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2004-10-29 18:04:25
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Background to Korean government and capital’s promotion of free trade agreements (FTA), and the position of KCTU
KCTU Policy Paper

Background to Korean government and capital’s promotion of free trade agreements (FTA), and the position of KCTU

1. Background and strategies in the drive for FTAs  

The speed in which the Korean government and capital are promoting FTAs is becoming hard to catch up. The Korea-Chile FTA has already been consolidated, the Korea-Japan FTA and the Korea-Singapore FTA, aimed at concluding in 2005, are currently being negotiated, and negotiations for the Korea-ASEAN FTA are scheduled to officially take off next year. The government has announced its ‘roadmap’, which states that in the mid to long term it will promote FTAs with the US, EU and China, and also a Korea-Japan-China FTA, and regional integration of East Asia.
There is a timely element in the background to the promotion of all these FTAs by the Korean government and capital –the so-called ‘change in external trade environment’. This refers to external factors such as the expansion of regionalism based on FTAs across the globe, and the repetitious failure of WTO ministerial meetings that is leading to loss of faith in the multilateral trade regime. Thus, there is a fear that Korea will lose out and be isolated if it doesn’t join this ‘FTA trend’. Under these premises, the Korean government is promoting a strategy to negotiate ‘multi-track’ FTAs.
However, we must also be aware that there is a strategic factor involved –FTAs are being encouraged under the strategy to ‘establish a paradigm of an open trading country’ on which to base its plans to become ‘the hub in Northeast Asia’. These are strategic choices that the Korean government has made, in order to facilitate integration into the process of neoliberal globalization and to continue its domestic restructuring programs.
The ‘paradigm of an open trading country’ is the result of pushing the traditional export-oriented economic development strategy to the extremes, in consistency with the process of neoliberal globalization. It is an idea to sacrifice domestically oriented sectors, public sectors, agriculture and small to medium manufacturing enterprises, while maximizing the profit of a handful of transnationalized ‘jaebols’ and a few competitive export-oriented sectors. In other words, it is a plan to develop new engines for economic growth by transforming the economy to a knowledge-based one, and by selectively developing major sectors that will promote economic growth, such as display technoloby, semi-conductors, futuristic automobiles, mobile communication and bioengineering, at the same time maintaining competitiveness of some exporting sectors. FTAs are considered to be proactive strategies in establishing the environment and momentum to promote these structural reformations. This will be a process to complete the neoliberal restructuring of the Korean economy.
This strategy is the result of a combination of various factors, such as the dilemma on how to survive amidst the pressure from neoliberal globalization regime, the increase of domination of transnational capital over Korean economy, and the transnationalization of Korean ‘jaebols’. However, the ruling bloc within Korea has not completely come to a consensus on this strategy. In particular, considering that the FTA roadmap declared by the government is directed towards the major economies including US, EU and Japan, and that capital is also being cautious about the effects of these FTAs, it is likely that questions will be constantly raised within the ruling bloc on the content, method and speed of this strategy. This is evident from the fact that capital is showing a passive attitude towards the presently negotiated Korea-Japan FTA.
This strategic choice of the Korean government and capital may lead to growth in economic size, but one without increase in jobs nor domestic consumption, and will bring devastating consequences such as institutionalization of unemployment and job insecurity. Furthermore, the establishment of ‘paradigm of an open trading country’ has, as its essence, the completion of a regime based on liberalization and accumulation of profit for financial capital. This will lead to complete domination by transnational financial capital of the Korean economy, and the collapse of national economy and the social sectors. Now is the time to construct an alternative paradigm, in which rights of workers are ascertained, jobs created and poverty seriously dealt with. It is the time to build a paradigm in which the need for co-existence and cooperation amidst diversity is recognized regionally and internationally. The FTAs merely direct us in the opposite direction.

2. Background to the Korea-Japan FTA (KJFTA)

The KJFTA is one of the fundamental strategies that the government and capital have adopted, in order to transform the paradigm of the Korean economy into one of ‘open trading country’, to integrate Korea fully into the neoliberal regime, and to continue propelling and encouraging restructuring. The Korean government and capital, on one hand, supported the IMF’s Structural Adjustment Program so as to guarantee its prevalence and perpetuity according to the rules of the market, while at the same time, promoted mid to long term plans to more closely adhere Korean economy to the global financial market. This was a strategic choice that Korean capital made, in a situation where ‘industrial policies’ and the ‘national development’ model based on intervention of the US to prevent opening of East Asian markets no longer functioning. It is also aimed at giving more privileges to transnational capital and adopting additional business-oriented policies to ensure a more favourable environment. This strategy has taken on the form of the plan to become ‘the hub of Northeast Asia’.
The first step that the president Noh Moo-Hyun took to realize this plan was to legislate the Bill on Free Economic Zones(FEZ) and to ratify the Korea-Chile FTA amidst strong resistance from the peasants. The Bill on FEZ abolished paid monthly leave, while changing weekly and menstrual leaves into non-paid ones. It also expanded the boundaries of dispatched labour, limited collective action of workers and allowed evasion from performance requirements such as employment of disabled or elderly. As for the Korea-Chile FTA, it is a well-known fact that it destroys food sovereignty and threatens livelihood of peasants. We can perceive from these examples that the series of neoliberal policies of the government and capital were indeed made under strategic considerations.
The KJFTA is a project of government and capital to actively integrate Korea into the process through which Japan seeks to restructure the East Asian region centered on Japanese capital, and to provide a way for survival in the neoliberal world capitalist order. Even though capitalists acknowledge that in the short run trade deficit will worsen under KJFTA, they are nevertheless pushing forth with the FTA in order to  promote restructuring of major industries with over-investment, such as automobiles, machinery, steel,  electric and electronic goods, under the logic of ‘enhancing efficiency through competition’ or ‘strategic alliance with advanced companies’. Domestically, capital concentration for jaebols would be strengthened while in the long run Korean capital may gain something from the new economic order in Northeast Asia centered around Japanese capital.
The KJFTA is also an important medium in transforming the Korean economy into one based on speculation, with only a shell but without substance, as part of Noh Moo-Hyun’s so-called ‘Northeast Asia Financial Hub Strategy’. This plan refers to the plans to develop Korea into a financial hub of Asia, to give privileges to encourage influx of transnational capital, and to secure activities of national financial capital by using pension funds as warranty, etc.. The KJFTA will provide the most appropriate environment for Japan to use its assets including financial assets, lead to destruction of Korean manufacturing sector, and eventually transform Korean economy into a speculative parasite economy.

