The Korea-U.S. Free Trade Agreement (Korea FTA), which the Obama administration is promising to send to Congress for ratification in the next weeks, would be the largest international trade deal since the North American Free Trade Agreement (NAFTA). Korea is the seventh largest U.S. trading partner and the United States is Korea’s third largest trading partner. Commerce between the two countries is estimated at $86 billion annually. The Korea FTA was originally signed in April 2007 by President Bush and later amended by the Obama administration in December 2010. But neither the U.S. Congress nor the South Korean parliament has yet to sign it.
The Korea FTA contains many frightening provisions, particularly the investment chapter, which threatens both U.S. and South Korean public interest laws. According to a flyer prepared by the Citizens Trade Campaign, the investment chapter of the Korea FTA is more potent than past FTAs and grants Korean investors “extraordinary new rights to challenge U.S. laws, regulations and even court decisions as ‘regulatory takings’ in international tribunals that circumvent the U.S. judicial system.” Not only is the Korea FTA expected to displace 888,000 U.S. jobs within seven years, it explicitly omits any reference to the International Labor Organization (ILO) conventions, which is significant given that over half of South Korea’s workforce are irregular workers without adequate protections.
Like many previous international trade agreements, the Korea FTA is benignly presented as “reducing barriers to trade” and “improving market access” for U.S. and Korean products. The simplicity of such language belies the anticipated and far-reaching social and environmental impacts should this agreement be ratified.
Forceful Opening of Korea
In the past century, the United States has played a very heavy hand in Korea. One of its first interactions with Korea took place in 1866, when the heavily armed USS General Sherman sailed up the Taepodong River to force open trade with Korea. In 1882, the United States became the first Western nation to open Korea through a treaty, paving the way for American companies to “develop” Korea’s gold mines, railroads, electrical and telephone systems. Many South Korean opponents of the Korea FTA have likened the trade deal to the 1905 Taft-Katsura Agreement when the United States agreed to allow Japan to colonize Korea in exchange for its takeover of Hawaii and the Philippines. At the end of WWII and Japan’s surrender, the United States played a central role in dividing the Korean peninsula, installing a military government led by Koreans who collaborated with Japanese colonizers and brutally quashing a vibrant grassroots pro-democracy movement. Then came the Korean War, the first Cold War the U.S. fought, which claimed four million lives, separated millions of Korean families, and formalized the division between North and South Korea.
As a strategic U.S. front in the Cold War, South Korea received significant amounts of military, development, and food aid. From 1956 to 1970, under PL 480, Korea received $800 million worth of aid commodities, largely in the form of wheat and cotton. The abundant supply of grains kept food prices and wages low, which provided a continuous supply of cheap labor to fuel Korea’s rapidly growing export manufacturing economy. But food aid devastated Korean agriculture. In the 1940s, approximately 583,000 acres were used for wheat production, whereas by 1968, due to the depressing effect of U.S. food aid, only 39,000 acres were used for wheat production. U.S. food aid lowered the prices of other grains, such as barley and rice. By the 1960s, agriculture was no longer the dominant economic sector.
“After the Korean War, the United States sent flour, sugar, and milk under PL 480, and the farmers and people of Korea received it gratefully,” said Lee Kwang Seok of the Korean Peasants League in a recent interview. “However, as time went by, we saw that those sectors of the agricultural economy were destroyed. And now with the FTA, the policies are aimed at further destroying agriculture in Korea.”
Aggressive U.S. trade policies starting in the 1980s sealed the fate of Korean farmers. During the Reagan administration, the United States began using Section 301 of U.S. trade law to break down South Korean tariffs that helped develop its domestic industries. Korea caved in and lifted tariffs on U.S. beef, wine, rice, and tobacco. Then came the World Trade Organization (WTO) and the push by rich, developed nations to include agriculture in trade negotiations. This proved devastating for small-scale Korean farmers (and other farmers around the world).
WTO Kills Korean Farmers
In 1995, South Korea joined the World Trade Organization and signed the Agreement on Agriculture. Like many Asian countries, South Korea had limited foreign agricultural imports through the use of quotas and tariffs to protect their agricultural base. But by signing the Agreement on Agriculture, Korea was forced to end its system of quotas and tariffs, and begin to import a certain amount of agricultural commodities.
Meanwhile, as the United States and the EU were forcing farmers in poor developing countries through the WTO to open their markets, they were providing billions of subsidies to their own farmers. From 1995 to 2005, OECD countries collectively increased the subsidies they provided their farmers from $182 billion to $300 billion. Although most unsubsidized peasant farmers around the world lived on less than $400 a year, U.S. and EU farmers received on average $21,000 and $16,000 annually in subsidies.
