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This page is graphically intense with long load times due to photos. However, the photos and narratives by the men who served at Osan Air Base makes the wait well worthwhile. The opinions expressed are those of the author and in no way represents any official statement of Osan AB or the USAF.

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If you wish to listen to some golden oldies from 1940s-1990s, click on the selection on the list below. There are about 80 full-length songs to choose from. (NOTE: Song audio degraded due to space limitations, but adequate for computer listening.) Click For Music 1940s: Billie Holiday_As Time Goes By 1940s: Kate Smith_God Bless America 1940s: Mills Brothers_Glow Worm 1950s: Big Bopper_Chantilly Lace 1950s: Bill Haley Comets_Youre Never Too Old To Rock 1950s: Coasters_Yakety Yak 1950s: Danny And TheJuniors_At The Hop 1950s: Del Shannon_Handyman 1950s: Doris Day_By The Light Of The Silvery Moon 1950s: Fats Domino_I Hear You Knockin 1950s: Freddie Canon_Palisades Park 1950s: Nat King Cole_Ramblin Rose 1950s: Pat Boone_Love Letters In The Sand 1950s: Red Skelton_Pledge Of Allegiance 1950s: Ricky Nelson_Listen To The Rhythm Of The Falling Rain 1950s: Ritchie Valens_Boney Maronie 1950s: Ritchie Valens_Donna 1950s: Ritchie Valens_LaBamba 1960s: Beach Boys_Surfin USA 1960s: Beach Boys_Barbara Ann 1960s: Beatles_Strawberry Fields Forever 1960s: Bobby Vee_Go Away Little Girl 1960s: Chubby Checker_The Twist 1960s: Chuck Berry_Johnny Be Good 1960s: Crosby Stills Nash_Teach Your Children 1960s: Dean Martin_Make The World Go Away 1960s: Elvis Presley_Blue Suede Shoes 1960s: Elvis Presley_Love Me Tender 1960s: Harry Belafonte_Day O 1960s: James Darren_Goodbye Cruel World 1960s: Johnny Mathis_Chances Are 1960s: Kingsman_Louie Louie 1960s: Marcels_Blue Moon 1960s: Marvin Gaye_Lets Get It On 1960s: Paul Anka_Put Your Head On My Shoulder 1960s: Harry Belafonte_Day O 1960s: Righteous Brothers_Youve Lost That Loving Feeling 1960s: Johnny Mathis_Chances Are 1960s: Peter Paul Mary_The Marvelous Toy 1960s: Roy Orbison_Only The Lonely 1960s: Roy Orbison_Pretty Woman 1960s: Sam The Sham_Wooly Bully 1960s: Shirelles_Soldier Boy 1960s: Silhouettes_Get AJ ob 1960s: Simon And Garfunkel_Bridge Over Troubled Waters 1960s: Thunderbirds_Hippy Hippy Shake 1960s: Tony Bennett_San Francisco 1960s: Ventures_Apache 1970s: Bette Midler_The Rose 1970s: Cher_If I Could Turn Back Time 1970s: Commodores_Three Times A Lady 1970s: Crystal Gayle_Ill Do It All Over Again 1970s: Dione Warwick_Ill Never Love This Way Again 1970s: Engelbert Humperdink_Release Me 1950s: Fleetwoods_Mr Blue 1970s: Lovin Spoonful_Rain On The Roof 1970s: Mamas And Papas_Age Of Aquarius 1970s: Mamas And Papas_California Dreaming 1970s: Mamas And Papas_Monday Monday 1970s: Tina Turner_Whats Love Got To Do With It 1970s: Tony Orlando And Dawn_Tie A Yellow Ribbon 1970s: Troggs_Wild Thing 1980s: Aaron Neville Linda Ronstadt_All My Life 1980s: Bruce Springsteen_Born In The USA 1980s: Kenny Loggins_Footloose 1980s: Kim Carnes_Betty Davis Eyes 1980s: Kris Kristofferson_Loving Her Was Easier 1980s: Lee Greenwood_God Bless The USA 1980s: LindaRonstadt_Desperado 1980s: Linda Ronstadt_Thatll Be The Day 1980s: Marie Osmond Dan Seals_Meet Me In Montana 1980s: Michael Jackson_Billie Jean 1980s: Michael Jackson_You Are Not Alone 1980s: Michael Jackson And Friends_We Are The World 1980s: Michael Jackson_Ill Be There 1980s: Phil Collins_In The Air Tonight 1980s: Ricky Nelson_Garden Party 1980s: Ronnie Milsap_Lost In The 50s Tonight 1990s: Kenny G_Auld Lang Syne 1990s: Luther Vandross_Id Rather 1990s: Ricky Martin_Livin La Vida Loca Free JavaScripts provided by The JavaScript Source

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BUSINESS, FINANCE AND LABOR EVENTS 2007

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RETURN TO MAIN TABLE OF CONTENTS

BUSINESS, FINANCE AND LABOR EVENTS

January 2007

(SITE NOTE: Unfortunately, the rest of the FEZs in Korea have been a bust. The first point was that most companies found the land "deals" were too costly and preferred to lease lands. The second point was that the "incentives" were matched or exceeded by other countries attracting foreign direct investment. The third point was that the foreign companies complained that the infrastructure in Korea -- highways, education, housing, medical, etc. -- were inadequate or too expensive. The fourth point was that foreign companies complained that the ROK bureaucracy involved too much red tape and costly hassles -- including corruption. The fifth point was the Korean labor had proven to be to bothersome with its radical union strikes were a regular feature of labor negotiations -- resulting in lowered productivity and reduced profits. There were many other complaints but the biggest worry was the xenophobic business environment that showed that the ROK was nice in attracting business, but the business had better not turn a profit in Korea.

The big plus of the Pusan-Chinhae FEZ area is the world-class containerized port facilities something most of the other FEZs lack. For the rest of Korea's FEZ, the ROK can only offer promises with a lukewarm reception from foreign companies.)

(SITE NOTE: The bottomline is that chaebols have returned to the "good ol' days." The ruling Uri Party pushed for chaebol (conglomerate) reform, but the weakness of its parliamentary position made it difficult for the party to achieve radical change. In Nov 2006, Korea’s major chaebols received a bonus as the Roh administration backed more lenient regulatory governance as the government decided to ease the equity investment cap on conglomerates. In a reprieve for Korea’s conglomerate-owning families, the government decided not to ban circular intra-group shareholding by subsidiaries of big conglomerates -- and will even ease an investment cap whereby business groups with assets over W2 trillion cannot invest more than 25 percent of their net worth in affiliated and non-affiliated companies. (Source: Chosun Ilbo.)

The Asian Financial Crisis ("IMF Crisis") of 1997-1998 was brought about by the chaebols providing cross-assurances on bad loans to sinking affiliate companies -- and brought Korea to the brink of disaster. The financial crisis leveled South Korean financial markets and investors got a look at how dysfunctional the chaebol had become. Leveraging strong government support in the form of cheap credit, subsidies and protectionist trade practices, the chaebol spent decades investing in a broad range of industries.

Afterward the "IMF Crisis," the government took action -- at the insistence of the International Monetary Fund -- to rein in the chaebols and provide transparency to their actions. Now in 2007, it is back to business as usual. The laws put in place to restrict the chaebols are now being rolled back or eliminated. The chaebol structure allows founding families to retain control of the company's businesses -- even though they do not own majority stakes. A Morgan Stanley report published online in Oct 2006 noted that corporate governance reform may in fact be a necessity for the long-term future of surviving chaebol. In 2006, the Korean market was in the doldrums until activists like Icahn and Michael Milken "came in and started shaking things up with hostile takeovers and leveraged buyouts." (Source: International Herald Tribune.)

Suddenly the old boy network sprang up to block foreign managerial controls of chaebol firms or national monopolies (i.e., KT&G) -- working in concert to block Icahn and Milken. The entire xenophobic business environment started with the Sovereign fiasco then Lone Star fund; followed by Icahn and Milken who have been basically thwarted at every turn -- though with a minor success in getting one foreign director on the KT&G board.)

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Stealing from Kids: 4 ice cream makers fined 4.63 bln won for price fixing (Mar 2007) On 18 Mar Yonhap News reported that South Korea's antitrust watchdog said it had decided to fine four snack food makers a combined 4.63 billion won (US$4.9 million) for the fixing of prices of their ice cream products. Lotte Confectionery Co., Lotte Samkang Co., Haitai Confectionery Co. and Binggrae Co. were found to have colluded in raising the prices of their main ice cream products from 700 won to 1,000 won since May 2005, the Fair Trade Commission said. (SITE NOTE: Is nothing sacred? Ripping off little kids is terrible...)

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U.K. Paper Says Korean Economy In "Middle-Age Crisis" (Mar 2007) On 27 Mar it was reported in the London-based Financial Times that the Korean economy is suffering a "premature middle-age crisis". An editorial in the financial newspaper said, “Regrettably, President Roh Moo-hyun's administration has lacked both the vision and political courage to pursue vigorous reforms. However, the inauguration of Mr. Roh's successor and parliamentary elections next year offer an opportunity for a fresh start.” The editorial said, “Once held up as a model of precocious development, which rapidly transformed itself from an agricultural into an industrialized society, east Asia's third-largest economy is sinking into premature middle age.”

To back up its critical view, the FT pointed to the nation’s average economic growth of 4.2 percent over the past four years, "far below its potential." The newspaper also said that Korea’s xenophobia discourages foreign investment while domestic companies are moving their plants abroad as fast as possible. “This faltering performance is all the more surprising because Korea still possesses enviable assets. It has a well-educated population, modern infrastructure, a high level of Internet penetration and an industrious, if militant, workforce,” the editorial said. The article concluded with an optimistic note, saying, “History suggests that, with the right political leadership, Korea is quite capable of” transforming itself.

Unlike the FT, Seoul National University economics professor Lee Seung-hoon is pessimistic about Korea's next president. In a forum on national development, he criticized the presidential hopefuls for making populist campaign pledges and failing to take national development seriously. Prof. Lee called their campaign promises a tactic to appeal to a certain social class in a certain region. He cited a ceiling on prices of new apartments and the disclosure of private builders’ construction costs as the best examples. (Source: Chosun Ilbo.)

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April 2007

Eased rules for Chaebols balanced by disclosures (Apr 2007) Beginning in July, the Fair Trade Commission will hold large conglomerates to higher disclosure standards regarding their cross-affiliate investments, in exchange for loosening limits on such investments. When a company belonging to a business group with assets of 2 trillion won ($2.1 billion) or more wants to trade goods or services with an affiliate that is at least 50 percent owned by someone from the group founder’s family, commonly called chaebol, the company will have to obtain the approval of its board of directors and announce the trade at the Seoul stock market, the antitrust agency said on 16 Apr.

The regulation is intended to prevent top conglomerates from focusing their trades on and giving privileges to their affiliates, the antitrust agency explained. The new obligation will take effect in July at the same time that the investment cap on top conglomerates will be loosened.

Now, every affiliate of a business group with assets of 10 trillion won or more is banned from investing more than 40 percent of its assets in other companies. The ceiling was raised from 25 percent of net assets last year. The investment restriction will be loosened further in July, as the investment cap will be applied to only big affiliates with minimum assets of 2 trillion won. Then, only 27 large affiliates in seven major business groups, including Samsung Electronics Co. in the Samsung Group, will remain subject to the restriction. Now, 264 affiliates in 11 business groups are subject to the investment cap. (Source: Joongang Ilbo.) (SITE NOTE: How soon everyone forgets about what brought about the IMF Crisis of 1997-1998. The excessive cross-assurances and cross-financing within the chaebol groups in order to bolster failing companies nearly brought the country to its knees. However, that was a decade ago and the populace has forgotten about the rules forced on Korea by the International Monetary Fund in order to gain the necessary bailout funds. The Roh Moo-hyun and Uri Party started courting big business as the Presidential elections neared. Running a presidential campaign is expensive and the Uri Party war chest needed filling. The easing of the rules is a result. Only now the "transparency" issue is being claimed as a "balancer" to funds. Such is life in Korea -- where big business rules the roost.)

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First Current Account Deficit in 10 Years Predicted (Apr 2007) The current account balance for 2007 seems likely to swing to a deficit for the first time since the financial crisis of 1997. That's because the amount of money earned from exports is less than the amount of money spent overseas on dividend payouts, foreign travel and studying abroad, and that gap is widening.

On 26 Apr the Bank of Korea announced that the current account deficit for March reached US$1.49 billion (US$1=929). That puts the cumulative account balance for January to March at a shortfall of $1.52 billion. The main reason the current account balance swung to a deficit in March is because of a jump in local companies' overseas dividend payments. As companies closed their books for last year, their payments to overseas investors totaled $2.85 billion for the month. The income account, which is overseas dividend payments and wages earned by foreigners in Korea minus incoming dividends and wages earned by Koreans overseas, posted a deficit of $2.09 billion in March. The trade account, which is income from exports minus payouts for imports, rose to a surplus of $2.5 billion in March, down $400 million compared to last March.

Because overseas travel and studies increased this year, the cumulative service account deficit for January to March reached $6.1801 billion. That nearly balances out the cumulative trade surplus ($6.1807 billion), meaning most of the money earned from exports is flowing out of the country through overseas travel and studies.

The problem is that the current account deficit will probably get worse next month considering that most dividend payments are sent in April. Jeong Sam-yong, the head of the BOK's balance of payments statistics team, predicted that if the trade surplus continues, the current account balance will likely be a surplus of $2 billion for this year. However most private researchers are forecasting a current account deficit for the year. Samsung Economic Research Institute predicted a deficit of $1.3 billion, LG Economic Research Institute predicted a $1.2 billion deficit, and Hyundai Economic Research Institute predicted a $3 billion deficit.

Chang Jae-chul, a senior economist at Samsung Economic Research Institute said, "The travel account deficit is already more than $1 billion a month even though it's not the summer vacation season yet. And with exports of chips, cell phones and other major key products slowing, it looks like the current account balance is likely to swing to a deficit." (Source: Chosun Ilbo.)

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May 2007

U.S. Puts Korea on Intellectual Property Watch List AGAIN... (May 2007) The U.S. trade representative (USTR) on 30 Apr placed 43 countries including South Korea on a "watch list" of intellectual property rights abusers. Another 12 countries, including China and Russia, were put on a "priority watch list," indicating that intellectual property rights violations in those countries have reached serious proportions.

In its annual "Special 301 Report" released Monday, the USTR praised Korea for having agreed in the Korea-U.S. free trade agreement to step up protection of intellectual property rights, but it also said Korea will remain on the watch list for this year. Since 1989 the U.S. has classified countries into three categories based upon how seriously they enforce intellectual property rights: a "priority foreign country" list, the priority watch list, and the watch list or "Section 306 monitoring list." (SITE NOTE: From our perspective, the ROK simply does not care about enforcing intellectual property rights, but always makes a big fanfare presentation of its "crackdown" efforts -- that never last more than a month -- if that. The Korean consumers want their name brand rip-off products and the police know that. Korea used to be known for its thriving rip-off market -- and attracted special foreign shopping tours -- but the ROK clamped down on this trade when it attempted to join the WTO and OECD. The market simply went underground.)

In May 1989, Korea was placed on the priority watch list, but in November of that year it was lowered to the watch list along with Taiwan. Korea was again placed on the priority watch list in January 2004 but moved to the watch list the following year.

The USTR named 12 countries -- China, Russia, Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine, and Venezuela -- as the worst violators of American intellectual property rights. The USTR was especially concerned about China's violations of intellectual property and trademark rights.

On Russia, the USTR said, "The coming months will be a critical period, as Russia moves to implement a variety of legal and law enforcement improvements to which it committed as part of a bilateral agreement with the United States on Russia's eventual accession to the World Trade Organization (WTO)." U.S. Trade Representative Susan Schwab said, "We must defend ideas, inventions and creativity from rip off artists and thieves." (Source: Chosun Ilbo.)

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Housing Bubble Could Cause Economic Bust - Bloomberg (May 2007) In a column dated May 3, Andy Mukherjee, a Bloomberg columnist covering Asian economies, wrote, "South Korea can't afford to stab the housing bubble." The housing bubble may be deflating as overheated Korean home prices stabilize,” he wrote, but "the danger now is of unintentional overkill." He said Korea may be headed for an economic slump because of the housing bubble. If the real estate bubble deflates, the columnist wrote, over-leveraged households would face a credit crisis, consumption would decline, and Korea could fall into a long-term economic descent. (SITE NOTE: The ROK financial gurus still maintain that there is NO housing bubble -- only inflated prices due to speculative buying. In May, the ROK government was patting itself on the back as the rate of increase for housing prices continued to drop.)

The enormous interest burden on over-leveraged Korean consumers is the danger lurking behind the real estate bubble, he added. Quoting data from the Samsung Economic Research Institute, he said Korea's household credit-risk index "had a reading of 2.29 in the fourth quarter of 2006, the highest level since the peak of a credit-card bubble in the third quarter of 2002." "Rising real interest rates have accounted for more than a quarter of the deterioration in the home buyers' credit-risk profile," Mukherjee wrote. "If inflation perks up, possibly because of oil prices, the Bank of Korea may be forced to raise rates again. And that may distress households by simultaneously increasing their mortgage costs and causing the prices of their properties to fall."

Middle-class households that would be unable to withstand the impact of mortgage interests may put their upscale homes up for sale, Mukherjee said. "So is another crisis coming to Korea? It might depend on the central bank." He suggested "a third way," advising Korea not to hesitate between two choices -- stabilizing commodity prices or housing prices. Korea, he suggested, should follow in the footsteps of the U.S. Federal Reserve Board (FRB).

Traditionally the FRB has made forecasts about real estate and stock markets through its own economic review reports and media outlets, without directly intervening in asset prices. Mukherjee said, "The Bank of Korea brings out a Financial Stability Report twice a year. It isn't something that gets a lot of attention. And that needs to change. Warnings must be timely. The stability report should be turned into a quarterly." (Source: Chosun Ilbo and Korea Herald.)

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SEE ROK, EU Agree to Scrap 95 Percent of Tariffs on Goods in FTA Talks (May 2007) for on-going ROK-EU FTA Negotiations

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ROK National Competitiveness Inches Up, but nosedives in Economic Performance (May 2007) South Korea ranks 29th in competitiveness among 55 nations and regions this year, up three notches from last year, in rankings by the International Institute for Management Development released Wednesday. The Swiss institute annually ranks countries in terms of competitiveness in the "World Competitiveness Yearbook.” The IMD said South Korea inched up due to an improvement in government efficiency by 10 notches, from 41st in 2006 to 31st in 2007. The U.S. ranked top for the fifth consecutive year. Singapore and Hong Kong ranked second and third.

But Korea tumbled 13 notches in economic performance, from 36th to 49th, reflecting businesspeople's recession concerns. The IMD gave Korea’s economy a poor rating due to high prices of daily necessities and a low ratio of foreign direct investment to GDP. Last year, Korea ranked 32nd in global competitiveness, down five notches from 2005 (27th).

The IMD classified the 55 nations and regions into one group of 40 which are "closing the gap" with the U.S. and a group of 15 that are widening it. Korea is at the lower end of the first group. The frontrunners are China (15th), Russia (43rd), India (27th), Slovakia (34th), Estonia (22nd), Sweden (ninth), Austria (11th), Australia (12th), Denmark (fifth), Switzerland (sixth) and Hong Kong (third).

