The purpose of this study is to suggest policy recommendations for reorganizing Korea’s labor standards so that they are in line with international norms and economic globalization.
As seen in the Korea-U.S. FTA, labor standards constituted a major issue in the free trade agreement. Korea’s binding agreement with the ILO is only expected to become stronger as it becomes linked to the ILO’s Basic Labor Standards. Those who support this idea argue that producing goods while violating the basic rights of workers is tantamount to ‘social dumping’ and a form of unfair trade. Hence, sanctions to prevent this behavior are necessary. However, those who disagree argue that this kind of binding agreement would eliminate a comparative advantage for developing countries, thus limiting their opportunities for development and achieving free trade.
Apart from bilateral agreements, developed countries such as the E.U. or U.S. have included minimum requirements on labor standards in the form of social provisions or labor acts. Above all, the ‘International Labor Standards’ have become a norm in the international market, and every country must abide by this regulation. In 1998, the ILO adopted the ‘Declaration on Fundamental Principles and Rights at Work’, which covers four main principles; 1) freedom of association and the effective recognition of the right to collective bargaining; 2) elimination of all forms of forced or compulsory labor; 3) effective abolition of child labor; and 4) elimination of discrimination with respect to employment and occupation. From these principles, the Organization proposed eight agreements as Core Labor Standards. Currently, 86% of ILO member states have ratified the Declaration, and Korea has ratified four of the eight agreements related to eliminating child labor and discrimination. While there is no direct relationship between the Core Labor Standards and the economy, the standards can serve as a tool for social order in the future. Institutional reforms must be implemented to meet the international labor standards.
Financial negotiation during the Korea-U.S. FTA led to great strides made in Korea’s financial market opening, and this process can help reconstruct Korea’s financial industry, as well as to enhance the overall economy. The government should try to improve the financial industry with policies promoting transparency, effectiveness, consumer protection, and financial institution restructuring.
An analysis of the duration and expected benefits of financial liberalization indicated that when selecting priority countries for FTA negotiation, the government must consider the other country’s political situation. If the partner country’s political restriction is low, then negotiations can bring about better results. And while progressive democracy can delay the negotiation, it does not significantly impact the expected benefits.
Korea has been highly evaluated for its efforts to sign multiple trade agreements by expanding its negotiation teams. However, the government should seek ways to minimize the trade diversion effect and examine whether or not the agreements align with WTO regulations. In terms of policy, Korea should focus more on improving competitiveness throughout a wide range of industries and modify the trade adjustment system so as to better position itself in the global economy.