Opening Korean markets to cheap foreign imports devastated Korean farmers. Since the 1995 Agreement on Agriculture, Korean farmer debt grew four-fold to approximately $30,000 forcing millions off their land and into poverty. In 1970, farmers made up 44.7 percent of the Korean population. By 1995, only 11.6 percent were farmers. Today, only 3.2 million Korean farmers remain, comprising 7 percent of the population. According to Reverend Han Kyung Ho, President of the Korean Rural Mission, Korea’s dependency on imported food has reduced its food self-sufficiency from 56 percent in 1980 to 25.3 percent by 2004. Lee Kwang Seok of the Korean Peasants League points out that, with rice out of the equation, Korea would only be 5-6 percent food self sufficient. “If a country depends on other countries for food, the sovereignty of the whole nation becomes threatened,” says Reverend Han. “Food is a strong weapon to control another country.”
Refusing to have their livelihoods and culture determined by the WTO, Korean farmers have been on the forefront to challenge and disrupt the global free trade agenda. In 2003 at the WTO ministerial meeting in Cancun Mexico, South Korean farmer and former parliamentarian Lee Kyung Hae took his life in protest of the WTO. Lee climbed the chain-linked fence that was erected to keep away civil society groups from disrupting the trade talks and wearing a sign that read “The WTO Kills Farmers,” he stabbed himself in the heart. His suicide was a rallying cry for millions of peasants experiencing the same onslaught of free market forces that are driving them off the land and into ruin.
Lee’s death not only helped further galvanize the global peasants movement Via Campesina, it greatly influenced future WTO talks. At the Cancun summit, talks broke down after the EU and United States refused three demands made by developing countries: cut domestic agricultural subsidies by rich, developed countries; exempt certain products that were vital to a country known as “Special Products;” and institute “Special Safeguard Mechanisms” to protect poor farmers by allowing countries to impose a special tariff on certain agricultural goods during volatile periods of import surges or price falls.
Again in 2005, at the WTO Ministerial talks in Hong Kong, thousands of Korean and developing country farmers called for the “WTO out of agriculture.” In a spirited display of their militancy, some 50 Korean farmers jumped into the freezing Victoria Harbor in an effort to reach the convention center where official talks were taking place. The concluding Ministerial Declaration recognized the right of developing countries to designate Special Products and institute safeguards. But by 2006, the United States had backtracked, refusing to cut domestic subsidies. The talks have stalled ever since. Recognizing the political constraints placed on the WTO, the United States and other developed countries have since sought bilateral trade deals to pry open or expand existing markets. Hence in 2006, official Korea FTA talks began.
Although the Korea FTA does not cover rice, the Agreement on Agriculture has already gradually opened the Korean rice market. By 2014, it will be completely opened. Korean farmers have already been hit hard by free trade, but the stark differences between South Korean and U.S. farms will drive most farmers to ruin. South Korea has just 4.2 million acres of farmland are under cultivation, compared with the United States, which has 434 million acres. The average farm in South Korea is 1.2 acres, compared with the average U.S. farm size of 71 acres. According to Lee of the Korean Peasants League, if the FTA is implemented, South Korean agricultural production will decrease by 45 percent and roughly half of Korea’s farmers will lose their livelihoods.
As Korea’s dependency on imports and global food prices soar, South Korean corporations have been purchasing and leasing land in Africa and Asia as a safeguard against the looming threat of food insecurity. In 2009, the South Korean corporation Daewoo, which is also owned by GM, nearly signed a deal with Madagascar for 3.2 million acres of farmland — half the country’s arable land — to produce mainly corn for export back to Korea over the next 99 years. Such land grabs would push residents of those nations into the same food deficits that Korea now faces. Lee Kwang Seok of the Korean Peasants League said that there are now some 30 Korean corporations buying land and investing in industrialized food production abroad, while Korean farmers who grow food cannot survive and are given no support. “Does such a things really have to be done,” Lee recently asked. “We who have lived through Japanese colonialism, do we have to go to other countries and do this?” In a recent op-ed in the Joong Ang Daily, a research fellow with the Samsung Economic Research Institute argues, “It is crucial to secure overseas agricultural suppliers to cope with speculative demand and global climate change.”
Hidden Costs of the Korea FTA
In addition to devastating Korea’s countryside, the FTA has been used to dismantle several of Korea’s domestic environmental and public health laws. As a precondition for negotiating the FTA, the South Korean government agreed to lower national auto emission standards to accommodate the import of less fuel-efficient vehicles from the United States. At a time when the Obama administration should be advocating for a more progressive global energy policy and greater restrictions on greenhouse gas emissions, the United States is undermining other nations’ efficiency standards.