The institute predicts the rankings will soon change as the competitiveness of these countries improves. The group of 15 widening the gap with the U.S. includes Indonesia (54th), Italy (42nd), Argentina (51st), Brazil (49th), Mexico (47th), Turkey (48th), the Philippines (45th), and France (28th). Although they are still competitive in certain sectors, some will fall behind others unless they carry out thoroughgoing restructuring. (Source: Chosun Ilbo

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Korean Economy is Bottoming Out ... AGAIN (May 2007) The Korean economy is pulling itself out of a year-long economic slump on recovering domestic spending and will become stronger, but inflationary pressure may build up in the second half, the state-run Korea Development Institute (KDI) reported, on 10 May. In addition, stats show that consumer confidence is on the rise after a year of stagnation.


GDP Growth

The KDI predicted the economy will expand 4.4 percent this year from a year earlier as growing private consumption and corporate investment will offset a slowdown in exports. The latest growth forecast is the same with its projection made late last year. Korea's gross domestic product (GDP) had slowed since the first quarter of 2006 when the output grew 6.3 percent. The institute said despite slowing exports, recovering domestic demand and corporate spending are expected to lead stronger economic activities into the latter half of the year.

It raised its outlook on domestic consumption for this year, citing improving consumer sentiment over the past few months. According to the National Statistical Office (NSO), the index measuring consumer confidence in economic and living conditions for the next six months increased to 100.1 last month, marking the first rise above the benchmark since April 2006 when the index stood at 100.6.

It raised domestic consumption growth projection to 4.2 percent this year from the earlier prediction of 3.9 percent. Also, corporate investment is expected to jump 5.7 percent, up from the previous 4.8 percent forecast. But the institute downgraded export growth to 10.5 percent from 11.9 percent. Hyundai Research Institute (HRI) said that domestic demand will replace exports as the main growth engine this year as exports are forecast to slow amid a global economic slowdown, adding consumer spending will likely determine the extent of expansion this year. (Source: Korea Times.)

OECD voices concern over S. Korea's growth potential (Jun 2007) South Korea's economic potential may weaken due to widening economic polarization, an OECD report showed on 20 Jun, sounding an alarm for the future of Asia's third-largest economy. The report by the Organization for Economic Cooperation and Development (OECD) comes as concerns over the country's widening income gap and disparities among industries are mounting. (Source: Yonhap News.)

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Personal Bankruptcy Filings Surge: Up 250% from 2006 (May 2007) A range of indices reflecting people's livelihoods continues to paint a bleak picture even if the economy has recently shown signs of recovery on rising domestic consumption and corporate capital spending. According to the Supreme Court on 20 May, the number of bankruptcies filed by individuals reached 45,057 in the first quarter of the year, up 2.5 times from 17,679 over the same period last year. If the pace continues, the number of personal bankruptcies will record an all-time high this year, surpassing last year's total of 123,691.

Analysts say personal bankruptcies filed with the court have been increasing as more individuals apply for various debt workout programs operated by government agencies and financial service companies to reschedule their repayments. But they also say slow income growth and lackluster job creation amid worsening business conditions have aggravated household finances, pushing the number of individual bankruptcies higher.


Personal bankruptcy (2007)

``The rise in bankruptcy filings basically reflects stagnant income and job growth,'' said Song Tae-jung, senior economist at the LG Economic Research Institute. He said even though a series of recent economic indices, including manufacturing output and consumer sentiment, indicate the economy is gaining growth momentum, people, particularly those in the low-income bracket, are still grappling with financial hardship. ``It will take at least several more months for households to benefit from improving economic conditions.''

Major private research institutes have raised their economic outlook for the second half of the year on signs of recovery in domestic consumption and corporate capital spending. The Korea Development Institute (KDI) said it expects domestic consumption to increase 4.2 percent this year, up from an earlier prediction of 3.9 percent, adding that corporate investment will jump 5.7 percent, up from the previous 4.8 percent forecast. The Samsung Economic Research Institute (SERI) also raised its 2007 economic growth projection to 4.5 percent from 4.3 percent made late last year, while the Korea Economic Research Institute (KERI) raised its growth forecast to 4.4 percent from an earlier 4.1 percent, citing improving consumer sentiment.

According to the National Statistical Office (NSO), the index measuring consumer confidence in economic and living conditions for the next six months increased to 100.1 last month, marking the first rise above the benchmark since April 2006 when the index stood at 100.6. ``During an economic rebound, those in the high-income bracket tend to gain first, while poor households usually benefit last. But consumers' perceived economic benefits are not going to last long because their purchasing power will likely stagnate because of sluggish income and job gains amid rising consumer prices,'' Song said.

The number of new jobs created from January to April this year fell short of the government's target of between 350,000 and 400,000. Last month, the country generated about 278,000 new jobs, following 273,000 in March and 262,000 in February. In particularly, the number of jobs in the retail, restaurant and lodging sectors, which usually employ workers from the low-income bracket, fell 66,000 in April from a year ago, after a 32,000 drop in March.

At the same time, consumer prices increased at a faster pace this year with prices rising 2.5 percent in April from a year earlier, up from a 2.2 percent year-on-year gain in March and February. Particularly, prices for living necessities, including food and clothes, rose 2.9 percent, the highest increase since last September, amid rising prices of international oil and other raw materials. (Source: Korea Times.)

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A Former FTC Official Took Bribes Worth about 100 Million Won (May 2007) On May 23, Choi Jae-gyung, the head of special investigations in Seoul Central District Prosecutors’ Office, requested an arrest warrant for a former member of the standing committee of the Fair Trade Commission, Park (64), who allegedly took money from the JU group (about 130 million won) in exchange for aiding the multi-level marketing company while the FTC investigation had been ongoing against the group Prosecutors arrested another former official, A, who was involved in the bribery scandal in regards to the investigation of the Fair Trade Commission into the group.

It is the first time that a high level FTC official in charge of supervising pyramid selling has been arrested. Park has been charged with taking bribes of about 100 million won for “favorable treatment” when the group was under an FTC investigation of the group’s violations against overpayments for supporting allowances.

Prosecutors said Park made a formal contract with the group as a management adviser, but he was actually playing a role as a lobbyist in the FTC investigation into the JU company. Park has also been charged with taking 30 million won in response to the company’s request for amending some of clauses related to deduction fees when he was working as an executive for an interest group for the Korean multi-level union from December 2003 to January 2005. Park had served as an executive of the union after he worked as FTC project director, subcontracting director, and a member of its standing committee. (Source: Donga Ilbo.)

Court upholds conviction of 2 at Samsung (May 2007) An appeals court decided on 29 May to uphold the conviction of two senior executives at Samsung Group on charges of helping the only son of its reclusive chairman, Lee Kun Hee, inherit control of Samsung, the country's largest conglomerate in 1996. A suit was filed in 2000 by law professors. The seven-year legal battle surrounding Lee's 39-year-old son, Lee Jae Yong, was the most prominent among cases in which the chairmen at some of the country's family-controlled conglomerates were accused of masterminding dubious financial deals to help their sons inherit the corporate reins. Though the ruling upholds the convictions, Lee Jae Yong gets to keep his control of Everland due to the statute of limitations.

The following is from International Herald Tribune on 30 May 2007:

In an intensely monitored ruling, the Seoul High Court upheld a lower-court ruling from 2005 and increased penalties for the two convicted Samsung executives, Hur Tae Hak and Park Ro Bin. But it left unanswered whether the 65-year-old Lee influenced the scheme.

Hur and Park, loyal aides to Lee and chief executives at Samsung subsidiaries, each received a suspended sentence of three years in prison for illegally selling a controlling stake in Samsung Everland, the conglomerate's holding company, to Lee Jae Yong at a discount price in 1996. Each was also fined 3 billion won, or $3.2 million. In the transaction, Everland, an unlisted company, sold Lee Jae Yong 1.25 million shares at 7,700 won per share. Thanks to that deal, the son acquired 31.9 percent of Everland, which runs South Korea's largest amusement park. His current stake there stands at 25.1 percent, and he still controls the company.

Everland, which holds major stakes in such key Samsung subsidiaries as Samsung Life and Samsung Electronics, is the linchpin in a chain of cross-financing among affiliates that the Lee family uses to control the entire group. Thus the 1996 deal helped the son inherit control over Samsung, whose 59 subsidiaries and 250,000 employees generated 141 trillion won in sales last year, an equivalent of almost one-fifth of South Korea's gross domestic product. Samsung's overseas shipments last year, valued at the equivalent of $70 billion, accounted for 21 percent of all South Korean export.

"The accused knew that this deal would enable Lee Jae Yong to take over the control of Everland for just 9.6 billion won, an extremely small sum compared with the company's total value," the court said. "Clearly the accused have breached their official duty." A handful of family-controlled conglomerates, or chaebol, spearheaded South Korea's export-driven economy in the decades following the Korean War in the early 1950s. In recent years, accusations of foul play have dogged some of the top conglomerates as they underwent generational changes in their leadership.

As the groups expanded rapidly through stock-market listings and as the so-called "owner" families' direct holdings in the conglomerates dwindled to less than 5 percent on average, the men in control of management found it increasingly difficult to make a handover to sons and grandsons without resorting to illegal means, critics say.

In 2000, a group of 43 law professors who said they were acting in the public interest filed a lawsuit claiming that Hur and Park, who were Everland executives in 1996, sold the shares to Lee Jae Yong at an unfairly low price and without getting proper approval of the company's board of directors. After the professors' lawsuit, prosecutors investigated the case and indicted the two.

On 29 May 2007, the appellate court said the shares should have been sold to Lee Jae Yong for at least 14,825 won apiece. Everland lost at least 8.9 billion won in the transaction, it said. In the indictment in 2003, prosecutors estimated the loss at 97 billion won. The appellate ruling also said that a board meeting in October 1996 that approved the sale was invalid because it failed to have a quorum.

Economists campaigning for transparency at big businesses called on prosecutors to expand their investigations to the chairman, Lee. The son became an executive in Samsung Electronics, the world's largest maker of computer memory chips, in 2001. "It is certain now that Mr. Lee Jae Yong's illicit gaining of profit and inheritance of management control has lost social justification," said Kim Sang Jo, an economist at Hansung University and director of Solidarity for Economic Reform. "Even if he becomes the third-generation head of Samsung, he will not be treated as a trustworthy CEO by the Korean people."

Samsung denied the chairman's involvement. Huh and Park said in a statement that they would appeal the ruling to the Supreme Court. Lee Jae Yong was not indicted in the case. Even if the Supreme Court upholds the lower court verdicts, legal experts say, the son's stake in Everland will not be nullified because of the statute of limitations.

The court ruling, however, further dented the image of Samsung, which has been implicated in a series of corruption scandals. In 2005, audiotapes that were made public disclosed that Samsung executives had made illegal donations during the 1997 presidential election. Although he was not indicted, Lee apologized and Samsung donated 800 billion won to charity.

Chung Mong Koo, 68-year-old chairman of Hyundai, is on trial on charges of stashing away slush funds and encouraging questionable deals between subsidiaries aimed at helping his son, Chung Eui Sun, 37, raise his stakes in Hyundai. The Chungs apologized for the scandal and promised to donate $1.1 billion to charity. (SITE NOTE: See 2007 Hyundai Scandal.)

Chey Tae Won, the scion of the family that owns much of SK, South Korea's No. 3 conglomerate, was convicted in 2003 of wrongfully accruing personal wealth and damaging the group's affiliates through dubious stock trading and accounting irregularities he used to increase his stakes in the group. He received a suspended sentence and survived a revolt by foreign investors who tried to oust him. (SITE NOTE: This fight for management control caused Sovereign to give up in disgust and sell off their shares in the company.)

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June 2007

OECD ends monitoring of Korea's labor issues, but 10-year inspection period was 'not enough,' say civic groups (Jun 2007) South Korea on June 12 was released from monitoring of labor-management relations by the Organization of Economic Cooperation and Development (OECD), which had been ongoing since the year after Korea joined the group of nations in 1996. The OECD held a board meeting in Paris on this day and decided to end its monitoring, which had been focused on Korea’s labor law reforms and overall labor-management relations.

Regarding such a result, the Ministry of Labor in Seoul stressed that most of issues raised by the OECD, such as bestowment of the right to organize to teachers and government officials and abolishment of a system of compulsory arbitration by the government in law-designated public utilities.

Since its entry into the OECD in 1996, the South Korean government has had 12 specific cases of investigation of its labor practices over the ten-year period. In fact, Korea is the only OECD-member country to have been monitored over the long term for reform of labor-management relations. The government promised to raise its labor laws and labor-management relationship to the international standards when joining the OECD, but failed to do so in a period of time satisfactory to the OECD.

As a consequence, the OECD granted monitoring rights in Korea to its Employment, Labor and Social Affairs Committee (ELSAC) in January 1997. However, in connection with the three-year postponement for allowing multiple trade unions for a single company, the Korean government should provide additional information on the progress of the matter to the ELSAC by 2010 when a revised law takes effect.

During the 110th round of ELSAC meetings on April 23, some member nations agreed to end monitoring on South Korea on condition that Seoul ratifies three of the major standards of the International Labor Organization (ILO), which South Korea has not yet signed.

For this, Korea should expand civil servants’ right to organize and guarantee their right to take action as well as allowing multiple labor unions at a single company. Labor raised objection to the OECD’s termination of monitoring, stressing a necessity of continuous monitoring. Woo Mun-suk, a spokesperson of the Korean Confederation of Trade Unions (KCTU), said, "As the government continues to arrest unionists for taking part in union activities and doesn’t allow public employees basic labor rights including the right to strike, the nation should receive continued special monitoring from the OECD." (Source: Hankyoreh News.)

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Four ROK Companies Cancel Land Use Contracts in Kaesong (Jun 2007) Four South Korean companies have canceled their contracts for the use of land at an inter-Korean industrial complex in the North Korean border city of Kaesong for unknown reasons, officials said. The cancellations come amid growing concerns about stalled negotiations on North Korea's nuclear weapons program, which critics fear might endanger, in the worst-case scenario, the status of the inter-Korean joint economic project, the brainchild of the unprecedented inter-Korean summit in 2000. Refusing to identify the companies, they said the contracts were revoked in January, February and April, respectively, but the government has yet to take back the corporate licenses for doing business in the Kaesong industrial complex.

In the capitalist enclave, South Korean businesses use cheap North Korean labor to produce goods. The monthly production in the complex exceeds US$10 million. Currently, 23 South Korean companies employ about 15,000 North Korean workers at a site developed on a trial basis, including construction workers and others at a management office. The number of North Korean workers is expected to increase to more than 350,000 when the complex becomes fully operational by 2012.

In September 2005, the South Korean government offered plots of land to 24 South Korean companies so that they could start to move into the area created in the first phase of the industrial complex's development. Some raised the possibility that the companies canceled the contracts because there is little chance that the complex will become an "outward processing zone" (OPZ) in a free trade deal between South Korea and the United States. South Korea pushed for the U.S. to include products from the complex in the trade deal, but they only agreed to create a committee to discuss what they called an outward processing zone. South Korea sees it as the basis for further discussion of the Kaesong issue, while the U.S. cautions against reading too much into it, saying it is a kind of agreement they can reach with any bilateral trade partner regardless of the existence of a free trade deal. They are expected to formally sign the deal later this month. (Source: Yonhap News.)

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Agriculture Exports Identified to Help Farmers (Jun 2007) On 22 Jun he Korean government designated 30 foods thought to have the potential to capture foreigners’ taste buds and help increase overseas sales as prime export products. The project is aimed at increasing the incomes of Korean farmers.

The Agriculture Ministry said that it had formed a task force to promote the items, with a target of increasing export volume from last year’s $4.7 million to $90 million by 2013. The foods range from kimchi to ginseng, pears, rice, pork, melons, strawberries, tomatoes and mushrooms, plus traditional processed products, including bean and pepper paste.

Despite a deteriorating climate for exports because of the won’s sharp appreciation against major currencies and high oil prices, Korean food products have displayed improved sales in international markets, said the ministry. Exports during the initial five months of this year were 7.6 percent higher than a year earlier.

Korean peppers sell especially well in Japan, posting export growth to that nation of 8.2 percent. Pears saw a 31.3 percent jump during the five-month period, compared with the previous year. Exports of kimchi leapt as much as 36 percent to the United States and 67.6 percent to Hong Kong over the same time span. The ministry is currently developing standards for ranking kimchi’s spiciness to facilitate its export growth.

With farm goods’ export volume to Japan sliding by 3.3 percent year on year due largely to the weakened yen, exports to Taiwan advanced 16.2 percent and 14.8 percent to China, including Hong Kong.

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Businesses Want Special Pardon for Convicted Executives (Jun 2007) Ahead of the Aug. 15 ``special amnesty,'' business groups are preparing a joint petition demanding a broad range of business people who've been penalized for involvement in wrongdoings be included in what is eyed as the ``participatory government's'' last large-scale pardon.

The upcoming amnesty is garnering more interest because Hyundai-Kia Automotive Group Chairman Chung Mong-koo and Hanwha Chairman Kim Seung Youn, who are both currently on trial, could be granted amnesty if they do not appeal after their initial hearings. There's also a growing possibility that former Daewoo Group Chairman Kim Woo-joong, who was declined in last February's pardon for unpaid fines, will be on the August list again. Some of the illegal practices that business executives were found guilty of include giving illegal political funds and cooking their books. (SITE NOTE: This is one of the most nauseating practices that Korea has to reward criminals if they contribute funds to the ruling party. There is a grass roots movement growing over this practice as the small guys get sent to prison for embezzling a several thousand won, but executives are granted amnesty -- most without spending any jail time because of their appeals -- after embezzling millions of dollars in company funds. The unfairness is evident.)

The Korea Chamber of Commerce & Industry (KCCI), the Federation of Korean Industries (FKI) and the Korea International Trade Association (KITA) are some of the groups working toward a petition. ``Business leaders face realistic barriers when they have this unlawful tag following them, which is why the pardon is crucial.'' said Lee Hyun-seok, vice president of KCCI. He explained that some of the roadblocks include the difficulty of bringing in foreign investment, regaining trust from others and also for the construction businesses, being named as a company CEO is impossible. ``This will probably be the last large-scale amnesty because the Christmas pardon won't be as big, as it will also come after the presidential election,'' Lee said, ``But we're optimistic about the upcoming pardon in August.'' He added that discussion is under way with the other participating groups, but a more detailed schedule will take shape early next week. (SITE NOTE: Note that the KCCI position is that it is not that they stole the money that is bad, but that they stole it ILLEGALLY. Is there a legal way to embezzle or steal company funds???)

``A list must be written up and submitted by sometime next month,'' Lee said, adding that such pardons will help enliven the business community, as many of the executives involved are influential leaders. A KITA official agreed, ``Many of the businessmen mentioned make a mark not only in the business world, but also in our society, so if they were to make up for their past and return with a positive push, it would be beneficial for most.'' (Source: Korea Times.)