3. How will the KJFTA affect us?

① It will destroy the reproduction base of national economy

The major industries of Korea and Japan –such as automobiles, machinery, steel, electric and electronic goods –are mostly in competition with each other in the world market. Japan, as world’s largest provider of capital resources, is far ahead of Korea in terms of technological competitiveness. Consolidating a FTA in this situation will grant Japanese companies the additional benefit of cost competitiveness, while bringing Korean major industries to ruin. If we look at the present level of tariffs on major industries, for automobiles and automobile parts it is 8%, for electronics 8%, machinery 7.9%, metal 7.3%, oil and chemicals 7.7% and other manufacturing sectors 7.2%. On the other hand, for Japan, it is either zero or very low –automobile and parts, other transport machinery and electronics 0%, machinery 0.2%, and metal and oil and chemicals 3%. Therefore, if KJFTA is implemented and tariffs eradicated, Korean major industries will become bankrupt or pressured into international M&As and abrupt restructuring. It can also lead to grave circumstances in which national businesses can move to other countries, such as China, worsen the process of deindustrialization, and demolish any possibility for an independent national reproduction base.

② It will lead to mass restructuring and job insecurity, unemployment and expansion of unstable labour

The KJFTA will turn Korean economy into a shell without substance. Machinery, automobile, electric & electronic industries, which are important in Korean industrial structure, will be pushed into unconditional competition with Japan. This process will be accompanied by extreme restructuring measures under the name of enhancing efficiency through competition, increase in economic size and solving problems of repetitious over-investment. As was the case during the economic crisis and the IMF’s SAP, this process will cause mass unemployment and job insecurity, and regular workers from the manufacturing sector will move to services sector as irregular workers. Under the IMF regime, the brunt of heavy international competition have been borne by the socially weak and the workers, and with the KJFTA, the cost of competition pressure will be passed again onto the workers and the people. We have already experienced all this under the IMF regime.

③ The KJFTA will deprive workers of their rights, which they had gained through historical struggle for democratic unions.

The governments of Korea and Japan are, at the moment, negotiating for a FTA between the two countries. The negotiations are based on the Joint Study Group Report on KJFTA, publicized last year. We cannot help but show our consternation at the report of the Non-Tariff Measures (NTM) Subcommittee of the Joint Study Group, attached at the annex of the report. According to this report, the following are recommended as NTM concerns: “Further efforts by the Korean Labour Commission to resolve labour-management disputes”; “Guarantee of the ‘no-work no-pay’ principle”; “Clarification of the employers no obligation to buy back employees’ or workers’ unused vacations”; Greater flexibility in calculation of retirement allowances”; and “Strict and swift measures against illegal activities of labour”. These demands are a clear manifestation of Japanese capital and government’s hostility towards Korea’s militant and democratic trade union movement. These demands from Japanese capitalists were already proposed during the negotiation process for the Korea-Japan BIT, under the name of ‘Serious Clauses’, and it is expected that the Japanese side will demand for these clauses more fervently during the FTA negotiations. These ‘recommendations’ are a fundamental negation of workers’ basic rights, which the Korean workers’ movement had fought for and gained through their historical struggles. They also ymbolically reveal how FTAs of the neoliberal era can be so antagonistic towards workers. As thus, the KJFTA will be devastating for workers in both Korea and Japan, and it will attack the economic and democratic rights of people in both nations.

4. Our demands

        The government and capital must stop its strategy of blindly promoting multiple FTAs and must reassess how neoliberal ‘free trade’ agreements affect Korean economy and society, together with trade unions and other civil society members.
        They must also immediately stop the KJFTA negotiations that are expected to bring devastating results to workers and the people.  
        The government must disclose all contents related to the KJFTA negotiations and establish a transparent and democratic consensus process.
        Democratic policies on economy and industry, based on eradication of poverty, creation of jobs and security of workers’ and social rights, are needed. Instead of the unconditional neoliberal ‘reforms’, we need economic policies that stabilize the lives of people and workers, and democratic participation into policy-making process has to be guaranteed.
        Regional cooperation for co-existence and co-development is necessary. We need to seek an alternative regional agreement, based on peace and cooperation, contribution to the peace on the Korean peninsula, equality between countries and fundamental democratic principles.
Background to Korean government and capital’s promotion of free trade agreements (FTA), and the position of KCTU





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