The FTA has also been used to lift Korea’s ban on U.S. beef. In 2003, prior to official FTA talks, the U.S. discovery of a cow with Bovine spongiform encephalopathy (BSE) (commonly known as ‘mad-cow disease’) prompted the South Korean government to impose a comprehensive ban on all imports of American beef. This was a major blow to U.S. beef industry since South Korea was its third largest export market with an estimated value of $800 million a year. In 2006, as a pre-condition for FTA talks, South Korea partially lifted the ban on U.S. beef. But after imports resumed, multiple shipments failed South Korea’s import standards prompting South Korea once again to revoke export permits to U.S. meat suppliers. In 2008, as soon as South Korean President Lee Myung Bak, the former Hyundai CEO, came into office, he immediately lifted the beef ban. This unilateral decision enraged South Koreans who then organized massive candlelight vigils and protests over a four-month period. At its height, over 750,000 South Koreans took to the streets calling for the resignation of President Lee and the reinstatement of the export ban to protect Korea’s public health. In the end, South Korea only required the United States to voluntarily certify the safety of U.S. beef.
It’s also unclear how much the FTA has been used to dismantle South Korea’s 2000 genetic engineering (GE) labeling law and undermine its commitment to the Cartagena Protocol on Biosafety, an international supplemental agreement to the UN Convention on Biological Diversity. The Cartagena Protocol seeks to protect biological diversity from risks posed by transgenic organisms resulting from biotechnology. Under the protocol, developing nations can restrict and/or label GE organisms to protect their biodiversity and/or public health if inadequate scientific evidence guarantees that a product is safe. The FTA negotiations overturned Korea’s 2000 GE labeling law that had largely kept transgenic imports out of Korea’s food supply. In 2007, the Washington-based Biotechnology Industry Organization hailed the conclusion of the Korea FTA for “providing additional market access opportunities in Korea for U.S. biotechnology companies.” It specifically lauded the U.S. agricultural negotiator for ensuring “that trade of biotech-derived crops, foods, and feeds continues without disruption.” Despite widespread opposition to GE foods in Korea, transgenic imports no longer have to be labeled.
The FTA lifted the floodgates for massive imports of GE foods and feedstock, namely U.S. GE corn. In February 2008, less than a year after the ag-biotech deal was signed, the Korean Corn Processing Industry Association purchased 697,000 metric tons of U.S. GE maize, the first major GE shipment destined for food use to arrive in Korea since 2000. Korean approvals of GE imports have since skyrocketed. By February 2008, Korea had approved 102 transgenic organisms for import as feed or food, 70 percent from U.S. firms Monsanto, DuPont, and Dow Chemical.
As many Americans struggle for universal healthcare, the FTA spells the death of Korea’s national healthcare program. South Korea has a universal health care system that covers up to 64 percent of all medical costs of its citizens. Korea’s healthcare program costs the government $26 billion annually, of which one-third (or $8.6 billion) is spent on medicines. Conditions imposed by the FTA stipulate two key conditions that will serve to undermine the viability of Korea’s near universal healthcare system. The first is an extension on pharmaceutical drug patents up to 30 years, thereby preventing patented drugs from becoming generic and lowering the cost to end consumers or the government. The second is the addition of patented pharmaceuticals to the government’s list of reimbursable drugs, most of which are currently generics. According to Lee Jooho, Senior Director of Strategic Planning for the Korean Health and Medical Workers Union, these two factors will likely drive up the cost of the national health care program and limit the government’s ability to provision healthcare services to its people.
Reversing the Free Trade Agenda
The Korea FTA is the latest in a long history of aggressive U.S. foreign policies toward Korea that have significantly undermined Korean farmers. The current FTA will further erode Korea’s agricultural sector and food security while contributing to its environmental degradation through reduced emission standards and potential exposure to contaminated U.S. beef and transgenic crops. With this FTA, Koreans also stand to lose their national healthcare system as U.S. financial services and pharmaceutical firms await the opportunity to use the Investor to State Dispute (ISD) mechanisms to sue governments for infringing on their right to profit.
Free trade agreements are fundamentally undemocratic. They serve to undermine the economic viability of traditional livelihoods and compromise the food security of millions of poor people around the world. At this point in human history, it leads both countries in the exact opposite direction that we should be heading. With the world facing the pressing issues of global climate change, biodiversity loss, rising food prices, and declining sources of fossil energy, what is now needed more than ever are national and international policies that favor small-scale ecologically based agriculture and food sovereignty. The Korea FTA should and can be stopped. Both the United States and South Korea should abolish export and domestic subsidies that promote unsustainable agriculture. Through sweeping legislative reforms, both should move swiftly to protect and enhance local sustainable economies that ensure the well-being of its people and sustains the integrity of ecosystems upon which all of our lives depend.
Like the people of Tunisia and Egypt have demonstrated, these changes will not come about without struggle.
*Christine Ahn is the executive director of the Korea Policy Institute and a Foreign Policy In Focus columnist.
**Albie Miles is a Ph.D. Candidate in the department of environmental science, policy and management at the University of California, Berkeley, and an FPIF contributor.