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July 2007

Seoul Sees Won Overvalued (Jul 2007) On 2 Jul, the won closed at 918 won to the dollar, the strongest level for the won since Dec. 7, 2006 when it traded at 913.8 won. The won corrected its gains as it lost 2.1 won to close at 922.00 won on 5 Jul, rising for two days in a row on intensified verbal intervention by officials, dealers said. The won appreciated 8.8 percent against the dollar in 2006 and appreciated another 1.1 percent this year. In contrast, the yen depreciated 0.7 percent against the dollar in 2006, and lost its value 3 percent since the beginning of the year as of yesterday, according to the Bank of Korea.

With all the negative effects, the ROK government still has not intervened to devalue the won. A stronger won makes Korean goods expensive on overseas markets and erodes exporters' earnings. The worsening business bottom line will also lead to a drop in corporate employment and investment, negatively affecting domestic consumption. But a strong won is a bonanza for Korean tourists abroad. The won is overvalued against the dollar and cannot sustain its appreciation against the greenback and other major currencies. But officials have not confirmed whether or not the government will intervene in the currency market to stem the won's rise. (Source: Korea Times.)

Domestic companies, especially exporting firms, have already felt the pain of the strengthening won over the last several years. Many of them said their profitability has deteriorated since the won fell below 950 won to the dollar. Such firms as Hyundai Motor, Samsung Electronics and the top steel-maker POSCO are speeding up relocating their production lines overseas to overcome the stronger won and higher production costs.

If the local currency continues its gains, a large number of exporters might lose product price competitiveness on overseas markets. Some Korean products, including electronics and automobiles, are even becoming more expensive than their Japanese counterparts. In addition, local companies are in fiercer competition with their Chinese and Indian rivals, which are aggressively marketing cheaper products around the world. Things have become worse for South Korean manufacturers as prices of crude oil and other natural resources have surged on international markets. Unionists' demand for higher wages and better working conditions has increased production costs. Businesses are also worried about an anticipated interest rate hike. The central Bank of Korea (BOK) has recently hinted at raising the overnight call rate in a desperate attempt to bring excess liquidity under control. (Source: Korea Times.) (SITE NOTE: As a retiree on a fixed income, my US military retirement check has become almost worthless. It now costs more to live in Korea than it would for me in the States. Korea is no longer a cheap place to live.)

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MORE BAD NEWS: 25% of Korean Businesses Planning Layoffs (Jul 2007) One out of four Korean businesses is laying off staff or plans to do so this year, a survey has found. According to the survey of 1,053 companies by jobs website Job Korea (www.jobkorea.co.kr) on Wednesday, 24.9 percent of companies said they are trimming workers or they will do so soon.

By company type, 30.6 percent of large enterprises said they're planning a restructuring in human resources, followed by 28.4 percent of foreign companies and 24.6 percent of small-to-medium size firms. By category, 34.8 percent of finance sector companies are planning cuts, followed by 32.7 percent of logistics and service firms, 27.4 percent of IT and communications companies, 22.6 percent of electronics firms, 20.4 percent of machinery, steel and automobile makers and 16.2 percent of construction and cement companies. When asked how they plan to restructure, 92 companies or 35.1 percent said they would cut employees by merging divisions. Another 25.6 percent said they planned to lay off temporary workers. (Source: Chosun Ilbo.)

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Government to buy 430,000 tons of rice (Jul 2007) The government will purchase 430,000 metric tons of rice this year to add to the nation's emergency reserve, the government said on 17 Jul. The decision was taken during a cabinet meeting on 17 Jul, as officials decided to buy 14 percent less for the emergency stockpile for 2007 compared to the 504,000 tons bought last year.

Farmers will be paid 48,450 won per 40 kilograms of unhusked rice, the same as last year's rate, ahead of the account settlement period in January 2008, the government said. Of the total, 317,000 tons will be bought packaged in sacks, while the remaining 115,000 tons will be purchased without being packaged. Farmers will receive 670 won less, or 47,780 won, for the unpackaged rice. The government switched to the emergency stockpile system in 2005 from the system of buying fall crops. Purchase prices for the rice reserve are based on the average price of homegrown rice during the harvest season between October and December.

The government's emergency reserve for the staple grain is a way of protecting the local rice market. Local farmers have been suffering from a declining trend of rice consumption as market opening brings in more diversity of choices. Rice production is also threatened by a decline in available arable land for cultivation. (Source: Korea Herald.)

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Hub Plan Becomes Hollow Slogan: Anti-Foreign Sentiment Scares Away International Investors (Jul 2007) The government unveiled a series of ambitious measures to turn the country into an international financial center over the past few years but the hub dream has become a hollow slogan, many international analysts say. On 18 Jul, the government announced the latest steps in its bid to achieve the financial hub plan, including providing tax breaks to promote mergers and acquisitions (M&As) between financial companies. Among the measures are allowing the establishment of hedge funds and scrapping all regulations governing private equity funds (PEFs) by 2012. The government also said it will overhaul supervisory rules on the financial market to be on a par with those of advanced countries. It plans to make things easier for financial firms to seek expansion through M&As and become internationally competitive investment banks with the Capital Market Consolidation Act, which is scheduled to take effect in 2009.

But many analysts say the government should do more than it has pledged, and should implement what it has promised, if it is serious about turning the world's 12th largest economy into a regional financial powerhouse. Seoul Financial Forum Chairman Kim Ki-hwan said the government should continue its drive to deregulate the financial market, adding that the momentum has weakened over the past two years. Kim pointed out that policymakers always pledge to ease regulations to make it more business-friendly. ``But they have just made some changes in specific sectors with the big picture left untouched. Policymakers are reluctant to take the initiative in reform for fear of taking responsibility for a possible failure in the future, which is the key reason behind the delay in the plan.'' (SITE NOTE: This is NOT news. It is a standard complaint from the AMCHAM and every foreign business leader. The promises of the Roh administration are hollow gestures.)

Frederic Neumann, chief Korea economist at HSBC, said the capital market integration is only a first step towards the development of Seoul as a financial hub. ``The country faces a number of challenges, which make it unlikely for Seoul to rival other financial centers, such as Hong Kong or Singapore, any time soon,'' he said. Neumann also said further regulatory reform appears necessary in order to attract significant investment in the sector. ``Also, Seoul still grapples with the image that foreign and domestic financial institutions do not always operate on the same footing. The development of a financial hub is likely to take time as financial market participants become more comfortable with Korea's regulatory system.''

Kim said the Korean public should have an unbiased and balanced view on the role of foreign capital and businesses to achieve the financial hub goal. He noted that the best negative example is regulators' probe of the legitimacy of Lone Star's takeover of the Korea Exchange Bank (KEB) in 2003. ``Through this incident, the international community thinks Koreans believe that non-Koreans making money in Korea is like committing a crime, which drives away potential foreign investors.''

Also, Henry M. Seggerman, president of International Investment Advisers, said foreign financial institutions are doing business to make profits, adding that Lone Star did a huge favor for the Korean people by bailing out the KEB. ``As long as the Lone Star investigation, attempted extradition and prosecution continue, Korea's financial hub initiative is impossible,'' he said.

HSBC's Neumann said there are other qualitative hurdles that represent challenges for the development of a more international financial system. ``Foremost is the supply of a larger pool of skilled professionals, fluent in English, that can help Korea win business from other financial centers. Also, comparatively high tax rates may be one of the barriers that could be addressed by authorities, as they represent one of the disincentives for the immigration of expatriates,'' he said.

Kim commented that to attract foreign investors and their families, Korea should construct more international schools so that children of foreign investors and company executives can study here and receive a quality education. He noted that the country needs to build more hospitals where foreigners can communicate in English and receive high quality medical services. (Source: Korea Times.) (SITE NOTE: This is the same complaints heard from 1998 after the "IMF Crisis." In my opinion, it is too late. The negativism against investing in Korea is shown by the declining FDI -- and the refusal of foreign corporations to build new plants in Korea. It will take more than gestures as long as the Roh administration continues to pursue its nationalistic ideas of who should own Korean companies -- meaning no foreigners allowed.)

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Korea's Economic Growth Rate Expected to Hit Bottom among Asian Countries (Jul 2007) Korea’s economic growth rate is expected to remain at the bottom among major Asian countries this year once again. According to ‘Focus on the World Economy’ released by the Bank of Korea on July 23, among 11 major Asian economies except Japan, China will see its economy grow by around 10%, and India, Vietnam, Singapore, the Philippines, Indonesia, Malaysia and Hong Kong will grow by more than 5%. By contrast, the Korean economy is expected to grow by only 4.5%, in the same range with Thailand and Taiwan (3.5% and 4.5%, respectively). The outlook of the world’s economy published by the Bank of Korea is based on a comparative analysis of economy outlooks by international organizations, including the International Monetary Fund (IMF), Asian Development Bank (ADB), and five investment banks, including JP Morgan and Goldman Sachs. In the first quarter, Korea’s Gross Domestic Product (GDP) growth rate was 4.0%, the lowest among major Asian countries except Japan (2.0%). (Source: Donga Ilbo.)

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August 2007

New U.S. Tax Bill Could Cost Korea Companies Billions (Aug 2007) According to the Financial Times newspaper on Monday, a new provision passed by the U.S. House of Representatives could end up costing multinational companies with U.S. subsidiaries such as Samsung and Nissan some US$7.5 billion in taxes over ten years. According to the FT, a law passed in the House and due to be considered in the Senate next month says that U.S.-based subsidiaries must pay taxes on funds transferred overseas even if they make transactions through countries with favorable tax treaties.

Currently companies with headquarters in countries that have no tax treaty with the U.S., such as Taiwan, Singapore and Korea, can avoid a 30 percent tax on funds transferred from U.S. subsidiaries by setting up units in countries with tax treaties. To put an end to this, Lloyd Doggett, a Texas Democrat, and other 42 lawmakers proposed the new measure known as the Doggett law last May. If the bill becomes law, the FT estimates companies with large operations in the U.S. such as Samsung and Japanese carmakers would have to pay much more in taxes. Currently, Samsung makes tax-free transfers from its U.S. subsidiary to its financing unit in the U.K. Under the Doggett law, Samsung's U.S. subsidiary would have to pay 15 percent tax on those transfers, the FT said. Multinational companies including Panasonic, Unilever, Allianz and Honda are lobbying against the bill, the FT said. "It would unfairly discriminate against foreign companies that create U.S. jobs and would interfere with legitimate business activity," a Washington lobbyist told the newspaper. (Source: Chosun Ilbo.)

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October 2007

ROK, EU Agree to Scrap 95 Percent of Tariffs on Goods in FTA Talks (May-Oct 2007) Yonhap News reported on 9 May that the ROK and the European Union agreed to abolish more than 95 percent of each other's tariffs on goods in their first round of free trade talks, Seoul's chief negotiator said, remarking that the talks are making faster progress than he had expected. He added that some agricultural goods would be excluded from the proposed free trade pact with the EU, declining to reveal what kind of products would be excluded.

Both sides agreed to eliminate more than 95 percent of tariffs on merchandise. The two sides also agreed that tariffs on all industrial goods should be phased out within 10 years. The proposed level of tariff elimination were described as "meaningful," particularly compared with a similar agreement made with the United States.

Seoul believes clinching a trade pact with the EU, the world's largest economic bloc, would help advance the country not only economically but also geopolitically. Korea believes that a bilateral trade pact will help Asia's third-largest economy become an FTA "hub." As for the EU, a trade accord would mean securing a strong foothold in Asia. The particular sectors in which the EU is interested are cosmetics, chemicals, machinery, automobiles and pharmaceuticals. The EU is also expected to seek greater access to Korea's service sector, especially its finance, special delivery, legal, accounting and news services.

Tension has already built up in talks concerning the mail and delivery sector, according to observers. It is believed that the EU made a proposal that required the privatization of Korea's postal sector, which is currently operated by the government. Seoul negotiators reportedly said such a proposal was absolutely not possible. The second and third rounds of the talks are scheduled for July and September in Brussels.

Research studies show that Korea's GDP could increase 2 to 3 percent after an FTA is signed with the EU. The agreement could also create 300,000 to 600,000 jobs and benefit such sectors as automobiles, pharmaceuticals and cosmetics. It could also boost service sectors including finance, telecom and law. (Source: Korea Herald.) (SITE NOTE: However, what is creating a stir is the silence on the streets of Seoul. Though the impacts of the EU FTA will be about the same, there are no demonstrations causing many to believe that the real root of the violent US-ROK FTA protests was anti-Americanism and the farmers had been manipulated by the anti-American NGO activists. Bloggers were starting to comment that the silence is "proof" that the protests were based on anti-Americanism -- NOT any economic concern. We tend to agree with them the FTA violence went way past rational protest -- reaching to hysteria. The same was true of the WTO entry years ago -- that blamed the US for wanting to open the rice market, even though it was a world trade effort.)

EU FTA Runs into Same Protectionist Roadblocks (Jul 2007) The Chosun Ilbo reported on 17 Jul that the ROK had sent a draft proposal on free trade talks to the EU, promising to remove or phase out import tariffs on cars over seven years, the government said. Seoul has also decided to exclude rice from its list of markets subject to opening, but it may agree to open up its agricultural market, including beef. According to the Korean delegation, the EU said, "If Korea does not improve its proposal, the EU will scale back its proposal as well." The EU said, "South Korea's proposal to the EU is much worse than its proposal to the U.S. with regard to many goods that are competing with the U.S. It is hard to accept politically and administratively," urging a change in the proposal. (SITE NOTE: The rice and beef areas are unimportant agriculturally to the EU as these are controlled by exporters from Southeast Asia, Australia, New Zealand and America. However, it does reflect the protectionism of the ROK in dealing with its FTA.)

The EU has called on Korea to improve its trade offers on major items like pork and cars in the second round of free trade talks underway in Brussels. The 25-nation bloc told Korea it could withdraw its initial proposal promising to fully open all product markets within seven years after the trade deal goes into effect unless Korea makes more drastic concessions on tariffs, according to chief Korean negotiator Kim Han-soo.

Joongang Ilbo reported on 17 Jul that the ROK tariff proposals upset negotiators for the European Union as free trade talks continued for a second day in Brussels. EU representatives were not satisfied with the ROK's proposal for tariff reductions and demanded a broader opening. Unlike the EU, which offered to phase out all tariffs within a period of no more than seven years, the ROK left tariffs in place for more than 250 items, including agricultural goods and the financial and investment sectors. (SITE NOTE: This is a typical ROK strategy of extending out implementation. For example, the ROK agreed to open the rice markets after a ten year delay when it joined the WTO, however, when the time came, it renegotiated for the reopening in another ten years. The FTA with the US upset this agreement. Now the ROK is attempting to protect its markets by excluding sensitive areas. In other words, the EU gives everything -- the ROK gives up only some things. Protectionism in Korea is alive and well.)

The government decided to accept part of the EU's demands and review removing tariffs on cars earlier than originally proposed and opening up markets for manufactured, agricultural and fisheries goods more widely. Korea in its original concession list delivered to the EU on July 6 sought to protect rice and abolish tariffs on 250 critical agricultural and fisheries goods within more than 10 years. As for pork and cars, which are of strategic importance to the EU, Korea proposed opening up the market for the latter in seven years and leave the timing and level of the opening of the pork market undecided.

Kim said his team will exchange opinions with other ministries about the opening of the car market after returning home. However, that process will be difficult since the Ministry of Commerce, Industry and Energy is reluctant to open the automobile market to the EU. An official with the Ministry of Foreign Affairs and Trade said Korea is in a position to demand a wide opening of the European car market because it has a competitive edge in the sector. But Seoul failed to be more aggressive in the negotiations due to differences among ministries.

Korea last year exported 740,000 cars to the EU but imported a mere 15,000 from there. The EU imposes a 10 percent tariff on cars, higher than the 8 percent tariff in Korea. The Federation of Korean Industries (FKI) estimates that a complete removal of tariffs on cars in the EU would increase Korea's car exports to the continent by US$1.48 billion a year. (Source: Chosun Ilbo.) The EU asked South Korea to phase out its 8 percent tariff on auto imports within three years, instead of the seven years suggested by Seoul.

The European Union shunned South Korea's request to include goods made in an inter-Korean industrial park in North Korea in a potential free trade agreement between the two sides, Seoul's chief negotiator said 18 Jul. "The EU side told us that it's difficult for trade negotiators to deal with the Kaesong issue because it's complex legally and politically," Deputy Trade Minister Kim Han-soo said, though the EU left open the possibility of a compromise, depending on the progress both sides will make in upcoming meetings.

Other potential sticking points in the negotiations are South Korea's protective pharmaceuticals and cosmetics markets. In addition, the EU wants better access to South Korea's services market, particularly for law firms and hospitals, Kim said earlier. Some progress has been reported, as the EU agreed to soften its anti-dumping rules for South Korean goods. (Source: Hankyoreh News.)

S. Korea, EU Fail to Make Breakthrough in Trade Negotiations (Oct 2007) South Korea and the European Union (EU) failed to narrow differences on some sticky issues, including car trade and related rules, in their fourth round of free trade negotiations this week, chief negotiators from both sides said on 19 Oct.

"There was some progress in most sectors, but the two sides did not make headway on tariffs, especially in negotiations over auto trade and related regulations," Kim Han-soo, Seoul's chief negotiator for the talks, told reporters on the last day of the five-day talks that started on 15 Oct.

Ignacio Garcia Bercero, Brussels' chief negotiator, criticized the positions Seoul took in this week's negotiations. "I am particularly disappointed that Korea appears to have taken a very defensive approach to tariff negotiations on the industrial sector," Bercero said. "As a major export-oriented economy, we would certainly expect Korea to take a bolder approach to these negotiations," he said. The 27-nation economic bloc is demanding that South Korea cut tariffs on cars and other products to the same extent that it did for the U.S. this year in a free trade agreement.

Previous rounds of the negotiations also hit snags over auto trade as both sides remained reluctant to sweeten tariff offers to each other. Fresh from reaching a trade accord with the United States in April this year, Seoul held three rounds of negotiations with Brussels on a free trade agreement that could provide Asia's third-largest economy with a commercial bridge to Europe.

The fifth round is scheduled to be held in Brussels beginning Nov. 19. Since the first round started in May this year, the EU has offered to eliminate or phase out all its import tariffs on South Korean goods within seven years, and remove tariffs on 80 percent of goods within three years after a deal comes into force. Seoul says it would remove all tariffs on industrial goods within three years with some exceptions, and eliminate tariffs on roughly 68 percent of EU goods as measured in value in three years, compared with 63 percent in a previous offer.

But the EU expressed disappointment with South Korea's offer, saying it falls short of the accord South Korea signed with the United States in June. "We have been concerned that the offer presented by Korea does not have the serious level of ambition and it is also less serious than the one that Korea has agreed with the U.S.," Bercero said. In particular, Brussels wants Seoul to cut regulations for European carmakers by applying international standards instead of different domestic rules. The EU has made a new proposal on tariffs for autos that Seoul is now reviewing. "Our judgement of of the new proposal is negative," Kim said. South Korea held out for an improvement in Europe's offer to eliminate a 10 percent tariff on imported autos within seven years. South Korea sold 74,000 autos worth US$9.1 billion in Europe last year while buying only 15,000 vehicles worth $1.6 billion. The country's tariff rate on cars is 8 percent, compared to 10 percent for the EU. Bercero said the fundamental issues are technical standards and regulations on autos, pointing out that despite the fact that South Korea is a globally competitive manufacturer, its domestic standards for cars are far different from the international standards that were created by an organization to which both the EU and South Korea belong.

