SEOUL: South Korea is overtaking competitors thanks to its free-trade deals, President Lee Myung-Bak declared on Wednesday, a day after a pact with the United States was ratified amid chaotic scenes in parliament.
Business groups also hailed the agreement as opening a new era for Asia’s fourth-largest economy, but opponents took to the streets and police used water cannon to block an estimated 2,500 protesters in central Seoul Tuesday night.
An opposition legislator also set off a tear gas canister in parliament before being bundled out of the chamber by security guards as he yelled protests.
“We have expanded our economic territory to cover 61 per cent of the world’s gross domestic product,” Lee said.
“This means that we’re moving one step ahead of any other country we compete with.
If we seize this opportunity and unite our strength, we can overcome the (global economic) crisis and make a leap,” Yonhap news agency quoted him as saying.
When the long-delayed US agreement comes into force, export-dependent South Korea will have free-trade deals with the world’s largest economy as well as the European Union, India, 10 Southeast Asian nations and several other states.
The two sides hope it will come into effect on January 1 after it sailed through the US Congress last month.
After weeks of unsuccessful haggling about opposition objections to the agreement, Lee’s ruling party on Tuesday called a snap parliamentary session and ratified the deal – prompting the tear gas protest.
The main opposition Democratic Party vowed on Wednesday to boycott all parliamentary sessions in anger at the railroading of the bill.
Lee, speaking during a meeting with ministers, told them to take thorough measures to protect farmers and small businesses.
US-South Korean trade totaled $88 billion in goods and services last year, with Seoul enjoying a $10 billion advantage.
Under the trade pact, Seoul will immediately reduce or eliminate tariffs on US cars and trucks, while the US will have more time to cut its already lower duties on South Korean vehicles.
In the long term, US farm exports will see duties reduced.
But American exporters will face tough competition from Europe after Brussels beat Washington to the punch in signing an FTA with Seoul.
South Korea can expect a boost in exports. But analysts say the main gain will be improved investment conditions, making the country more attractive for foreign investment and foreign services providers.
DBS Bank in Singapore said US foreign direct investment is likely to rise, especially in the services sector.
“This will help sustain Korea’s long-term economic growth through boosting productivity and capital formation, easing the pressure of population ageing over the next decade,” it said.