Once the current wave caterwauling against the KORUS FTA subsides, most Koreans will likely find themselves benefiting greatly from the trade agreement. Of course, particular companies will face new competition and, having grown up behind the protective skirts of state protection, will find themselves unable to withstand the forces of economic dynamism.
In this CNBC video, Sean King (a VP of Park Strategies) discusses the KORUS FTA on CNBC. King believes, and I agree, that in purely zero-sum terms Korean companies likely gained a bigger prize in this trade agreement, as it gives Korean firms access to the world’s largest single market, while American firms gained access to a much smaller Korean market. That said, the world economy is a complex ecosystem and only time will tell which firms are able to take advantage of the new angles created by these bilateral trade agreements. Some companies will succeed, some will fold, others will emerge to take their place.
Yet, while we need not celebrate the demise of uncompetitive firms, we must not lose sight of the most important benefits of increased trade and specialization, even when such forces change the composition of market participants. As Adam Smith wrote, “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.” For years, Korean consumers have been held hostage by various local interest groups (automobile manufacturers, farmers, consumer goods makers, etc.) who charged higher prices for lower quality, generally pitching their self-interested behavior as noble patriotism. Fortunately, Korean consumers will soon be met with a wider array of choices and a lower prices as American goods and services enter the Korean market. Likewise for American consumers, who will benefit from the competition provided by Korean goods and services.
Regardless of which companies may benefit from the KORUS FTA, then, we can be sure that consumers will be the ultimate beneficiaries of any increase in trade.
h/t: Don Southerton at Korealegal.org
Tags: cnbc, consumers, consumption, don southern, economic dynamism, free trade, fta, korean, park strategies, sean king, subsidies