"There is no way that we can conclude the free trade agreement without substantive outcome in the technical barrier to trade in the auto sector," he said. Bercero said the fifth round would be key in predicting the possibility of reaching a deal. "This round (in November) is going to be key in order to see whether or not there can be much progress for the conclusion of these negotiations," Bercero said. "This will only be possible if a breakthrough is made on tariffs and non-tariff measures and services, all key elements of the negotiations." "I certainly think it was a useful round, and we have to prepare the stage to make substantive progress in November. I don't want to exclude the possibility of a rapid conclusion," Bercero said, adding that this week's results would not change the EU's commitment to the talks.

In a related comment, South Korea's chief negotiator hinted at revising its tariff offer to the EU in a bid to push the trade talks forward. "I can't talk about that (revising South Korea's offer). But the negotiations will last longer and be very tough unless we revise our offer," Kim said, adding that the EU side should make a new proposal on tariffs and other issues.

The EU is South Korea's second-largest trading partner after China, with bilateral trade reaching $79 billion in 2006. Some unofficial studies suggest a free trade agreement would boost that figure by as much as 40 percent in the long run. If implemented, the free trade pact would be the largest for South Korea, surpassing the agreement signed in June with the U.S. that is still under legislative review. The EU is also the largest foreign investor in South Korea, with $40.4 billion invested as of the end of 2006. Currently, South Korea has free trade agreements with Chile, Singapore and the European Free Trade Association as well as a partial pact with the Association of Southeast Asian Nations. Seoul is also seeking similar trade deals with Canada, India and Mexico. (Source: Hankyoreh News.)

Korea-EU FTA Talks Run into Stumbling Block (Nov 2007) The outlook for the early settlement of the Free Trade Agreement (FTA) between Korea and the European Union remains murky as the fifth round of negotiations concluded without being able to bridge the gap between the two sides' positions on the stickiest issues.

"The remaining tasks are to uncover and improve a balance point on issues such as the country of origin labeling rule, auto-related technical standards, and tariff concessions on goods, which is the most important issue," stated Kim Han-soo, Seoul`s chief negotiator for the talks, on 22 Nov, which was the fourth day of the free trade negotiations held in Brussels.

Although the three issues that Kim addressed above were the three key agenda items indicating the possibility of an early settlement, the two sides failed to narrow their differences. Korea proposed further tariff concessions, but negotiations made little progress due to the EU's negative reaction to the proposal. In particular, the EU said that Korea's demand to move up the timetable to abolish tariffs on Korean automobiles and steel products are "excessive."

However, the two sides agreed to begin negotiations on some manufactured products and to exchange written requests until the next round of negotiations takes place. Regarding whether to recognize the products of the Gaesong Industrial Park as Korean-made, the EU reportedly said, "It will not be difficult to resolve the problem once a political decision is made."

Kim also expressed the possibility of assuming extensive negotiations. "If we can get the same quality of a product, the early settlement is preferred. However, I will make sure not to produce a bad product because of the time factor," Kim added. Meanwhile, Garcia Bercero, Brussels` chief negotiator for the talks, pressured the Korean delegation. "Although there has been progress in a number of areas, there remain thorny issues that make further negotiations difficult to move forward, such as the issues of automobiles, tariffs on goods and the origin labeling rule," Garcia told reporters on 23 Nov. The sixth round of negotiations will be held in Seoul from January 21 to 25, 2008. (Source: Donga Ilbo.)

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Businesses Still Struggling at Kaesong Complex (Oct 2007) Most South Korean companies doing business at the Kaesong Industrial Complex in North Korea have performed much worse than their local rivals, a lawmaker said at a parliamentary audit of the Export-Import Bank of Korea on 29 Oct. Grand National Party lawmaker Lee Hahn-koo, who sits on the National Assembly's financial and economic committee, said that 13 out of 16 companies that established offices at the Kaesong complex with loans from the state-run Export-Import Bank's inter-Korean cooperation fund before 2006 have suffered losses for two straight years.

The debt ratio of the 16 companies was 438.8 percent on average in 2006, almost double the 223.7 percent ratio in 2005. Their average capital stock was W830 million (US$1=W907) in 2006, less than half the W1.69 billion average in 2005. The value of their assets also fell around 18 percent from W5.48 billion to W4.49 billion over the same period. Only sales increased by W490 million to W790 million. The figures indicate that overall, companies at the complex saw losses rather than gains. All 16 companies posted losses in 2005, Lee said. Although the situation improved in 2006, 13 still suffered losses, with three in a state of capital impairment. (Source: Chosun Ilbo.)

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November 2007

Roh's Sloppy Management of State-run Companies and Burgeoning Public Costs (Nov 2007) The Roh administration has notoriously mismanaged state-owned corporations, running up astronomical debts while adding more employees to their payrolls. Most state-run companies cannot pay for the paychecks given to their own employees. Their profits and government grants are not enough to cover their payroll expenses in some cases.

Roh has aborted all privatization efforts, however. Experts point out the need to privatize idling state-run companies, along with various initiatives to overhaul their competitiveness. The Kim Dae-jung administration at least endeavored to streamline the corporate structures of state-run entities through restructuring. On the contrary, Roh Moo-hyun aborted such efforts allegedly to improve internal governance and operational systems.

Roh's approach did not bring any improvements; rather, Roh's measures led to burgeoning debts and many more employees on the public payroll. As of 2002, Korea National Housing Corporation had debts amounting to 9.8 trillion won. The amount increased a whopping 258.2 percent to 35 trillion won in June 2007. Despite the disappointing performance, its payroll shot up 35.4 percent from 3,238 to 4,385 for the same period.

Roh's various development projects, including the construction of a new administrative capital, have also depleted the treasury of Korea Land Corporation, doubling its debts from 11 trillion won in 2002 to 25 trillion won in June 2007. Its payroll, however, snowballed from 2,125 to 2,677 workers over the same period. Likewise, Korea Minting and Security Printing Corporation watched its debts rise 387.5 percent from 2002 to June 2007, the highest increase among the 24 state-run companies. Its personnel, on the contrary, rose 20.5 percent for the same period. Korea Coal Corporation constituted another vivid example of Roh's notorious management. Declining coal demand and poor management have completely eaten up its capital, losing more and more money every year. Now, it pays its employees with loans. In 2002, for example, its debts amounted to 897 billion won, which shot up to 1.2 trillion won as of June 2007.

The burgeoning payrolls of state-run entities have deteriorated their profitability. A congressional accounting bureau recently reviewed the management conditions of 13 major state-owned companies, including Korea National Housing Corporation, Korea Coal Corporation, and Korea Tourism Corporation. Their net profit margin dropped from 10.63 percent in 2002 to 7.04 percent in 2006. The term "net profit margin" refers to the ratio of net profits to net sales, an important indicator showing how much profit or loss a company generates.

Experts and scholars point to Roh as the epicenter of the problems. Once taking office, Roh aborted all ongoing privatization efforts and egged on public companies toward sloppier management and worse profits. Yonsei University economics professor Kim Jeong-sik criticized, "Roh has stressed the value and needs of state-run corporations. But he did not mention their problems, such as sloppy management, burgeoning debts, and excessive spending. The bigger they get, the more taxpayers have to cough up to finance their payrolls." (Source: Donga Ilbo.)

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After Mass Lay Offs, Daewoo Electronics Turns Abroad (Nov 2007) Daewoo Electronics completed a quiet restructuring last month, laying off as many as 1,500 of its 4,000 workers. It paid only W17 million (US$1=W906) per worker in severance pay, a miserable amount for many with over 20 years at the company. In the financial industry, laid off workers can expect hundreds of million of won in severance pay. But the restructuring at Daewoo was done quickly, in just two months, without dispute or conflict.

The company has been managed by its creditors since Daewoo Group's dissolution during the 1998 Asian financial crisis. The creditors and management had talked with a foreign company to sell the company throughout last year before the talks were broken off in May. It was then that restructuring began in earnest. Workers who kept their jobs gave up their bonuses to help pay severance to those laid off. Management also returned 30 percent of their annual salaries in the form of deferred pay. In addition, the company closed down its poorly performing units and sold off bad assets, clearing up potentially problematic elements worth W300 billion. These efforts began to bear fruit in October when it posted a slight surplus.

Despite the massive restructuring, Daewoo maintained its 44 overseas offices and branches in Europe, North America, Russia and other nations. It left its two overseas research centers in Europe and North America untouched. It is pinning its future on the overseas network, established by Daewoo Group with trillions of won in spending. Overseas sales now account for 82 percent of its total sales of W1.9 trillion.

Daewoo Electronics CEO Lee Seung-chang has two plans for overseas. One is to export the company’s whole production system to emerging markets including the Middle East. That means teaching its know-how on producing appliances to overseas companies and exporting components or half-finished products to them. It is currently negotiating with foreign buyers from Egypt, United Arab Emirates, and Argentina. The other is to operate sales and after-service agents for Korean small-and-medium sized businesses, allowing them to use its brand if they want. "Daewoo still has brand power overseas," Lee said. "We will develop a new business model from which both we and local small-and-medium businesses can benefit." (Source: Chosun Ilbo.)

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For details of the Samsung scandal touched off by allegations of hidden accounts by a former Samsung lawyer in Nov 2007, see SAMSUNG SLUSH FUND SCANDAL (Nov 2007- ??? ).

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US-ROK FAIR TRADE AGREEMENT (FTA) NEGOTIATIONS

Before one wades through this collection of articles on the ROK-US FTA, one should review the US International Trade Committee Report: KOR-US FTA. The KOR-US FTA report shows the the ROK has the most to gain from this FTA. See Chap 4 -- Trade Barriers -- to understand the negotiations.

On 20 Sep 2005, South Korean President Roh Moo-hyun and U.S. President George W. Bush, speaking by telephone, stated their willingness to explore the possibility of an FTA.

On 13 Jan 2006, South Korea's Agriculture Ministry announced the terms for resumption of U.S. beef imports. On 3 Feb 2006 South Korean Trade Minister Kim Hyun-chong and his U.S. counterpart at the time, Trade Representative Rob Portman, announced their intention to hold FTA talks. The Korean Alliance Against Korea-U.S. FTA, a nationwide anti-FTA organization, was formed on 28 Mar. On 5 Jun South Korea, United States began first round of formal talks in Washington. On 10 Jul, South Korea, U.S. exchanged their first tariff phase-out proposals in the second round of negotiations in Seoul. On 6 Sep South Korea, U.S. hold third round of talks in the. western U.S city of Seattle. On 23 Oct South Korea, U.S. hold fourth round of talks on the South Korean island of Jeju. On 4 Dec South Korea, U.S. hold fifth round of talks in the U.S. ski resort town of Big Sky, Montana. On 30 Dec 2006, the U.S. formally refuses to accept South Korea's request to soften its antidumping laws, one of South Korea's key demands in a potential free trade deal.

On 15 Jan 2007 South Korea, U.S. held sixth round of talks in Seoul. Washington's chief negotiator Wendy Cutler first reports progress in key areas such as antidumping measures and pharmaceuticals. On 11 Feb South Korea, U.S. hold seventh round of talks in Washington. On 26 Feb South Korean Trade Minister Kim Hyun-chong and U.S. Trade Representative Susan Schwab held talks in Washington to narrow differences on the proposed free trade pact. On 5 Mar South Korea, U.S. held high-level agriculture talks in Seoul to resolve key trade differences in farm goods, but failed to make a breakthrough. On 8 Mar South Korea, U.S. held final round of formal talks in Seoul. The sides agreed on three out of 17 categories under review. On 19 Mar South Korea, U.S. hold a series of informal meetings in Seoul and Washington to narrow key differences in the areas of automobiles, agriculture and textiles to forge a free trade pact. On 26 Mar South Korea, U.S. hold 11th-hour negotiations to conclude free trade agreement talks ahead of an end-of-March deadline. On 31 Mar South Korea, U.S. extend their free trade talks by 48 hours. On 2 Apr South Korea, U.S. reach a free trade agreement. On 10 May the U.S. government announced a bipartisan deal with Congress to include tougher labor and environmental rules in pending and future free trade agreements. On 25 May South Korea, U.S. release full text of free trade agreement. On 16 Jun the U.S. officially asks South Korea to reflect Washington's new trade policy guidelines initiated by the Democratic-led U.S. Congress. On 21 Jun Souuth Korea's chief negotiator Kim Jong-hoon meets his U.S. counterpart Cutler in Seoul to discuss the U.S. demand for amendments to the free trade deal. On 25 Jun South Korean Trade Minister Kim Hyun-chong and U.S. Trade Representative Schwab meet in Washington to talk about the amendments. On 29 Jun South Korean Prime Minister Han Duck-soo says his government had accepted the U.S. demands. On 30 Jun (Washington time) South Korea, U.S. were set to sign the agreement.

South Korea and the U.S. signed the deal on 30 Jun 2007, after reaching the agreement in April following 10 months of often acrimonious negotiations. The agreement would eliminate tariffs and other trade barriers on a wide range of industrial goods and services, including automobiles, agricultural products and services. South Korea accepted a U.S. demand to change parts of a bilateral free trade agreement (FTA), raising the possibility that the deal could be endorsed by the Democratic-controlled U.S. Congress. However, the US Trade Negotiator continued to remind the ROK in Oct 2007 that without the opening of the beef market, the ROK-US FTA remained a problem for approval in the US Congress. Those American auto manufacturing companies without joint-venture commitments in Korea are also lobbying against the passage of the FTA.

On 7 Sep 2007 South Korea submitted the ROK-US FTA to the nation's legislative body for approval, in a move expected to again heat up public debate over the deal.

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Sixth Round of FTA talks (Jan 2007) The sixth round of free trade agreement (FTA) talks between South Korea and the United States was to be held at the Shilla Hotel in Seoul for five days starting 15 Jan. Both countries, which launched the bilateral trade talks last June, plan to wrap up negotiations at the seventh round scheduled in the U.S. in February after reaching a certain level of consensus in Seoul. The fifth round ended in a stand-off with the US raising the beef import blockages as an issue though not on the agenda. Because there are so many areas of dispute, the strategy of both sides is to tackle the non-controversial items first and then move on to the areas where there are conflicts of views. South Korean officials said they will focus on "less sensitive" areas such as a phase-out of tariffs on industrial goods, competition and intellectual property rights. Apparently angered by Washington's refusal to address its key demand to ease U.S. anti-dumping rules under the envisaged free trade agreement, South Korea refused official discussions of autos, medicine and other issues of U.S. concern.South Korean officials said, however, that those key pending issues will be discussed at informal meetings between their top delegates.

U.S. negotiators have rejected Korea's major demands, including easing restrictions of anti-dumping duties on Korean exporters, inclusion of goods from the Kaesong Industrial Complex, and easing rules of origin in the textile sector. (SITE NOTE: Kaesong profits have been accused by US human rights envoy Lefkowitz as being used for the DPRK WMD programs. The "Made in Korea" stamp from Kaesong is a topic of dispute between the ROK and US.)

Going into the talks, one of the issues was whether U.S. negotiators would demand that Korea soften its rules on U.S. beef imports. Though not on the original agenda, the issue had become central to the FTA agreement. On the first day of the talks, the US laid its bombshell. With no U.S. beef in the Korean market, there will be no free trade agreement between Korea and the United States, said the chief U.S. negotiator, Wendy Cutler, on 15 Jan. “Korea must fully open its beef market,” Ms. Cutler said. “We want to sit down with our Korean counterparts and discuss the matter with international standards as well as considering the health of Koreans.” The ROK rejection over its interpretation of "boneless beef" as "without any bones" while the US interpreted it as "ribs without bones" as "kalbi" which was the most popular export to Korea before the ban. The US position is that bone fragments are permissible, but the ROK stand is no bone fragments at all.

Discussions of quarantine issues were suspended pending resolution of "technical" disputes over U.S. beef imports. Lifting a three-year ban on U.S. beef imports caused by the discovery of a case of mad cow disease in the U.S., South Korea allowed shipments in September on condition that no bones be included in them. South Korea has since turned back three shipments of U.S. beef totaling 22.3 tons after some bone fragments were found in the meat. U.S. officials protested that South Korea employed excessively strict rules to block U.S. imports. The South Korean agreement to allow in boneless U.S. beef is only for health reasons. Before its import ban, South Korea was the third largest U.S. beef market, with annual purchases totaling US$850 million. Scientists say that mad cow disease can be transmitted to humans through bone marrow -- but the US stated that the fragments were from portions of the beef do not transmit the disease. (SITE NOTE: Korea Times ran an article of a 70 year-old man suffering from "suspected Mad Cow Disease." But this was NOT bovine spongiform encephalopathy (BSE), or Mad Cow Disease. This article played upon the hysteria and hype. In actuality, it was a disease that was a variant of Creutzfeldt-Jakob disease (vCJD) with similar symptoms to BSE. According to the Korea Center for Disease Control and Prevention, there were 75 people in Korea from 2001 through last September who were suspected of having the Creutzfeldt-Jakob disease (CJD). Korea has had cases of CJD, which is caused by gene mutation, but not a case of variant CJD (vCJD) yet. With vCJD, brains develop holes like sponges have. "People infected with vCJD have similar symptoms to that of bovine spongiform encephalopathy (BSE), the so-called mad cow disease." )

Also looming as a potential deal-breaker is South Korea's adamant refusal to open its rice market. The U.S. insists there should be no exception under the proposed free trade agreement. Rice, the staple for 48.5 million South Koreans, is the most sensitive of all for the Seoul government. Farmers have frequently staged violent protests against the negotiations. South Korea's Minister of Agriculture and Forestry Park Hoong-soo confirmed on 12 Jan that his government will not open its rice market under a proposed free trade agreement with the United States. "Excluding rice from the FTA talks under any circumstances is our basic stance," Park told told Yonhap News Agency in an interview. No real discussions have been made on the issue of rice in the free trade talks which began in June last year. U.S. officials have said they would raise the issue "at some point", possibly in the upcoming round in Seoul.

South Korea is sticking to a gradual opening of the pharmaceutical market item-by-item. The U.S. is demanding Korea remove all tariffs on pharmaceuticals. On anti-dumping, the ROK wishes an easing of the rules on Korean goods, while the US stand is that there will be no special rules for Korean goods. On the visa issue, the ROK wants a special visa provision for Korean businessmen, while the US will give no dispensations. (NOTE: The chance of the ROK entering under the Visa Waiver Program (VWP) is very slim as its reject rate remains slightly above 3.0 percent -- and has been compounded by the deportation of prostitutes who lied to obtain visas. In May 2007, Homeland Security wanted to change the rules on the VWP because terrorists can slip by easily. The spokesman for Homeland Security used as an example that one man was turned down as suspicious two years ago, but this year was found to be suicide bomber from his body parts fingerprints. The worry is from the European community mainly, but terrorists could come from anywhere.)

The ROK balked at any concessions on opening of the agricultural markets as well as the auto import tariffs. The Koreans have strongly indicated that they would not address such key U.S. interests as opening wider South Korea's lucrative automobile and medicine sectors.

The mood among South Korean delegates remains subdued after the U.S. rejected outright one of their key demands for eliminating or restricting the imposition of U.S. anti-dumping duties on imports from South Korea. South Korean officials believe that the U.S. has so far overly used its anti-dumping rules to block shipments of semiconductors and other high-tech Korean industrial goods.

