are very few victories. Most of the governments of global capital (e.g. the EU, US, or Japan) are dominated by neoliberalist forces. The opening of markets is profitable and hence very important to them. With liberalization of trade, there is also a liberalization of financial markets which is highly important to financial capital. The neoliberals coordinate with each other and have an international network. The people in the respective countries do not: they are not united; so, of course they lose.
DHS: So how are people supposed to unite together and fight?
HYL: Even in instances where there is some international solidarity, such as around the ISD in the TPPA or the TTIP, they don’t have enough power within their own governments to battle neoliberalism. So they lose. When they win, it is small cosmetic changes such as the exemption of tobacco from ISD or transparency in the arbitration.[1] This was after great public outcry against the ISD. So this is a big criticism on civil society for not being able to stop the TPPA.
DHS: What will it take to shift away from neoliberalism?
HYL: In the case of South Korea, its conglomerates are global players. To secure, the biggest profits, they need to go abroad to get their factors of production, especially labor. Globalization is still beneficial to them. When it is no longer profitable for these Korean global capitalists, then the mood will change. The FTAs are tailor made for conglomerates because they are designing them. I don’t see changes happening very soon. Within Korea’s capitalism, the domestic market is small. The conglomerates developed through export based production, riding on globalization. So that system cannot change right away. Furthermore, the interests of Korean global capital align with those of the US and Europe.
DHS: South Korea now has FTAs with many countries. Among the most extensive FTAs was the one with the United States that came into effect in 2012. What has been the impact of this FTA so far?
HYL: Those that pushed for the Korea-US FTA said that it would result in a total 5.6% growth and 330 thousand new jobs over ten years. It was all an illusion. For 5.6% growth, you would need an annual growth increase in growth of 0.5%. This didn’t happen, in fact the growth rate is going down and so are jobs. The purported benefits of growth and jobs are not being realized. Instead, profit is simply going to the large export capital. The FTA has produced no benefits for people’s livelihoods. We have exports with little benefit to the domestic sphere.
Korea has a lot of FTAs with 50-60 countries. What effect did that have? If we look at the statistics over the past 10 years, we see that there has been no benefit. It is time to review and re-examine FTAs and create mechanisms to lessen the risk. Statistically, the profit that can be realized with each additional FTA decreases. This is because of trade divergence. If country A and B have a free trade agreement, then country A will prefer buying from country B. However if country A also has a free trade agreement with a third country C, then some of the demand for country B’s products will be diverted to country C’s products. So they will keep making FTAs but it will not extract greater profits. Our society is sinking deeper into neoliberalism and becoming more polarized. Not simply economically but in all aspects, between those that receive a good education and those that do not, those that live in nice apartments and those that cannot.
DHS: I went to Bolivia recently to attend the World People’s Conference Against Climate Change and the Defense of Life. Being in Bolivia, it became clear that even in Latin America with its shift towards the left, it is still difficult for countries to escape the global order. Even as they attempt to shake US dominance, Latin American countries are still forming relations between themselves that don’t necessarily escape the current neoliberal system.
HYL: There are different groups in Latin America. There are those like Brazil and Argentina that want to integrate themselves deeper into the global system. There are those like Venezuela that oppose neoliberalist globalization and push forth alternatives such as the People’s Trade Agreement. There are those in between.
Venezuela’s People’s Trade Agreement is trying to create another type of free trade agreement that doesn’t simply trade goods but also doctors and medical services. To talk about Latin America as being of one kind is difficult. Like cultural diversity, economic diversity is also important and valuable. However, the TPPA is trying to enforce US neoliberalism on all the other countries. The US is trying to impose US Anglo-Saxon capitalism upon the rest of the world.
DHS: When do you think that Korea will join the TPPA?
HYL: Well, first before Korea can join, the TPPA has to come into effect. That means that based on GDP, 85% of the economy of the TPPA must ratify it. I think it will probably take 2-3 years. So basically if the US, Japan, and Australia ratify then the TPPA would go into effect. Even then, it’s the US and Japan that take up the majority of GDP. What the US and Japan want will determine the entrance fee for countries that want to join later. As regards to Japan, if Japan wants 100, then the negotiation will be about whether South Korea will give 50, 60, or 90. We have to give it. The negotiation is not about what can we get, but simply about how much will we have to give. This is the worst type of negotiation.
DHS: Why is what Japan wants from South Korea so important? What about the US? HYL: We already gave everything the US wanted in the Korea-US FTA! Right now, we don’t have an FTA with Japan. So Japan will want to establish an FTA with Korea through the TPPA. The China led RCEP and China-Japan-Korea FTA involve give and take. However, the TPPA is not about give and take but about how much you give. This is because for a country to join the TPPA, they have to ascend to it. This means that the existing members of the TPPA must approve the entry of the new country. For Japan it is more profitable to get concessions from Korea through the TPPA then through the other two. Because to ascend to the TPPA, you have to agree to the criteria set by the preexisting countries.
DHS: How long will it take Korea to apply to the TPPA? HYL: It will probably take Korea 2-3 years to apply to the TPPA. This is because the TPPA will not simply pass in the legislatures of the member countries. In particular, the US will face large obstacles which might lead to additional negotiations. The fight is not over yet.
DHS: The contents of the TPPA were recently made public. What was your thought of it? HYL: Compared to the KUS FTA there are some improvement around tobacco or transparency (ISDS). There was also an exemption for Chile. But if you look at the provisions on trade secrets (as would apply to Wikileaks), there are many ridiculous provisions. However, since the Korea-US FTA already has many of the TPPA provisions, the impact of the TPPA on Korea won’t be as great. A lot of the stuff that we have to be worried about in the TPPA is stuff that has already been implemented in the Korea-US FTA.
DHS: What has to happen next in the TPPA fight? HYL: What we need to focus on right now is the process. For South Korea to apply for membership, the TPPA must come into effect with the current members. We need solidarity with each country that is preparing to ratify. Korea can play a role in that because the basis of the TPPA is the Korea-US FTA. That means that South Korea is already familiar with all the toxic provisions in the TPPA and so we can play a play a role in educating others to oppose ratification of the TPPA
DHS: Finally, I wanted to ask about the WTO. From the 15 to the 18 of December, the WTO meeting will be held in Kenya. What are your thoughts on it. HYL: Well if we look at the TPPA and TTIP, they are both agreements outside of the WTO. These mega-FTA networks pushed by the US are actually weakening the WTO.
DHS: Who is pushing for the WTO? HYL: It has no owner so it is powerless. In the WTO, one country has one vote. But in the TPPA and TTIP, the US is king. The Doha round has been going on for ten years. It will remain at a low level. The higher levels of liberalization are already happening at the mega FTAs the US is pushing which are making the world more polarized. There are some elements in the WTO that are not necessarily negative such as trade facilitation which would reduce the costs of trade. That’s about it. The rest is vague. Before the WTO was the highest form of trade liberalization, now, the FTAs supersede the WTO.
[1] Currently, the rulings from ISD arbitration proceedings are secret. This creates a vague, unaccountable, and arbitrary legal landscape that gives great power for arbitrators to interpret trade agreements as they desire. Making the arbitration procedures public creates greater accountability as well as sets up the foundation for precedent.