South-Western College Publishing - Economics  
Free Trade With South Korea?
Topic International Trade
Key Words Free Trade, Protectionism, and Antidumping
Full Article

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Reference ID: A157626720

News Story Leaning on President Bush's special trade negotiating powers, known as "fast track" authority, the United States has resumed free-trade talks with South Korea. This "fast track" authority allows the president to negotiate a deal and present the legislation to congress for acceptance or rejection and no amendments may be made.

"We have made important progress to date, but we still have a lot of work to do," said Wendy Cutler, an assistant trade representative and the lead negotiator for the United States. The U.S. wants greater access to the Korean market for American cars, rice and drugs. South Korea is asking the U.S. to change antidumping rules applied to South Korean Steel, cars, computer chips and textiles. Seoul also wants goods produced by South Korean factories located in North Korea to be included in the agreement.

Antidumping laws are passed to prevent discriminatory pricing. In other words "dumping" refers to a country that sells products in different markets at different prices without a basis in the cost of production. The U.S. has passed laws against such dumping to protect domestic producers from unfair competition. South Korea says their products have been unfairly targeted.

On the other side of the table, South Korea has placed limits on American exports of cars and medical products that keep U.S. producers from selling their products in South Korea. Such protectionist actions usually are met with retaliation in the form of tariffs and other trade measures.

It would seem that there is certainly room for negotiation between the two countries. A successful deal would be beneficial to exporters in both countries. According to the United States International Trade Commission, U.S. firms could expect an increase in exports to South Korea of about $19 billion while South Korean firms could expect to deliver an additional $10 billion in goods to the U.S.

Questions
Discussion Questions:
1. Use any source available to define and discuss the "fast track" authority referred to in the article. .
2. Name and discuss two types of protectionist measures that may be employed by Korea to keep American made products out of their country.
Multiple Choice/True False Questions:
1. When a country sells its products in one market at a lower price than another without a basis in cost, the firm is subject to:
  1. antitrust laws.
  2. antidumping laws.
  3. Say's law.
  4. none of the above.
2. The fast track authority given to President Bush has the one drawback that congress may add amendments to the legislation that would kill the deal.
  1. True
  2. False
Source Choe sang-Hun, "With New Urgency, U.S. and South Korea Seek Free-Trade Deal", The New York Times Online, January 16, 2007.
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