Apparently upset by the U.S. refusal to address its key demand for easing anti-dumping rules, South Korea said on 12 Jan that it would refuse formal discussion of automobile and other issues of U.S. concern at the upcoming free trade talks between the two countries. The tough South Korean move clouded the prospects for a sixth round of free trade talks which began in June last year. The talks have so far made few breakthroughs.

Under the current FTA agreement, U.S. could gain an advantage in 18.5 out of the total 19 negotiation sectors while Korea is winning in only half a sector. Some state it would be better for the Roh administration to drop out of the talks now as the FTA is apparently unequal in the give-and-takes. "Discussions on trade remedies, automobiles and medicine were halted during the fifth round of talks. There has since been no advanced U.S. position on the issue, so we've decided not to hold these three committee meetings this time," South Korea's Foreign Affairs and Trade Ministry said in a statement. Those issues, however, are expected to be discussed informally between top negotiators from both sides, the ministry said, adding that there also will be no official discussion on quarantine disputes touched off by tough South Korean rules on U.S. beef imports.

Overall, 14 committees will be convened in Seoul to handle less disputed areas, including some industrial and agricultural products, services, competition and intellectual property rights, it said. A committee handling the rules of origin will meet separately in Seoul on Jan. 23-25, the ministry said without elaborating.

Timing presents a huge challenge because the two countries must wrap up the talks by the end of March at the latest. U.S. negotiators have until the end of March to present a deal to the Congress for a three-month review under George W. Bush's trade promotion authority (TPA). Bush's TPA, which runs out on July 1, requires the Congress to vote for or against a deal without amendments. There is very little chance that Bush's TPA will be extended by Congress.

The FTA issue is one of the hot potatoes for the 2007 Korean presidential election. Trade experts said that the signing of an FTA could be delayed until next year even if both sides reach an agreement and ROK lawmakers were willing to approve it. The main opposition GNP will block any attempt by the Roh Moo-hyun administration to sign the agreement with the U.S. during Roh's tenure which runs out in February 2008. Regardless of a possible approval of a Korea-U.S. FTA by the U.S. Congress before 1 July 2007 when Bush's Trade Promotion Authority (TPA) expires, there is no time limit for the National Assembly of Korea to ratify it or not. Thus the GNP could simply stall approval until after Roh's term in office.

But even if the ROK National Assembly did approve the FTA, the possibility that the U.S. House of Representatives will vote for the bilateral FTA is NOT high. With a new Democratic Congress in place with a protectionist view of business, the future of an FTA agreement with Korea remained cloudy.

"We have a 50-50 chance," Lee Hye-min, deputy chief of South Korea's 200-member delegation, said of this round of talks. "The prospects for success are not as low as seen by some." Time is running short for the talks that should be wrapped up by the end of March at the latest. U.S. delegates have until April 2 to submit a deal to Congress for a vote for or against without amendments. Under U.S. President George W. Bush's "fast-track" trade promotion authority which expires on July 1, a free trade bill requires a 90-day congressional review before voting. (Source: Yonhap News and Korea Times .)

They also "tentatively" decided to hold another round of talks in the U.S. in February, an indiction that they did not expect to wrap up the talks in this round. Talks on the areas left out at this round will be held separately at higher levels. "Ambassador Kim and I are going to have meetings not only on the three areas. We will have talks on all areas [during the sixth round] and will have high-level talks immediately following the sixth round," said the Wendy Cutler, US chief negotiator. (Source: Joongang Daily .) (SEE 2006: US-ROK FAIR TRADE AGREEMENT (FTA) NEGOTIATIONS for 2006 details of stalled negotiations.)

FTA Protests (Jan 2007) Free trade negotiations with the U.S. drew considerable protests in South Korea in the past. The violent anti-FTA protest last December injured over 60 people, causing some 670 million won ($720,000) in property damage nationwide. Farmers and activists claimed that if a trade deal is signed, it would devastate their livelihoods due to a flood of cheaper American goods. Police banned demonstrators from holding protests at the venue for the talks, the Shilla hotel in central Seoul, and several areas of the capital. Police will mobilize about 15,000 riot police to protect the venue and prevent demonstrations throughout the week, the Seoul Metropolitan Police Agency said. About 2,000 riot police were deployed around the hotel in eastern Seoul. All vehicles and people going into the hotel were checked. The anti-FTA demonstrations were scheduled throughout the five-day negotiations with farmers planning large-scale protests between 16-17 Jan.

On 15 Jan, at least 100 protesters, including farmers, clashed briefly with 1,800 riot police when they attempted to march into the hotel. No arrests or injuries were reported. Separately, nine DLP members, including Reps. Kwon Young-gil and Sim Sang-jung, launched a five-day hunger strike demanding the immediate halt of talks. "Immediately stop the pro-U.S. FTA negotiations," a lawmaker said. "The government is misleading the people and virtually giving up the country through an FTA. It must be stopped."

The Korean Alliance against the Korea-U.S. FTA, a coalition of civic groups, said it would stage a series of demonstrations during the five-day negotiations despite a police ban. "The Korean government has gained nothing during the past year of negotiations which have been kept secret from the public. There is no reason for the talks to go on," the alliance said in a news conference in front of the hotel.

The alliance held a candlelight rally in central Seoul on 15 Jan. The group had already launched a protest rally at Incheon International Airport as Wendy Cutler, a top U.S. negotiator, arrived in Korea on 14 Jan. The group expected about 20,000 farmers and workers to face off against 2,000 riot police in demonstrations planned for Daehangno, Seoul, on 16 Jan.

As police banned all protest rallies organized by civic groups - citing fears of violence and traffic congestion - the radical DLP on 15 Jan applied for a demonstration permit under its name. "Although we expect the demonstration to turn into a collaborated rally of all anti-FTA groups as was the case last December, we could not refuse the party's request according to the demonstration law," police said. The police asked lawmakers to disband immediately after the party demonstration, warning stern action would be taken should last year's violent scenes be repeated. Despite orders from police, anti-FTA activists joined with the DLP members in Daehangno in another massive protest against the negotiations.

As police tried to block regional activists from entering Seoul to join in the rally, about 40 Jeju islanders clashed with riot police at Jeju International Airport. "Because the anti-FTA protest led by the Korean Alliance against the Korea-U.S. FTA has not been permitted, we plan to block all regional protesters from entering Seoul in the first place," police said.

However, the turnout was much lower than anticipated. Despite a police ban, about 3,200 farmers and workers gathered in Daehangno, Seoul for a massive rally, and marched through the city to the Shilla Hotel, causing severe traffic congestion.

Religious groups held a separate anti-FTA protest in front of the hotel yesterday, announcing a joint prayer meeting of Christians, Catholics and Buddhists that call for the halt of the talks. Leaders of the three religious groups including Pastor Lee Se-woo and Father Kim Si-young took part in the public action.

A group of Oriental medicine doctors held a press conference on 14 Jan to reaffirm their opposition to a possible market opening. Members of the Association of Korean Oriental Medicine said that they would take every possible means to block the market opening. Washington reportedly asked Seoul to allow its medical doctors to practice in Korea without having to obtain a new local business license. The Korean government had said that the issue was not being discussed, but it was reported on 15 Jan that the FTA negotiations agreed to a reciprocal arrangement to accept the licenses of Oriental Medicine doctors from the US in Korea and the Korean licenses in the US. (Source: Joongang Daily and Korea Herald .)






FTA Protests (5 Dec 2006)

Sixth Round Ends (Jan 2007) The sixth round of talks in the Korea-U.S. free trade agreement (FTA), ended on January 19. As both countries held a series of high-level meetings on the sidelines of group negotiations, they saw partial progress made in the goods section by agreeing to abolish 99% of tariffs on those items within 10 years, but there was no notable result in contentious areas including automobiles, pharmaceuticals and trade remedies.

U.S. chief negotiator Wendy Cutler told the press at the Shilla Hotel, where the negotiations took place, “It was regrettable not to have patched up differences in automobiles and pharmaceuticals as hoped, but that there is no breakthrough to be announced shouldn’t be necessarily interpreted as something negative.” Cutler’s remark indicates that the U.S. request for a change in Korea’s tax code regarding cars has been accepted and both sides have managed to narrow down their differences through the behind-the-scenes meetings on pharmaceuticals.

However, as the U.S. remains on the offensive by pressuring Korea to resume U.S. beef imports, which is not up for the FTA negotiation, it is unlikely that the upcoming seventh round of the FTA negotiations will cut a complete deal. Korea’s chief negotiator Kim Jong-hun hinted at a remaining hurdle to overcome, saying, “We have been standing ten steps away from each other and have taken four steps forward. But by failing to make one more step forward, we both could see everything blown away.” Meanwhile, regarding the leak of a confidential document containing negotiation strategies submitted to the National Assembly by the Ministry of Foreign Affairs and Trade, the committee to support a successful conclusion of the Korea-U.S. FTA announced that it will find out who leaked the document and determine whether the leakage is legal, saying, “Checks and balances and even criticism should not cross the line.”

An unexpected breakthrough came when a leaked South Korean government report suggested that the country has virtually retracted its demand for the U.S. to revise its anti-dumping laws for Korean goods to be covered under the proposed free trade agreement.

In another sign of progress in Seoul, South Korea has expressed its intention to change its tax system to address a U.S. push to expand its auto sales here, said a South Korean official involved in the talks. "We've delivered our intention to change our tariffs on U.S. cars, based on their prices, not their engine capacity," the official said on the condition of anonymity. U.S. officials have long complained that the current Koran tax system based on engine capacity is disadvantageous to large U.S. cars. Cutler earlier had openly complained that U.S. manufacturers sold only 4,000 cars here in 2006 , which compared with 800,000 Korean cars sold in the U.S.

Cutler said both sides improved their offers to phase out tariffs on 500 industrial goods such as digital televisions and machinery worth US$1.9 billion, while South Korea agreed to improve its offer for 650 products worth US$1.6 billion dollars.

Korea and the U.S. are to have the seventh round of the FTA talks in the U.S. between February 11 and 14. (Source: Hankyoreh.)

White House Calls for Fast-Track Trade Authority Renewal (Jan 2007) The White House called on U.S. Congress on 29 Jan to renew a key trade negotiating authority that expires in Jul 2007, Reuters reported. Many business groups were disappointed when Bush did not call for a renewal of fast-track authority in his State of the Union speech in Jan.

Reuters reported that the outlook for world trade talks, suspended six months ago because of disagreements over how far to cut farm subsidies and tariffs, had brightened, raising hopes for a possible breakthrough. Many analysts believed Bush needed a breakthrough in world trade talks to have any chance of persuading the Democratic-controlled Congress to approve an extension of his trade promotion authority. According to Reuters many Democrats oppose free-trade agreements, while others say they can only support them if the Bush administration includes tougher labor and environmental provisions than it has so far. (Source: Korea Times.)

However, as soon as the White House asked for the extension, Lee Hye-min, who heads the Foreign Ministry's Korea-U.S. FTA Trade Promotion Team, said on 31 Jan that Korea would not withdraw its demand that the U.S. ease its anti-dumping rules, calling their revision a top priority in negotiations for a free trade agreement with the United States. Lee said Korean negotiators have placed top priority on the issue because the domestic business community regards it as the most important item on the agenda. He also predicted that high-level involvement in the FTA negotiations will be necessary if the two countries fail to narrow differences on certain key issues in the upcoming seventh round of talks. In addition, he stated that the Beef issue should not be linked to the FTA. (Source: KBS News.)

ROK Plans "Package Deal" (Feb 2007) South Korea said Thursday it plans to make a "package deal" on antidumping rules, automobiles and other key pending issues in next week's free trade talks with the United States. The next round of Seoul-Washington free trade talks, the seventh since last June, is scheduled for Feb. 11-14 in Washington. "The objective of the seventh round is to seek specific measures to make concessions on key issues by linking them with each other," Trade Minister Kim Hyun-jong said in a report to the National Assembly. "By making as much concessions as possible, the government plans to lay the groundwork to sign an agreement in time," he said.

The sides have achieved "significant" progress in less sensitive areas but admitted that they still have wide gaps in some sensitive sectors, including U.S. anti-dumping rules and South Korea's automobile and pharmaceutical markets. The two sides agreed to resume stalled formal negotiations on these three pending issues in Washington, Kim said. Negotiators are under time pressure.

In an unusual move ahead of next week's talks, South Korea's chief negotiator Kim Jong-hoon and Commerce Minister Kim Young-ju said their government are ready to make concessions on automobile and pharmaceuticals. Also ahead of the free trade talks, agriculture officials from both sides held two days of talks in Seoul earlier this week to try to resolve a trade spat over U.S. beef imports. The row is over South Korea repeated rejection of U.S. beef shipments after bone chips were found in them in violation of a 2006 agreement under which South Korea agreed to buy only boneless meat after ending a three-year import ban prompted by a mad cow scare. A group of poultry farmers held a rally on February 7 against the potential easing of quarantine regulations on beef imports from the U.S. in front of the National Veterinary Research Quarantine Service, at which the U.S. and Korean delegates were holding talks on related issues. (Source: Hankyoreh News.)

Although there is no official announcement about the degree of progress in the beef talks, South Korea's agriculture officials said on 7 Feb that their government may ease its quarantine rules on U.S. beef imports. Unfortunately, this was not true. On 9 Feb, Lee Sang-kil, director general at the ministry's livestock bureau said, "Our position on maintaining zero tolerance in terms of not allowing any bones or bone fragments into the country remains unchanged and we've explained this to our counterparts." He said Seoul also said it will continue to conduct x-ray screenings of all shipments entering the country to check for bones.


FTA Protests: (L) Candlelight Vigil (R) Protest of 0 benefits for Korea, while 169 concessions to US (15 Jan 2007)

7th Round of FTA Talks Begin (Feb 2007) Korean and U.S. negotiators entered their seventh round of talks for a free trade agreement in Washington D.C. from 10-14 Feb with time running out to conclude a deal. Seoul and Washington are holding talks until Wednesday with the hope of getting closer to agreeing on a mutually beneficial trade pact by the end of March. Korea has been facing U.S. pressure for wider access to its automobile, pharmaceuticals, and beef markets, while Washington has been pressured to soften its anti-dumping rules and open up its textiles market. Both sides need to make an agreement by the end of March to meet the June 30 deadline of the Bush administration's trade promotion authority. With the impending deadline, the Korean government stressed the need to "discuss" and "seek out" compromise on all issues. The Trade Ministry said that both sides decided to resume talks on areas suspended after the fifth round in December. They include trade rules, animal health and food safety measures, automobiles, pharmaceuticals, and medical devices.

But an ongoing trade dispute over U.S. beef imports raises questions about how the latest trade negotiations will fare. The two countries on Friday failed to narrow differences on the quarantine measures applied on U.S. beef imports. Washington has repeatedly emphasized that full market opening to American beef is crucial to realizing a successful trade agreement. (Source: .)

At the free trade talks themselves on 11 Feb, agricultural trade negotiations reportedly dominated the discussions, but little progress was reported. The negotiators are facing a March deadline for concluding a trade pact. Korean farm interests demonstrated near the site of the negotiations outside Washington, D.C., but no violence was reported. The protests were led by the Korean Alliance against KorUs FTA. (Source: Joongang Ilbo.)

The seventh round of FTA talks ended on an up-note with talk that an agreement was "imminent" in their nine-month-old negotiations after making "substantial" headway. Negotiators from Seoul made a series of concessions on key issues during the 7th round of negotiations in Washington D.C. that ended on February 14. South Korean negotiators presented an amended proposal regarding the trade remedies section of the agreement to the U.S. side after concluding it would be impossible to achieve South Korean goals on issues that would require a change of U.S. laws. However, others viewed this as FTA hype with a lot of disagreements over critical issues that remained unresolved. At the same time, the Korean activists were up-in-arms over the "concessions" the Roh government supposedly were making that would open the agricultural rice markets and key industrial advantages.

Some key issues, including U.S. anti-dumping trade remedies and South Korean auto taxation and pharmaceutical pricing, remain unresolved but Cutler said the negotiators have "a clear idea of the path forward." Cutler cited that specific achievements reached in Washington this week include duty-free status for electronically traded products such as software, music and movies and rules of origin for critical products such as chemicals, pharmaceuticals and plastics. "On industrial market access, the sides agreed to tariff improvements in important sectors such as chemicals, cosmetics, industrial machinery and IT," she said. Kim said both sides have agreed to immediately abolish tariffs on about 85 percent of industrial goods so far, excluding some sensitive farm products and automobiles. One of the most sensitive issues that both sides have barely touched is rice, the South Korean staple. While Cutler has said rice would be discussed at some point, Kim has argued rice should be excluded from the proposed deal, given the crop's political sensitivity for South Korean farmers. Kim said he was determined to shield rice from the deal.

Washington has strongly opposed any demands from Seoul that would require any change in legislation. However, on the other hand, legal experts said that many U.S. demands would require the alteration of Korean laws -- some especially written to implement protectionist practices.

Regarding the automobile sector, South Korea agreed to establish a system to take into account the opinions of U.S. companies whenever Seoul revises regulations that could affect the industry, such as standards on safety or the environment, added the official. The two sides also discussed ways to see eye-to-eye on South Korea's special consumption tax and to reduce steps related to imposing automobile tariffs based on the size of a car's engine displacement.

Seoul also accepted U.S. demands that South Korea allow U.S. financial firms which have branches in Korea to transfer Koreans' personal financial information overseas.

Wendy Cutler, the U.S. chief negotiator, said that Kim Jong-hoon, her South Korean counterpart, came up with new and innovative ideas in connection with trade, and stressed that the negotiations had been very successful. In relation to the automotive sector, Cutler added that the teams had discussed the improvement of various non-tariff barriers, as well as tax reforms.

In the meantime, the South Korean team said it had selected 100 out of 235 sensitive agricultural products for continued tarriff protection. As for the textile market, the U.S. presented its final proposal over high-tariff barriers and regulation of a product's place of origin. Kim, however, said that this proposal was not satisfactory to the South Korean side.

On the 7th round of FTA negotiations overall, Cutler called them "the most successful negotiating round so far" and said that the round brought "substantial progress." Kim said, "I can't say that an agreement is imminent, but considering the progress of this round of negotiations, it will be possible to reach an agreement in proper time." The 8th round of talks will open in South Korea between March 8 and 12. The two sides want to conclude the negotiations by April 2, the deadline per the soon-to-expire U.S. Trade Promotion Authority (TPA), which allows trade deals to be passed more easily through Congress.

Kim denied the claims made by a February 15 Hankyoreh report, which said that the nation is considering opening the market on some less sensitive rice products. Kim has maintained that Korea's rice market would remain untouched by an FTA with the U.S.

President Roh Moo-hyun had a telephone conversation with U.S. President George Bush, during which they reconfirmed their commitment to the success of the trade talks, said presidential spokesperson Yoon Seung-yong. The two presidents agreed to allow the FTA delegations to demonstrate flexibility and take the initiative in seeking a mutually beneficial way of reaching an agreement in a timely manner, added Yoon. (Source: Hankyoreh News.)

