T he world has been moving toward the "free' trade and political system. Since the North American Free Trade Agreement (NAFTA) took effect in 1994, the former American governments have been negotiating for a number of bilateral and multi-lateral agreements with various international governments. Currently, the Obama administration has successfully completed another important free-trade agreement with South Korea. This pact means potential business and political opportunities for both America and Korea. The major benefit of this agreement includes the promotion of free trade by eliminating tariffs on key export industries such as automobiles and hi-technology products.
Korea is a strategic location in North Asia, due to her rapid growth and political power in the region. Free trade with Korea may lead to potential strategic locations for key American companies and free flow of labor and capital between both countries. It is speculated that over 70,000 jobs will be created for American in automobile and electronic industries. Furthermore, export of American products to South Korea will rise to $10 billion.
What will be the key benefit for the American automobile industry? Apart from the obvious multiple industrial links in Asia, this free trade agreement may open the door to European Union. One factor pushing the South Korean-U.S. negotiations was the recent approval of a trade pact between South Korea and the European Union. This is the prospect that manufacturers in country such as Germany would soon see lower tariffs and other advantages over U.S. competitors.
For political reason, this free trade agreement becomes a landmark of victory for President Obama and his team since this free trade deal had been one of the major international trade issues raised by the former American government. International trade has been a subject of criticism and a crucial test of the White House's ability to find common ground with Republicans after the drubbing Democrats took in the mid-term elections. Thus, Obama realizes how significant this achievement is and will be for him and his leadership.
It, however, is still important for the Obama administration to consider key issues that require special attention from all business and political stakeholders. It includes issues such as safety regulations, environmental aspects of automobile industries, competition among American and Korean cars in the global market and unfair trade practices in industries other than automobile between both countries.