The Details in Free Trade Agreements with South Korea

An article in BloombergBusinessweek (Oct24-20, 2011, page 30/31) describes details in the free trade agreement with South Korea that define a US made product. For instant hot chocolate, a US made definition requires at least 65 % of the sugar to be purchased from US growers. But for chocolate bars, there is no restriction on the sugar source – even a 100 % foreign sugar source can certify the product American. Similarly, to compensate for last minute auto standards changes, each foreign auto manufacturer is allowed to sell 25,000 cars that do not satisfy Korean safety specifications. Given the complexity of the free trade specifications, and the arbitrary nature of the rules, how should companies design products to avail of the flexibility in these rules ? Given the roles of companies on both sides to adjust the agreements to maximize their benefits, how will it impact assessments of the overall economic benefits to the two countries ? Given that the estimated impact is just $ 15 billion in export revenues, is it really fair to call the US-South Korea agreement a free trade agreement ?

Advertisements

About aviyer2010

Professor
This entry was posted in Global Contexts, Supply Chain Issues and tagged , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s