Rice Off the Table, but Congressmen Demand Auto Tariff Must Go (Mar 2007) South Korean officials expressed "regret" Sunday over U.S. lawmakers' demands that South Korea further open its auto market as part of a proposed free trade agreement (FTA) with the world's largest economy. On March 2, 15 members of the U.S. Congress, including nine democrats and six republican, sent a letter to President George W. Bush demanding that South Korea's 8 percent tariff on imported autos must drop to zero immediately, in exchange for the phased elimination of the 2.5 percent U.S. tariff on South Korean vehicles.

Over the past few years, U.S. automakers and politicians have raised their voice over the bias of the Korea-U.S. car trade. According to the Korea Automobile Importers & Distributors Association ministry, imported cars accounted for only 4.15 percent, or 45,000 units, of the domestic market last year. If pressed, this could be a "deal breaker." Complaints from Korean consumers also began to rise over the heavy tariff on foreign cars this year, after several news reports have revealed that Korean carmakers such as Hyundai are selling their products at higher prices in Korea where they have a virtual oligopoly.

At the same time, it was announced that both sides agreed that rice would be off the table for the FTA talks. The ROK stated that they would not budge on the opening of the rice market -- over what was agreed to under the WTO agreement. South Korea and the United States have in principle agreed to exclude rice from their free trade agreement (FTA) negotiations, an official of the Ministry of Foreign Affairs said on 4 Mar. If not, it would be a "deal breaker." The two countries were to begin their eighth round of FTA negotiation on 8 Mar in Seoul. (NOTE: On 8 Mar, the idea that rice was "off-the-table" was denied by Richard Crowder, the chief agricultural negotiator at the U.S. Trade Representative. Instead, Crowder stressed that all sectors including rice remained on the table.) (Source: Korea Times.)

KBS News reported that the ROK was likely to resume U.S. beef imports this month, as Korea and the U.S. were to discuss the matter at high-ranking agricultural talks in Washington 5-6 Mar, prior to the FTA talks. Though not on the table, it turned into a major obstacle in the last round of talks.


US Chief Negotiator Wendy Carter and ROK Chief Negotiator Kim Jong-hoon at 8th Round of FTA (8 Mar 2007)

8th Round of FTA talks (Mar 2007) The 8th round of talks opened in South Korea from March 8-12. Korea was prepared to drop products made in the Kaesong Industrial Complex. “The tension between the two governments was too extreme on the Kaesong issue,” said a high-level official who declined to be identified. “To stop the issue from becoming a ‘deal-breaker,’ a compromise was needed.” The United States has long refused to include products made in the complex, which is located just over the border in North Korea. The inter-Korean economic experiment uses North Korean labor and South Korean technology and management. The United States has opposed the complex itself, saying some of the profits may be a source of income for North Korean leader Kim Jong-il. As for products from the inter-Korean Kaesong Industrial Complex in North Korea, Wendy Cutler reiterated that they cannot be included in a bilateral FTA with South Korea.

Under the Korean plan, Kaesong would still be mentioned in the free trade agreement, but without any specific requirements or guidelines. Instead, such details could be resolved in separate discussions outside the trade pact, government officials said. Previous South Korean free trade agreements signed with Asean, or the Association of South-East Asian Nations, have conditional clauses regarding Kaesong-made products. Asean agreed to recognize 100 products made there as South Korean, but “may rescind” the clause within five years after the agreement goes into effect.

Meetings in Washington with representatives from the Ministry of Agriculture reported that it got rice to taken off the table, but the US insisted on the opening for apples and oranges. However, Richard Crowder, the chief agricultural negotiator at the U.S. Trade Representative, on 8 Mar denied reports that the two sides as good as agreed to exempt rice from the list of items subject to market opening. Instead, Crowder stressed that all sectors including rice remain on the table.

In meetings on beef prior to the start of the 8th Round, there was no headway in discussions in Washington. However, the ROK agreed to only return individual packages of meat the US proposing sending back on the boxes with chips instead of the entire shipment on 8 Mar in Seoul. However, the restraints on the import of American beef still looms as a concern. "The core of Korea's proposal here is based on what we call a 'zero tolerance' for bone chips. We just can’t agree with that proposal, given that it’s not based on science and is not commercially feasible,” Ms. Cutler said, insisting that Korea fully open its beef market. “Our Congress continues to make it abundantly clear to us that there will be no FTA without the opening of Korea’s beef market,” she said.

On 13 Mar the Korea times reported the World Organization for Animal Health (OIE), a global animal health body, was moving to categorize the American meat as safe to eat. The Paris-based OIE Scientific Commission endorsed an OIE recommendation that the U.S. be classified as ``controlled risk’’ for bovine spongiform encephalopathy (BSE), also known as mad cow disease.

The ``controlled risk’’ classification is an intermediate level, which is placed between ``undetermined risk’’ for countries vulnerable to mad cow disease and ``negligible risk’’ for countries free from the risk of BSE. ``The controlled risk classification recognizes that OIE-recommended, science-based mitigation measures are in place to effectively manage any possible risk of BSE in the cattle population,’’ argued Ron DeHaven, a senior official of the U.S. Department of Agriculture (USDA).

The OIE planned to announce its final classification decision on the U.S. in May when the organization’s General Assembly meeting is held. Canada will also likely be added to the OIE's list of countries where mad cow disease is controlled. (Source: Korea Times.)

Cutler said her team was determined to make every effort to satisfy U.S. congressmen who are calling for the removal of tariffs on U.S. cars in Korea. She also told reporters her country will give top priority to making American automakers compete with their Korean counterparts on an equal footing, a signal that talks on the auto market will be tough.

Many pundits remained skeptical of the success in the FTA talks by the 2 Apr deadline. As of 9 Mar, the two sides had only reached agreement in two areas, competition policy and customs affairs. Deals on high-profile areas including trade remedies, automobiles, pharmaceuticals and agriculture remain to be sealed.

Korea agreed with the U.S. to introduce a rule whereby violators would be let off if they promise a fair trade watchdog to correct their wrongdoings. The U.S., Japan and the EU adopted the system to speed up the resolution of antitrust cases, which are legally ambiguous and time-consuming to settle. A specific reference to “chaebol” -- Korea's large family-owned conglomerates -- in the footnotes of the agreement was deleted.

In the customs talks, the two sides agreed to streamline the clearance process to speed up the handling of imports and exports. They also agreed to check the origin of products to prevent a detour import of merchandise manufactured in a third country. In government procurement, Korea got its wish to exempt procurement by local governments and public companies from market opening, while in the U.S. the same will be true for state governments. They also agreed not to open up the school meal market. But agriculture, textiles and auto taxes are still up on the air. High-ranking textile talks collapsed on Sunday as the U.S. market opening proposal fell short of Korea’s expectations.

Both countries agreed to open their law markets on a three-phase process. In the final phase, lawyers could set up joint businesses with lawyers from the other country. Issues on accounting practices were also fixed, but the recognition of licenses for doctors and in other special areas remained unsettled. (Source: Joongang Ilbo and Chosun Ilbo.)

The eighth round of free trade agreement (FTA) talks ended on 12 Mar, though there still remained wide gaps in the issues of automobiles, beef and some sensitive agricultural products. The two sides were to hold a series of informal high-ranking meetings in Washington to clear the remaining obstacles. The two sides tried to conclude an eleventh-hour deal in two rounds of high-level talks. The free trade talks, which started last June, have been a success in small matters but failed to clinch a big deal. The two reached a series of agreements on competition, government procurement and customs clearance in this round but were stuck over more critical issues like agricultural goods, car taxes, pharmaceuticals, textiles and anti-dumping rules.

Korea and the U.S. made big headway on the financial sector on Monday. Seoul won concessions from Washington on one of thorniest financial issues -- exempting state-run financial institutions from market opening. Beneficiaries include the Korea Development Bank and the Industrial Bank of Korea. In return, Korea accepted the U.S. demand that Korean affiliates of U.S. financial firms will be allowed to share financial information with their overseas headquarters under the same U.S. protection as their mother companies. The new rule will go into effect within two years after the FTA is ratified.

The two effectively reached agreement on the environment, e-commerce, technical barriers to trade, sanitary and phytosanitary and financial sectors, with only technical differences remaining. In e-commerce, no customs will be imposed on electronic trade between the two countries. In technical barriers, the government will be able to intervene in choosing technology standards if it has reasonable policy goals.

Although the two sides say a deal is close, some hairy issues like agriculture, cars, textiles, anti-dumping and the inclusion of goods produced in the Kaesong Industrial Complex in North Korea still remain to be worked out. U.S. chief negotiator Wendy Cutler reiterated that access of U.S. cars to Korean markets remains her country’s priority, while her Korean counterpart Kim Jong-hoon said some sensitive issues still require “hard work and attention.”

During the eighth round, high-level talks on the margins of plenary negotiations were held to settle agricultural, textiles and financial issues. But the textile talks collapsed when the U.S. proposal for items subject to market opening fell short of Korea’s expectations. In the agricultural talks, the U.S. stuck to its demand that all markets must be open. Korean chief agricultural negotiator Bae Jong-ha said the two sides clashed even on principles. Although Korea reportedly softened its demand for the U.S. to ease anti-dumping rules for Korean exporters, Cutler still described it as hard to accept. Conversely, U.S. demands to change Korea’s drug-pricing system are unacceptable to Seoul.

Still, Seoul and Washington stand a higher chance of concluding the FTA than ever since they are committed to wrapping up the trade negotiations by late this month so it can be ratified before the Bush administration’s authority to fast-track trade deals expires. The two are expected to reach for a “big deal” in critical issues at high-level talks to be held in Seoul and Washington on March 19. They will determine success or failure. But the eight rounds of trade negotiations did help Korea and the U.S. narrow the gap on less critical issues. (Source: Chosun Ilbo.)

Protests during Eighth Round On 8 Mar a group of about 870 people, including 23 lawmakers, voiced their opposition to the free trade talks underway in Seoul, said organizers, witnesses and police. About 100 of them marched toward the presidential office, Cheong Wa Dae, after the conference, demanding the government immediately suspend the negotiations and disclose details, but were stopped short by riot police, witnesses said. Another group of 33 lawmakers, some of whom had been at the earlier conference, gathered in the National Assembly to oppose the trade deal, organizers said. On 9 Mar about 50 people, mostly affiliated with women's groups, rallied near the presidential Blue House in Seoul, denouncing the proposed deal.

On 10 Mar riot police used a water cannon to break up a noisy but peaceful street protest in downtown Seoul. Police fired several bursts from a water cannon into the crowd of about 2,000-3,000 protesters, mostly farmers, workers and students, after they ignored a warning to disperse as temperatures dropped to freezing in early evening. Some scuffles broke out as police pushed the demonstrators back, but there appeared to be no major injuries on either side. Some in the crowd began to disperse, while others eventually marched away. 10 people were supposedly detained. A National Police Agency official said 18,000 riot police were being mobilized across the city to prevent protests. 12,000 were to be positioned around the hilltop hotel where negotiators were meeting.

Currently, the Korean Alliance Against KorUS FTA includes Hanchongryon, the Korean Confederation of Trade Unions, the Korean Teachers and Education Workers’ Union, Tongil (Reunification) Solidarity, the Korean Peasants League, Korean Government Employees’ Union, National Union of Media Workers, People's Coalition for Media Reform, People's Solidarity for Participatory Democracy.

Roh threatens to scrap FTA deal with U.S. President Roh Moo-hyun said on 13 Mar that his government may choose to scrap free trade negotiations with the United States if South Korea's economic interests are not properly reflected in the final deal. "We're in a dilemma (over free trade talks with the U.S.), but we'll not rush for an early and unconditional conclusion," said the president at a Cabinet meeting at his office Cheong Wa Dae. "I've instructed Korean negotiators to thoroughly take real economic benefits into consideration in the free trade talks. Security and other non-economic factors will never be considered. Unless our interests are fully secured, we'll not bother to sign the deal by the (end-of-March) deadline," said Roh.

Roh also instructed his Cabinet ministers to consider settling for an "intermediate or lower" level FTA deal with the U.S., if South Korea has any product items that can never be opened to American competition. "We can scrap the deal or not. We can extend the deadline or not. We can choose among low, intermediate or high level of agreement. But any final deal should be thoroughly based on practical national and public interests," said the president. "The (Korean) people's opposition to an FTA with the U.S. still remains strong. But the government should not give too much consideration to such a political burden. I stress again all the negotiations have to be carried out in accordance with the principles of a merchant. We can persuade the people in a straightforward manner." (Source: Hankyoreh News.)

Thirty-eight lawmakers from five different political parties gathered on 16 Mar at the National Assembly to urge the government to scrap its negotiations for a FTA with the United States. After a month-long hibernation, Rep. Kim Geun-tae, former chairman of the pro-government Uri Party, also resumed his political activity with a pledge to oppose the signing of the FTA. ``The Korea-U.S. FTA has been pushed ahead in a hasty manner due to the Bush administration’s trade promotion authority,’’ the lawmakers said in a statement. ``The South Korean government should make much more efforts to prepare the very crucial agreement from a long-term perspective.’’ (Source: Korea Times.)

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FTA Talkers Reveal Their Sneaky Tricks (Mar 2007) The atmosphere between Korean and U.S. trade negotiators soured during sectional talks on Monday, the last day of the eighth round of free trade talks at the Hyatt Hotel in Seoul. Korea's chief negotiator in charge of the section threw some documents and threatened to walk out after the U.S. suddenly attached a new condition as the two sides were nearing a conclusion.

In the end the U.S. backed down and an agreement was reached. But this wasn't the only case of low tactics and high tensions during the trade talks that spanned nine months and two continents. Here is a glimpse into what has gone on behind those closed doors.

Insults and rude tricks

With each side struggling to gain an advantage over the other, diplomatic courtesies weren't always followed. The diplomats would at times jump to their feet in anger or even flat-out insult the other side. For example, when the Korean negotiators demanded an increase in how much foreigners can own in U.S. telecom companies, the Americans told them to forget it -- because the Koreans didn't have enough money to afford them.

A leading Korean negotiator said that both teams frequently used tactics to take control of the talks or confound the other side. “We would leave the room on the pretext of going to the bathroom, but then we wouldn't come back for 30 or 40 minutes,” he said. ? Unofficial contact

The talks weren't limited to the conference tables. Sometimes the negotiators from both sides would continue their discussions and build up trust over a meal or drinks outside the official negotiating venue. And they weren't drinking water: “One night we were downing boilermakers with the U.S. team,” a top Korean negotiator said.

Language as a weapon

Because most of the Korean team members have master or doctoral degrees from American universities, they're fluent in English and the negotiations took on a format where sectional chiefs speak directly to the U.S. delegates in English.

While translators were used when issues became so specific that the negotiators had to have a precise understanding of the details, the Koreans weren't afraid to dismiss them when they thought it would give them an advantage. A Korean chief sectional negotiator said, “Sometimes we didn’t use translators on purpose because then we could deny a previous agreement, claiming that we made a mistake because of our poor English.” (Source: Chosun Ilbo.)

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ROK-US Attempt "Package" Deal at FTA Talks (Mar 2007) Top South Korean and U.S. officials met in Washington behind the closed doors on 19 Mar, determined to clear last-minute hurdles to a proposed free trade agreement before an end-of-March deadline. Unable to resolve a handful of agricultural and other sensitive issues in 10 months of formal negotiations, both sides scheduled a series of informal "backroom" sessions, with only top-level negotiators participating. The two chief delegates -- Kim Jong-hoon from South Korea and Wendy Cutler from the U.S. met. Outstanding issues include automobiles, agriculture, anti-dumping remedies, pharmaceuticals and textiles.

If there are still are outstanding issues after the three-day meeting, their superiors -- South Korean Trade Minister Kim Hyun-jong and U.S. Trade Representative Susan Schwab -- will meet in Seoul at the end of March. If there still are issues hanging in the balance after those meetings, the two countries' presidents may have to be asked to intervene. (SITE NOTE: With the opposition stiffening in Korea with Uri Party lawmakers against the FTA AND Congressional opposition if the beef, rice and auto sectors are not opened, the option of a presidential intervention will probably not happen. Though South Korea's National Assembly supporters far outnumber opponents, Roh has already promised to kill the FTA if the terms are "disadvantageous" to the ROK economic interests.)

In Seoul, South Korea's Assistant Agriculture Minister Min Dong-seok and Richard Crowder, the chief agriculture negotiator for the U.S. trade office, opened three days of talks on 19 Mar to try to narrow differences on a range of outstanding farm products, including rice, oranges, pork, pears. Also on their table is a trade row over U.S. beef imports to South Korea. U.S. officials warned that Congress would not support a deal with South Korea unless its beef market is fully opened. (Source: Yonhap News

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U.S. Insists on Talking Rice in Top-Level FTA Talks (Mar 2007) U.S. negotiators have informed their Korean counterparts that the tricky issue of the Korean rice market will be on the agenda in ministerial talks scheduled on Monday in Seoul. “The U.S. chief agriculture negotiator Richard Crowder said the issue of opening the Korean rice market will be included in next week's minister-level talks,” Min Dong-seok, the deputy minister of agricultural trade policy, told reporters.

The U.S. chief negotiator Wendy Cutler previously said rice would have to be dealt with. But this is the first time that U.S. negotiators have directly pinpointed the rice market, which Korea is particularly keen to protect. Min said Korean negotiators had strong concerns and were saying the U.S. delegation's insistence on opening Korea’s rice market would “derail” the FTA talks. He added the two sides in the latest round narrowed the gap in some areas, but differences over key issues including beef, oranges and pork could not be resolved. (Source: Chosun Ilbo.)

An estimated 7,500 protesters gathered on 25 Mar at Seoul Plaza in front of City Hall to rally against ongoing negotiations between Washington and Seoul for a free trade agreement. After the rally, which was sponsored by the left-leaning opposition Democratic Labor Party, the protesters occupied Sejongno and Euljiro, bringing traffic in the area to a standstill. The free trade negotiations resumed on 26 Mar in Seoul as the two countries tried to solve tough sticking points on automobiles and agriculture.

On 30 Mar, some 5,000 activists, farmers and workers held an all-day protest against the proposed free trade agreement (FTA) between Korea and the United States nationwide, the last day of the talks. Their candlelight vigil continued until late into the night in downtown Seoul, causing traffic chaos. After the vigil, some 1,000 demonstrators broke the police barrier around the plaza and tried to enter Chong Wa Dae. They clashed with police, halting traffic there.

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Comparison US versus ROK Trade (Mar 2007)

US-ROK FTA in hands of Presidents (Mar 2007) President Roh Moo-hyun and his U.S. counterpart George W. Bush discussed knotty issues in bilateral free trade negotiations for 20 minutes on 29 Mar, less than two days before the deadline for trade talks. Presidential spokesman Yoon Seung-yong said the two presidents mainly talked about auto taxes, textiles and the opening of the Korean agricultural market. He added Roh and Bush did not touch on the full opening of the Korean rice market but did not elaborate on the details.

According to Yoon, the two presidents reiterated their will to clinch a free trade agreement as a way of maximizing the mutual interest of both countries. The two heads of state decided to ask negotiators from both countries to show as much flexibility as possible in the trade talks. Observers speculate that the two agreed a broad deal given that their phone conversation came this close to the deadline and followed coordination among senior officials from the two countries.

