U.S., South Korea Free Trade Pact

Trade negotiators from the U.S. and South Korea reached an agreement on a free trade agreement on April 2, just days beyond a self-imposed deadline of March 31, which means the pact has a good chance of making it to President Bush’s desk for approval before his fast-track authority expires on June 30.

If approved by both Congress and South Korea’s legislature, the pact would be the largest for the U.S. since the North American Free Trade Agreement of 1994.

According to the U.S. International Trade Commission, the pact could potentially boost American exports to Asia’s third-largest economy by as much as $19 billion annually, and by $10 billion for South Korea.

Alan Gershenhorn, president of UPS International, praised the deal. “The United States and South Korea have reached a trade accord that establishes new opportunities for small and large companies on either side of the Pacific,” he said. “The increase in trade that will come from this agreement means more jobs and more global competitiveness for the two countries.”

The U.S.-South Korea Free Trade Agreement contains vital provisions for the express delivery industry, including enhanced market access and improved customs clearance times that allow companies such as UPS to better serve their customers. More than a quarter of U.S. exports to South Korea come from small- and medium-sized businesses.

Meanwhile, South Korea says it intends to launch free trade talks with the EU in May in hopes of reaching a similar agreement by the end of the year. Afterwards, the South Korean government says it will likely seek a commercial agreement with China, adding, “South Korea cannot go against the tide of free trade amid intensifying global competition.”

Rail Investment for China

The Chinese government is pouring billions into the country’s rail network and adding over 10,000 miles of new track over the next three years as part of its 11th Five-Year Plan.

The $190 billion outlay amounts to the “biggest (infrastructure investment) in China’s history,” remarked one Chinese official.

A serious shortage of freight trains and a sub-par rail network are already affecting the country’s manufacturing sector, which relies on raw materials from the interior western provinces being transported to production facilities along China’s coast.

“Our railroad service can only satisfy 35 percent of cargo demand,” acknowledged the chief economist with China’s Railways Ministry.

Trade Protectionism on the Rise

A study by the Organisation for Economic Co-operation and Development (OECD) shows that protectionism in the agricultural sector is increasing in a number of emerging markets.

Specifically, the group’s “Agricultural Policies in Non-OECD Countries” study analyzed eight nations that jointly produce nearly one-third of the world’s agricultural output: Brazil, China, India, South Africa, Russia, Bulgaria, Romania and Ukraine. It found that while government subsidies were generally half the OECD average of 30 percent, the percentage is rising in most of those countries.

Despite government supports for agriculture that are far lower in major emerging economies than in developed countries, pressure is growing to protect farmers in those countries, according to the OECD.

U.S., Vietnam Maritime Agreement

Officials from the U.S. and Vietnam signed a maritime agreement this week that will give American companies greater access to Vietnam’s market.

Under the pact, U.S. companies will be obliged to enter joint ventures with Vietnamese partners for the first five years, but the U.S. company will be allowed a 51 percent stake. The agreement will apply to terminal operators, forwarding, consolidation and ship’s services.

This is the fourth bilateral maritime agreement that the U.S. has signed in recent years. The Maritime Administration and State Department negotiators reached a landmark pact with China in 2004, and there are also agreements with Russia and Brazil.