The long odyssey has finally come to an end. Fifty-seven months after the jubilant signing ceremony and ensuing heated debates in the legislatures of both countries, the Korea-U.S. Free Trade Agreement went into effect on March 15. Despite all the controversies, the majority view is that this agreement reflects the long-term trade interests of the two countries in a balanced manner and opens up a new horizon for bilateral trade.

Not surprisingly, a huge sigh of relief is being heard in both capitals. The efforts of the two governments for the past seven years (since the idea was first floated) to bring this agreement into existence should be fully commended. At the same time, however, it should not be forgotten that this is just the beginning and the hard part has yet to come. The ultimate success of the KORUS FTA hinges upon how effectively the two countries handle this hard part down the road.

The hard part started after March 14, because full implementation of all the provisions in the agreement will be tough and time-consuming for both countries and thus require continued attention from the two governments. Yet still, quite a few people in the two countries tend to look at the agreement as if it were a static document, focusing on who gets what and who benefits from which sector. That is always important. This agreement, however, is not about a snap-shot picture on March 14, but about a continuing process whose final score sheet can only be confirmed once the agreement is fully implemented over time.

As with any other FTA concluded these days, the KORUS FTA is notable for its comprehensive coverage: the almost 1,000-page treaty text covers virtually the entire spectrum of economic activities. The voluminous nature of the treaty text sometimes belies the fact that many provisions in the treaty only set forth basic principles and general guidelines whose specific implementation is reserved to the two contracting parties’ agencies. Implementation of the agreement does not merely stop at amendment or enactment of laws and regulations, but goes even deeper than that.

Bringing tariff rates for goods to zero is easy to implement and, more importantly, easy to verify. What is difficult, however, is when the treaty commitments concern abstract obligations susceptible to relational concepts such as transparency, fairness, promptness, due process, market principles or the proper role of governmental agencies and the like. The more grandiose the covenants are, the more difficult they are for a party to implement.

The difficulty actually is two-fold. First, with respect to a relational concept, your best effort does not always guarantee the satisfaction of the other party. The two contracting parties look at the same words and terms in the treaty, but their expectations concerning the words and terms may significantly differ. Secondly, these types of commitments are not susceptible to easy verification. You basically rely on the good faith of the other party until a serious problem arises. In fact, difficulties of various kinds have been presented during the negotiations and ensuing discussions, but most likely we have only seen the tip of the iceberg.

Another twist in this regard is the fact that the agreement introduces new dispute settlement mechanisms that have not been tried before in the Washington-Seoul bilateral relationship. Although it is difficult to quantify, the experiences tell us that increased interaction usually leads to increased occurrences of disputes of all sorts. The agreement is premised upon this assumption and introduces various mechanisms to handle these situations. How these dispute settlement mechanisms are administered so as to address these disputes will significantly affect how the two countries evaluate this FTA in the long run. The gaps will be filled and the contours will be clarified by these treaty-based adjudicating bodies. Not now, but over time.

In a nutshell, with respect to the KORUS FTA the basic plot is there, but you never know whether the final story will be a happy ending of common economic prosperity in an ever volatile global economy, or a saga of dashed hopes and broken promises. It can go either way depending upon how the two countries proceed from March 15 onward. After all the rehearsals, the curtain is now going up, and the hard part has just started. 

By Lee Jae-min

Lee Jae-min is a professor of law at the School of Law, Hanyang University, in Seoul. Formerly he practiced law as an associate attorney with Willkie Farr & Gallagher LLP. ― Ed.