Earlier, speaking before the National Cattlemen's Beef Association in Washington on 28 Mar, Bush said the U.S. government’s goal is to persuade countries that ban the import of some U.S. beef, like Japan and South Korea, to “fully open” their beef markets. He said the U.S. government’s efforts to give beef exporters full access to such countries is an important part of U.S. foreign policies. All eyes are now on Roh’s decision about the FTA’s fate. The two delegations still have a pile of unresolved issues on their hands as the deadline, 7:00 a.m. on 31 Mar, looms.

Decision time

By saying he may have to “surrender” one or two things to conclude the FTA, Roh hinted the decision will be his. Close associates say the president is mulling over last-minute variables but continues to believe that an FTA between Korea and the U.S. is needed. Members of the Korean delegation are paying keen attention, given that Roh told them after the penultimate round of the FTA talks was finished there was no point concluding the deal by the deadline if the negotiations are unfavorable to Korea.

Roh maintains a style of making drastic decisions in important matters if things don't go in the direction he favors. A senior member of the Korean delegation said, "All delegation members are of the opinion that they should conclude the negotiations under any circumstances. But it’s possible that the president might instruct us to stall the negotiations unless satisfactory results come out before we brief him."

Decision time on 30 Mar

Roh will likely make his final decision on the afternoon of 30 Mar. In the afternoon, he presides over a meeting of economic affairs-related ministers to discuss whether to conclude the negotiations, and make a final decision. Whether the deal is concluded or not, Roh will make a statement on the Korea-U.S. FTA talks to the nation on 1 Apr. (Source: Chosun Ilbo.) (SITE NOTE: The Uri Party is lining up votes to oppose the FTA Agreement in the National Assembly -- including hunger strikes by presidential hopefuls. Likewise there are reports that the Democrats are sounding negative as to the FTA Agreement.)

FTA Decision Extended Two Days (Mar 2007) South Korea and the United States decided to extend their free trade agreement (FTA) talks by two days until 2 Apr. At a news briefing early 31 Mar, chief Korean negotiator Kim Jong-hoon said, ``Negotiations may continue to 1 a.m., April 2 (Korean Standard Time), or the noon of April 1 (U.S. Eastern Time).’’ In a statement, U.S. Trade Representative (USTR) spokesman Sean Spicer said April 1 is the deadline for Congressional notification under the Bush administration’s trade promotion authority. U.S. negotiators are required to notify the Congress of the final results by 6 a.m., April 2 (KST) and 5 p.m., April 1 (ET).

To meet the deadline, the two sides agreed to declare the accord, with promises to codify technical details over the next two days. After 422 days of tough negotiations, the Roh Moo-hyun administration is looking to clinch the deal, which is regarded as one of the major achievements of his presidency. The Korean government unveiled a package of measures to help farmers and other people who would lose out in the FTA. The Ministry of Finance and Economy said in a report to the National Assembly that it would provide relief measures to the losers but this would entail more of a burden on taxpayers. (Source: Yonhap News.)

As the trade talks ticked down to the last minute, lawmakers waited to get their hands on the deal. The leadership of both the Uri Party and the opposition Grand National Party reiterated their support for the free trade pact, although a small multiparty group of legislators continue to reject the deal. While demonstrations against a trade pact with the United States were held nationwide again on 30 Mar, they failed to gain the momentum needed to apply significant pressure on the administration.

The National Assembly must vote the deal up or down with no amendments. The same is true for the U.S. Congress. The deal could have a hard time in the U.S. Congress with the Democratic Party controlling both houses and leaders worried about the the U.S. trade deficit with Korea.

But it is not all clear sailing. Representative Kim Geun-tae, a former Uri chairman, has been on a hunger strike to protest the deal. He released a letter to Mr. Roh, asking that the talks be halted. Uri defector Representative Chun Jung-bae, said, “Concluding a deal without national consensus is an act that can only take place under a dictatorship.” A group of 48 lawmakers from different parties have formed a coalition to oppose a deal. The rest of the 296-member assembly seems likely to pass a deal -- as long as agriculture is left untouched. (Source: Joongang Ilbo.)

The hysteria started reaching a fever pitch. Protestors were at all major subway entrances in Seoul chanting against the FTA. On 1 Apr, a taxi driver set himself ablaze yesterday in protest against Korea-U.S. free trade talks outside the hotel where the negotiations were taking place. Korean and American negotiators were conducting last-minute talks to finalize the deal. Heo Se-ok, 56, a member of the Korean Confederation of Trade Unions and the Democratic Labor Party, dumped l.5 liters of a flammable liquid on his body and set himself on fire with a cigarette lighter at 3:55 p.m. on the road 20 meters away from the Grand Hyatt Hotel, witnesses said. Policemen extinguished the fire immediately and sent him to a nearby hospital. He suffered third-degree burns over his entire body and was in critical condition last night, police said. Witnesses said he was shouting "Stop the Korea-U.S. FTA" while he was engulfed in flames. This is the first time that a Korean antifree trade activist attempted to kill himself since 2003, when Lee Kyung-hae stabbed himself to death in Mexico in protest against World Trade Organization talks.

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Korea, U.S. Reach Historic Trade Deal (Apr 2007) Korea and the United States concluded talks for a free trade agreement in Seoul on 1 Apr, which would be the biggest trade accord ever for Seoul and the largest for Washington since NAFTA in 1993. Once the deal is ratified, the United States will become Korea’s fourth trading partner with which it has signed a free trade deal after Chile, Singapore and the Association of Southeast Asian Nations (ASEAN). Except for the multilateral North American Free Trade Agreement (NAFTA), the accord is regarded as the biggest deal among the 211 FTAs signed worldwide. The agreement will eliminate duties on products such as South Korean autos and apparel, and cut investment barriers for American insurers and financial companies.

Trade between the two nations was worth almost $77 billion in 2006, according to South Korea's Commerce Ministry. A free- trade agreement may boost U.S. exports to Asia's third-largest economy by as much as $19 billion annually, while South Korea stands to get a $10 billion jump in exports to the U.S., according to the U.S. International Trade Commission.

"We have a deal," Stephen Norton, spokesman for the U.S. Trade Representative, told The Korea Herald in Seoul on 1 Apr. This brings to an end the laborious and intense negotiations that began in June 2006. Both sides began their final week of talks in Seoul on March 26. The accord, which was reached 10 minutes before the self-imposed deadline, marked one of the most significant developments in the countries’ bilateral relations.

The $29 billion accord is expected to boost Korean exports to the United States by $19 billion and U.S. exports to Korea by $10 billion, according to the U.S. International Trade Commission. Breakthroughs were made in sensitive areas for both Seoul and Washington.

Textile and Apparel Seoul received wider access to the sensitive U.S. textile market, however, given the proposal of a mid- to long-term phase-out period of between five and 10 years. Concerning the issue of allowing Korean textile goods made of material from a different country, such as China, the United States accepted only linen, women's jackets and men's shirts. The U.S. will immediately abolish tariffs on 61 percent of Korean textiles and garments, and exclude major Korean textile exports such as linen, rayon, men's shirts and women's jackets from the so-called yarn-forward rule that forces exporters to use U.S. or Korean yarn in any product. The two will strengthen cooperation to prevent detour exports of cheap Chinese and Southeast Asian textile products to the U.S. via Korea.

According to the USTR, the agreement adopts the "yarn forward" rule, meaning that, generally, apparel using yarn and fabric from the United States and South Korea qualifies for preferential tariff treatment. The agreement provides reciprocal duty-free access immediately for most textile and apparel goods. The agreement contains strict customs enforcement provisions. U.S. and Korean customs authorities may conduct unannounced site visits to Korean producers and the United States is authorized to undertake a variety of enforcement actions (up to and including denying entry for suspect goods). The agreement contains a special textile safeguard, allowing the United States to impose tariffs on certain goods should injury occur due to import surges. As in past free trade agreements, there is a provision to ensure visible linings that originate from the United States or Korea. The agreement contains mechanisms that allow the Parties to modify the rules of origin to address the availability of fibers, yarns, and fabrics.

Agricultural Market Historically, Korea has been one of the most protected agricultural markets in the world. The ROK farmers here have been criticized for being spoiled by the government with one of the highest subsidies among OECD-member countries. The KORUS FTA supposedly will create highly valuable new export opportunities for American farmers and ranchers by eliminating and phasing out tariffs and quotas on a broad range of products. Under the agreement, over $1 billion worth of U.S. farm exports to Korea will become duty-free immediately. Most remaining tariffs and quotas will be phased out over the first ten years the agreement is in force.

Korea opened up its sensitive agriculture markets, including poultry, pork and oranges. The trade-off, however, was that Seoul would have to eliminate the tariffs between a five- and 10-year period. Seoul also managed to assuage Washington on the sticky issue of beef, which U.S. negotiators have said would be crucial for winning support for an FTA from Congress. According to Bloomberg.com, South Korea will abolish its 40 percent tariff on U.S. beef over 15 years and the pork tariff over 10 years. The current 40 percent tariffs on beef will be removed over the next 15 years, but the Korean beef industry will be temporarily protected by a safeguard whereby tariffs rise when there is a surge in imports. Seoul and Washington will discuss the resumption of U.S. beef import after May, when the World Organization for Animal Health (OIE) reviews its classification of the U.S. as a "controlled risk" region for mad cow disease.

The U.S. backed down from its original demand for a written guarantee on the full re-opening of the Korean beef market and compromised on a verbal promise. President Roh Moo-hyun made the promise in a public statement on 2 Apr. A fully open South Korean market for U.S. beef would be worth about $1 billion a year, according to Greg Doud, chief economist for the National Cattlemen's Beef Association. Bush said last week that persuading South Korea to remove beef restrictions was ``an important part of our foreign policy.'' However, the US did not get a "full opening." While the ban on beef is not officially part of the free-trade agreement (FTA) clinched after 10 months of negotiations, both sides acknowledge that U.S. lawmakers would block any deal unless the issue is resolved, Deputy U.S. Trade Representative Karan Bhatia said. ``I don't think the Congress will approve an FTA with Korea without the full reopening of Korean beef market,’’ Bhatia told reporters on a conference call from Seoul. ``We have made that very clear to Korea and they understand that.’’ (SITE NOTE: On 2 Apr Agriculture Minister Park Hong-soo said Seoul will follow an eight-point checklist to determine whether or not American beef is a threat to human health. He stressed that while Seoul can use the OIE recommendation as reference, it need NOT adhere to it. (Source: Yonhap News. However, by 10 Apr the message from the ROK was that beef "with bones" would be considered in the future -- a dramatic turnaround in the ROK position.)

However, the US on 4 Apr sent a message very plainly. "There has to be clear path before we would sign and send that up to Congress," U.S. Trade Representative (USTR) spokesman Sean Spicer told reporters. He spoke immediately after Deputy USTR Karan Bhatia told a press conference that he made clear to Seoul the Congress would NOT approve the FTA without the resolution of the beef issue. Bhatia said more than once in his press conference that Congress will not approve the FTA until the beef issue is settled satisfactorily for the U.S. side. Spicer said a "clear path" means complying with the OIE standards, "and knowing that things were on track for U.S. beef to go through.")

The decision underscores the importance of Korea's beef market to the United States. Korea was the world's third-largest market for U.S. beef before an import ban was placed in late December 2003 after the 4 discovery of a case of mad cow disease in Washington state.

In the end, rice was removed from the table. The two sides eventually agreed to exclude rice from the FTA. About half of South Korean farmers grow rice, and duties keep prices about four times that of the world average, according to a report by the American University in Washington. South Korea's 35 trillion won ($37.3 billion) agricultural production will decline by as much as 2 trillion won a year under the proposed accord, according to the Seoul-based Korea Rural Economic Institute. Production of beef, chicken and other meat may fall by as much as 1 trillion won a year as U.S. imports gain ground, the report said. ``We tried to protect the profits of farmers as much as possible during the negotiations,'' President Roh Moo-Hyun said in a nationally televised speech. ``If their income is cut because of increased imports, the government will maintain it.'' (SITE NOTE: According to one estimate, the government spent as much as 45 trillion won in support for farming households in the wake of the Uruguay round of multilateral trade negotiations and committed itself to an additional 1.5 trillion won after concluding a free trade agreement with Chile three years ago. These subsidies were ineffective in reshaping the agricultural infrastructure -- and simply were subsidies without any meaningful results in switching farmer from rice production to special crops. Most of the 50 billion of dollars in subsidies were wasted because the government did not want to commit itself to the painful restructuring that would lead to the opening of the rice markets. The government failed to make correct estimates of damage to different agricultural sectors and allocate resources fairly and efficiently for the affected farming households. As a consequence, Korea is ill-prepared for the market opening forced upon it by the FTA.)

Tariffs on apples, pears, pork and chicken will be removed over the long term. The tariff on pork will be lifted in an unusual way. The two countries agreed to scrap tariffs on pork by 2014. But Korea will decide on its own to what extent it will lift them in the meantime. To protect the Korean agricultural industry from repercussions, Korea will apply a tariff rate quota and maintain tariffs on U.S. potatoes, honey, beans and powdered milk. With the quota, Korea can impose lower tariffs on a certain amount of such products. In the case of oranges, Korea will maintain the current 50 percent tariff between September and February the following year, when domestic mandarine oranges are in season, but for the rest of the year it will be reduced to 30 percent. In seven years, this will be eventually abolished. A tariff rate quota will be applied to 2,500 tons of U.S. oranges a year.

According to the USTR, more than half ($1.6 billion) of current U.S. farm exports to Korea will become duty-free immediately, including wheat, feed corn, soybeans for crushing, hides and skins, and cotton, plus a broad range of high value agricultural products such as almonds, pistachios, bourbon whiskey, wine, raisins, grape juice, orange juice, fresh cherries, frozen french fries, frozen orange juice concentrate, and pet food. U.S. farm products benefiting from expanded market opportunities with two-year tariff phase-outs include avocados, lemons, dried prunes, and sunflower seeds. US farm products benefiting from expanded market opportunities with five-year tariff phase-outs include food preparations, chocolate and chocolate confectionary, sweet corn, sauces and preparations, other fodder and forage (alfalfa), breads and pastry, grapefruit, and dried mushrooms. Other U.S. farm products that will benefit from expanded market access opportunities through tariff rate quotas include skim and whole milk powder, whey for food use, cheese, dextrins and modified starches, barley, popcorn, and soybeans for food use. Market access was also expanded for beef and pork products, pears, apples, grapes and oranges. (Source: Synopsis of ROKUS FTA.)

Increased Access for US Autos Automobiles, another sticking point, also saw an amicable conclusion. Korea agreed to provide immediate elimination of its eight percent tariff on American cars, as well as changes to its non-tariff barrier of levying tax based on engine size within three years. It will also overhaul within three years its auto tax system, under which a flat special excise tax of 5 percent is levied on cars and streamline its car taxation scheme. The U.S. will ``immediately'' scrap tariffs on Korean cars with engines of three liters or less and on auto parts, Bhatia said. It will phase out duties on bigger engines within three years, on tires within five years and on pick-up trucks within 10. South Korea exported $6.6 billion a year in automobiles to the U.S. between 2003 and 2005. Auto part exports during the same period averaged $1.4 billion annually. Pick-up trucks will have tariffs eliminated in five years.

The United States in return agreed to immediately remove its 2.5 percent tariff on Korean cars with engine sizes of under 3,000 cc. The tariff on automobiles with engines larger than 3,000 cc will be removed in a three-year period. Korean policymakers also agreed that the American cars sold here will be regulated by the emission standards of the state of California, not by the stronger local standards. Seoul agreed with the U.S. to introduce expedited procedures whereby tariffs will be restored if the other side violates an auto-related agreement. (SITE NOTE: On 5 Apr, it was revealed that "foreign" luxury cars manufactured in the US such as the Lexus 350 and BMW 3-series will be regarded as "made-in-United States" if more than ``65 percent’’ of their parts are American products under U.S. laws. Under a free trade agreement (FTA) with South Korea, the U.S. could export cars produced by Japanese or European companies including Toyota Motor and the BMW Group as well as products from the home-grown General Motors and Ford Motor. Trade Minister Kim Hyun-chong did NOT make public the U.S. auto-related rule on ``65-percent’’ of auto parts, said Prof. Lee Hae-young of Hanshin Uniiversity. Auto experts said the coming elimination of the 2.5 percent tariff on Korean cars will be meaningless, predicting the ratio of Hyundai-Kia’s production in U.S. plants will reach 70 percent in two to three years. (Source: Korea Times.))

The Chosun Ilbo reported that Korea and the U.S. agreed to reduce tariffs on hybrid cars by 0.8 percent a year over the next 10 years until levies disappear completely. Japanese cars manufactured in the U.S. will hit the Korean market without tariffs, as the two agreed to recognize cars with more than 50 percent of U.S.-made components as made in America. Hyundai Motor will complete development of its own hybrid cars by 2009 and produce 300,000 units a year of the environmentally friendly automobiles that run on both gasoline and electricity, by 2015. The extended tariff removal period will therefore give domestic carmakers time to sharpen their competitive edge. The government will also offer tax breaks to encourage the use of the environment-friendly autos.

The removal of tariffs is expected to expand Korean auto exports to the United States by $860 million in the first year, a 10.7 percent increase, the Korea Institute for International Economic Policy said. For the United States, it would mean a big chance to level the playing field for American auto companies, which suffer a small import volume compared with the demand for Korean cars in the United States. South Korea sold more than 800,000 vehicles worth US$10.8 billion in the U.S. last year, while U.S. automakers exported only about 4,000 vehicles to South Korea.

According to the USTR, the agreement includes a broad range of focused provisions designed to open up Korea's auto market to U.S. cars and ensure that U.S. cars have a fair opportunity to compete in Korea. It eliminates the discriminatory aspects of Korea's Special Consumption and Annual Vehicle Taxes. In addition, it commits the Korean government not to impose any new engine displacement taxes and to maintain non-discriminatory application of those taxes. Korea agrees to address specific auto non-tariff barriers to ensure they do not impede the market access of U.S. autos, and to create an Autos Working Group to serve as an early warning system to address regulatory issues that may develop in the future. The FTA contains innovative expedited dispute settlement process for auto-related measures that violate the FTA, with a full snapback of MFN car tariffs in the case of a violation. Finally it establishes an Autos Working Group to address regulatory issues that may develop in the future. Korea also agrees not to adopt technical regulations that create unnecessary barriers to trade, and to cooperate to harmonize standards. (Source: Synopsis of ROKUS FTA.)

Kaesong Industrial Area Both nations agreed to discuss ``at a later stage'' goods made at an industrial complex in the North Korean city of Gaeseong, South Korea's Kim said. South Korea began financing the 25-acre complex in 2002 as part of its policy of engaging with North Korea. Bhatia said the U.S. doesn't want those products covered by any agreement. ``Let's be clear,'' he said. ``Gaeseong is not in this FTA. There is nothing in the agreement that will allow goods processed or made in North Korea to enter the U.S.'' By using the so-called “built-in” method, the two sides will address the issue of the inter-Korean Kaesong Industrial Complex in North Korea AFTER the FTA goes into effect. Korea wants to include products from the industrial park. The same standard will be applied to products manufactured in other inter-Korean economic cooperation zones. The two sides agreed to establish a committee that will designate inter-Korean joint ventures as outward processing zones if some conditions are met, like progress in efforts to make the Korean Peninsula nuclear-free and improvements in North Korea’s human rights.

However, even before the ink was dry on the agreement, Yonhap on 3 Apr reported that incoming Prime Minister Han Duck-soo said that goods produced in a joint industrial complex in the DPRK will benefit from a free trade pact agreed upon with the US the previous day. Denying reports that the free trade agreement put aside the country-of-origin issue for future negotiations, Han said that the two countries cleared the way for treating goods produced in the Kaesong Industrial Complex as made in the ROK. In a press conference right after the FTA was concluded on 2 Apr, Trade Minister Kim Hyun-chong said, "The United States has agreed, in principle, to designate an outward processing zone. The products made at the Kaesong Industrial Complex will also benefit from the FTA”, provided a committee “designates the Kaesong Industrial Complex as such a zone." In a statement on the same day, President Roh Moo-hyun said, "We have laid the foundation for having products from the Kaesong Industrial Complex recognized as South Korean goods." (Source: Chosun Ilbo.)

Service Industry The government emphasized even before the launch of the FTA talks that one of its main objectives was the opening of the services sector, to hone its competitiveness and create more jobs in education, healthcare, legal work and accounting. Unfortunately, Washington didn’t see the services industry as a negotiating card as much as Korea did. Chief U.S. negotiator Wendy Cutler said from the beginning that they were not interested in the education or healthcare services. Korea is not an attractive market for U.S. hospitals as Korea bans profit-making medical corporations. A Korean negotiator for the FTA said it is regrettable to note that the FTA had not covered certain service sectors such as education, medical, legal and accounting services.

The grand scheme suffered a setback from the outset due to the opposition of interest groups. The losers are Korean consumers who have to pay more for globally uncompetitive services. According to the OECD, Korea ranks first in private tutoring spending against GDP among its members. The ratio is 2.9 percent for Korea. Korea is estimated to have recorded a $3.4 billion deficit in education and $400 million deficit in medical services last year. In the end, the opening of the service market, which had been expected to strategically boost the competitiveness of the ROK industry, stopped short of the ROK expectations.

The two countries also reached an agreement for a phased opening of Korea’s legal service market. Korean law firms have five years to prepare for their competition with their bigger U.S. rivals, which will then be able to form partnerships with Korean firms and hire local talent. Korean law firms are worried that the U.S. firms will take the domestic market by storm, sweeping most of the lucrative legal work by snatching up the big deals of multinational companies and luring away blue-chip clients from local competitors.

The agreement will expand market access and investment opportunities in a number of service sectors, including telecommunications and e-commerce. According to the USTR, Korea vastly improved upon its WTO commitments in services, providing meaningful market access commitments that extend across virtually all major service sectors and include services supplied both cross-border (such as through electronic means) as well as through a commercial presence. Korea's commitments provide U.S. service suppliers with new opportunities and greater assurance of their rights and privileges in the robust Korean market. Significant progress was made in the area of express delivery services, where Korea provided greater and more secure access to international delivery services and charted a course for future reform on domestic services. Korea also made great strides on legal services, opening for the first time to foreign legal consulting services and committing to phase in additional liberalization that will permit foreign lawyers to more freely associate with Korean lawyers and offer a broader range of services. Similar steps were taken for accounting services. Korea also provided meaningful commitments in the areas of health care and education services, guaranteeing that current health care reforms in special economic zones will be maintained and extending new market access commitments in the areas of higher education and distance adult education. Other areas where Korea offered improved access include research and development services, services incidental to mining, maintenance and repair of equipment, and environmental services. (Source: Synopsis of ROKUS FTA.)

Financial Services According to the USTR, under the agreement, the U.S. financial institutions: (1) have full rights to establish or acquire financial institutions in Korea to supply a complete range of financial services; (2) may establish branches of U.S. banks, insurance companies, and asset managers; and (3) have rights to supply cross-border a specified list of financial services, including portfolio management services for investment funds in Korea. Korea committed to ensure regulatory reforms in the financial services sector, such as increasing the allowance of foreign currency reserves, bancassurance reform, more regularized and transparent regulatory procedures, adoption of a negative list approach to financial sector regulation, regional integration of data processing, and leveling the playing field between private insurers and Korea Post and cooperatives selling insurance services. (Source: Synopsis of ROKUS FTA.)

Broadcast market for U.S. audio-visual products, Telecommunications Market and E-Commerce The USTR predicts that the FTA will expand market access and investment opportunities in a number of service sectors, including telecommunications and e-commerce. It also says the agreement will boost market opportunities for U.S. audio-visual products. But this elides the U.S. side's dissatisfaction over a failure to prize the Korean service market, including educational and medical services, open further.

According to the USTR, the FTA provides improved market access concerning broadcasting and audiovisual services, including a commitment to phase-in over three years 100 percent foreign ownership of program providers for U.S. firms that establish a Korean subsidiary. It provides for a commitment to lock in all other content requirements at the least restrictive level allowed under current law, including the motion picture screen quota. In also provides for a commitment to decrease Korean TV content quotas for key audiovisual products (film and animation). It provides a commitment to allow U.S. controlled companies to invest up to 100 percent in Korean broadcast program providers (channel operators) after two years. It provides a commitment to permit U.S. investment in IPTV and to bind Korean content quotas in the platform. (SITE NOTE: The USTR use of the word "commitment" is suspect as this means the ROK "intends" -- but not necessarily is held to a standard.)

The agreement includes a commitment by Korea to permit U.S. companies to own up to 100 percent of an operation in Korea. It also ensures U.S. operators cost-based access to the services and facilities of dominant Korean phone companies, including their submarine cable stations, facilitating U.S. companies' ability to build competing networks to serve customers in Korea. The FTA also includes groundbreaking safeguards on restrictions that regulators can impose on operators' technology choice, particularly in wireless technologies, where U.S. service and equipment suppliers have strong competitive advantages.

In the area of E-Commerce, the ROK agreed to non-discriminatory and duty-free treatment of all digital products (e.g., software, audio-visual products, etc.), whether imported in physical form or over the Internet. It also agreed to principles ensuring consumers' reasonable access to the Internet for electronic commerce. In addition, it agreed to commitments facilitating the use of electronic authentication in their respective markets. (Source: Synopsis of ROKUS FTA.)

Pharmaceuticals and Medical Devices Under the deal, the Korean government will deny a local pharmaceutical company the license to sell generic drugs should the U.S. company that produced the original drug file a lawsuit over patent infringement. Currently, Korean firms were allowed to produce generic drugs after the patent right of the original drugs expires. However, considering that most Korean companies had been filing for the license to sell generic drugs before the patent deadline to fast-track its market release, critics argue that the new deal has the same effect of extending the patent rights of U.S. drug companies. Korean drugmakers have been focusing more on producing generic medications than developing new drugs, with most of their income coming from making similar but less expensive products to U.S. pharmaceuticals. Generic drugs accounted for 69 percent of the total number of medications sold in the Korean market last year. The drug sector had been one of the three most sensitive issues in the FTA negotiations, along with agriculture and automobiles.

U.S. drugmakers will be able to secure longer exclusive sales periods for their products in Korea. They will also have more control when determining the price of their products in the Korean market. Korean drugmakers anxiously insist that their larger U.S. rivals would expand their domination of the domestic market and that Korean firms would sustain up to 2 trillion won (about $2.14 billion) in losses each year with mid- and small-tier companies bearing the brunt of the blow. However, the ROK government argues that the loss will be only about $57-100 million in its $8.9 billion market. (Source: Korea Herald.)

According to the USTR, there was agreement on common principles on facilitating high-quality health care and continued improvements in public health for nationals. It provides a commitment to increase access to innovative products, including through ensurance the fair, reasonable, and non-discriminatory treatment for pharmaceutical products and medical devices. It provides commitments on transparency in the pricing and reimbursement process for pharmaceutical products and medical devices. There was agreement to adopt and maintain measures to prohibit improper inducements by pharmaceutical products and medical device manufacturers and to enforce such measures. There was agreement to establish a Medicines and Medical Devices Working Group that will provide for continued dialogue between the United States and Korea on emerging health care policy issues. There was agreement by Korea to establish and maintain an independent body that reviews recommendations or determinations regarding the pricing and reimbursement of pharmaceutical products and medical devices. (Source: Synopsis of ROKUS FTA.)

Trade Dispute Remedies Under the deal, the two countries are expected to launch trade remedies commissions, which will give advance notice and go through discussions prior to antidumping inspections into each country’s products. Seoul and Washington also agreed to allow exceptions at their discretion in applying safeguards if goods from one country do not cause damage directly to the other. To Korean observers, this was an unsatisfactory aspect of the agreement.

The agreement ensures that U.S. investors in Korea will have the same rights and enjoy equal footing with Korean investors. These rights will be backed by a stable, transparent legal framework. According to the USTR, the FTA contained important new protections for US investors. It establishes a stable legal framework for U.S. investors operating in Korea. All forms of investment will be protected under the agreement, including enterprises, debt, concessions and similar contracts, and intellectual property. With very few exceptions, U.S. investors will be treated as well as Korean investors (or investors of any other country) in the establishment, acquisition, and operation of investments in Korea. Pursuant to the Trade Promotion Authority (TPA) statute, the agreement draws from U.S. legal principles and practices to provide U.S. investors in Korea with substantive and procedural protections that foreign investors currently enjoy under the U.S. legal system. These include due process protections and the right to receive fair market value for property in the event of an expropriation. The investor protections are backed by a transparent, binding international arbitration mechanism, under which investors may, at their own initiative, bring claims against a government for an alleged breach of the chapter. Submissions to investor-state arbitral tribunals will be made public, and hearings will generally be open to the public. Tribunals will also be authorized to accept amicus submissions from non-disputing parties. (Source: Synopsis of ROKUS FTA.)

The Korean government concentrated on quite different issues. It emphasized that in connection with investor-to-state dispute (ISD) cases, real estate and tax policies will be excluded from lists subject to "indirect expropriation," for which American investors can be compensated when state policies unintentionally infringe the interests of American investors.

Copyright and Trademark Protection According to the USTR, the FTA provides trademark protection for sound and scent marks, as well as certification marks. It requires a system to resolve disputes about trademarks used in Internet domain names, which is important to prevent "cyber-squatting" with respect to high-value domain names. It applies principle of "first-in-time, first-in-right" to trademarks and geographical indications, so that the first person who acquires a right to a trademark or geographical indication is the person who has the right to use it. It provides for an on-line system for the registration and maintenance of trademarks, as well as a searchable database and requires transparent procedures for the registration of trademarks, including geographical indications. It prevents requirements for license recordation in order to establish the validity of that license.

The FTA protects music, videos, software, and text from widespread unauthorized sharing via the Internet by giving copyright owners to ability to maintain rights over temporary copies of their works. It provides extended terms of protection (e.g., life of the author plus seventy years) for copyrighted works, including phonograms, consistent with emerging international standards. It establishes strong anti-circumvention provisions to prohibit tampering with technologies (like embedded codes on discs) that are designed to prevent piracy and unauthorized distribution over the Internet. It requires that government agencies use only legitimate computer software, setting a positive example for private users. It requires rules to prohibit the unauthorized receipt or distribution of encrypted satellite signals, to prevent piracy of satellite television programming. It provides rules for the liability of Internet Service Providers (ISPs) for copyright infringement, reflecting the balance struck in the U.S. Digital Millennium Copyright Act between legitimate ISP activity and the infringement of copyright.

In the area of patents and regulated products, the FTA provides for the extension of patent terms to compensate for delays in granting the original patent. It permits inventors to publish their inventions in journals and still have 12-months before their own publication will prevent patenting that invention. It protects against arbitrary revocation of patents and assures protection for newly developed plant varieties and animals. It clarifies that test data submitted to a government for the purpose of product approval will be protected against unfair commercial use for a period of five years for pharmaceuticals and 10 years for agricultural chemicals. It requires measures to prevent the marketing of pharmaceutical products that infringe patents, and to provide notice when the validity of a pharmaceutical patent is to be challenged. (SITE NOTE: The ROK considers this area unfair as the rules will in effect extend the patent period and limit the manufacturing of generic drugs by Korean companies.)

The FTA criminalizes end-user piracy, providing strong deterrence against copyright piracy and trademark counterfeiting. It requires parties to authorize the seizure, forfeiture, and destruction of counterfeit and pirated goods and the equipment used to produce them. It provides for customs enforcement against goods-in-transit, to deter violators from using ports or free trade zones to traffic in pirated products. It streamlines customs procedures to increase efficiency of enforcement. It permits customs officials and prosecutors to bring an IPR enforcement action without having to wait for a formal complaint from the right holders, providing for more effective enforcement. (SITE NOTE: Though the ROK has made progress in this area, it has only been a few years since it was removed from the USTR watch list.) (Source: Synopsis of ROKUS FTA.)

Protection and Promotion of Worker Rights According to the USTR, both parties reaffirm their obligations as members of the International Labor Organization (ILO), and shall strive to ensure that their domestic laws provide for labor standards consistent with internationally recognized labor rights. The agreement makes clear that it is inappropriate to weaken or reduce domestic labor protections to encourage trade or investment between the United States and Korea. The FTA requires Korea and the United States to effectively enforce their own domestic labor laws, and this obligation is enforceable through the agreement's dispute settlement procedures. It contains procedural guarantees that ensure that workers have access to fair, equitable, and transparent proceeding for enforcement of labor rights. It establishes a process for further cooperation on labor matters, including possible joint cooperative activities to advance common objectives and work on labor law and practice in the context of the ILO Declaration on Fundamental Principles and Rights at Work. (SITE NOTE: This also impacts on the Kaesong Industrial area and the ROK involvement in the use of North Korean workers.) (Source: Synopsis of ROKUS FTA.)

Environment Protection According to the USTR, the FTA requires each party to effectively enforce their own domestic environmental laws, and this obligation is enforceable through the agreement's dispute settlement procedures. It commits each party to establish high levels of environmental protection and to strive to ensure that it does not weaken or reduce environmental laws to attract trade and investment. It promotes a comprehensive approach to environmental protection. Procedural guarantees that ensure fair, equitable, and transparent proceedings for the administration and enforcement of environmental laws are complemented by provisions that promote voluntary, market-based mechanisms to protect the environment. It highlights the importance of public participation in the successful implementation of the Agreement and requires a public submissions process to ensure that views of civil society are appropriately considered. It builds on the history of collaboration and cooperation between the United States and Korea on bilateral, regional, and multilateral environmental matters under a parallel Environmental Cooperation Agreement. (SITE NOTE: Unfortunately, the ROK is one of the largest polluters of their own environment through illegal dumping and indiscriminate disposal of toxic wastes directly into the environment. This provision is mostly for show -- but what it does is state that the US is not responsible for the ROK's problems. The ROK activist groups have targeted the USFK -- and American companies can also become targets as well.) (Source: Synopsis of ROKUS FTA.)

Government Procurement Contracts According to the USTR, the ROK grants U.S. suppliers rights to bid on more contracts to supply Korean government ministries, agencies, and other central government entities than are covered under the WTO Agreement on Government Procurement (GPA), to which both countries are a party. It covers the purchases of more than 50 Korean central government entities, nine more than are covered under the GPA. The United States added one more entity than it covers under the GPA (the Social Security Administration). It expands the procurements to which U.S. suppliers will be ensured non-discriminatory access by reducing by nearly half the threshold applied by the GPA. Procurements above the threshold are opened under the FTA. Low-value procurements are excluded from the FTA. It builds and expands on the WTO Agreement on Government Procurement by incorporating important improvements that reflect the current practices in procurement, such as: (1) Reducing the tendering period where procurement notices and other procurement information are made available electronically; (2) Reducing the tendering period for commercial goods and services (off-the-shelf goods and services); and (3) Encouraging use of electronic procurement. The FTA provides for a working group on government procurement to take up any issues, in particular, those related to information technology. (Source: Synopsis of ROKUS FTA.)

Increased Transparency According to the USTR, the FTA includes strong transparency obligations, including commitments that the national governments will publish proposed regulations in advance, allow a reasonable opportunity to comment on the proposed regulations, address significant substantive comments received, and publish final regulations in an official journal of national circulation. Additional transparency provisions apply in the areas of customs administration, pharmaceutical reimbursement, technical regulations, services, financial services, and telecommunications. The FTA requires transparency in the operation of the FTA. The agreement's dispute settlement mechanisms provide for open public hearings, public access to documents, and the opportunity for third parties to submit views. (SITE NOTE: Everyone has sought to get the ROK to increase its transparency within its business infrastructure. From the late 1980s, there have been calls to improve transparency in all areas of ROK business -- but very little progress, though a lot of lip service to the "transparency" issues.) (Source: Synopsis of ROKUS FTA.)

Technical Barriers to Trade According to the USTR, the FTA strengthens disciplines to promote transparency in the way governments develop and apply technical regulations and related conformity assessment procedures (e.g., testing and certification). For example, Korea will be obliged to: (1) provide national treatment to U.S. persons for participation in the development of standards, technical regulations, and conformity assessment procedures; (2) publish criteria it uses to recognize conformity assessment bodies; (3) explain objectives and how proposed regulations will address those objectives when regulations are notified for comment and again when they are adopted as final; (4) make available to the public all comments received on proposals; (5) notify proposals for comment, even if they are based on international standards; (6) allow 60 days for written comments on proposals; (7) publish notice of proposed and final regulations in a single official journal; and (8) when publishing a final regulation, include responses to significant comments received along with an explanation of the revisions made to the proposal.

The FTA requires Korea to make binding the WTO TBT Committee Decision to promote reliance on international standards that are consensus-based. In areas where Korea recognizes non-governmental bodies to perform testing and certification for compliance with its technical regulations, commitment to provide national treatment to U.S. conformity assessment bodies and otherwise for Korea's government authorities to provide national treatment when testing and certifying U.S. products. It establishes a bilateral committee to strengthen FTA and WTO commitments on TBT. This committee will monitor implementation, promote cooperation, and facilitate discussion of such topics as good regulatory practice and alternative regulatory approaches to facilitate the cross-border acceptance of conformity assessment results. (SITE NOTE: This has been a major area where the ROK simply changes the rules whenever it wants to protect an area -- regardless of the agreements negotiated and ratified by both parties. This has been a consistent thorn for anyone doing business in Korea. The prime example is the quarantine by Customs officials of the shipments of beef.) (Source: Synopsis of ROKUS FTA.)



Customs Procedures and Rules of Origin According to the USTR, the FTA provides agreement on landmark, cutting-edge commitments on customs administration, rules of origin, and origin procedures that will ensure that the U.S. and Korean private sector stakeholders lock-in and maximize the benefits of the FTA. It provides an agreement on transparency and publication commitments that will ensure our respective private sectors have access to each others customs laws and regulations, and have an opportunity to comment on proposed changes to customs laws/regulations before they are implemented. It provides an agreement to streamlined and trade facilitative customs procedures for the timely and efficient release of goods that will facilitate the "just-in-time" supply chain logistics systems utilized by each party's private sector. The United States and Korea also agreed to allow for advance electronic submission of manifests and trade data to ensure that goods are cleared with a minimum of delays; in many cases goods can clear customs before they physically arrive at the importing party's port. It provides an agreement to maximize the use of automation and electronic clearance to expedite the release of goods. It provides an agreement to establish expedited customs procedures for express shipments through the electronic submission of manifest and the release of express shipments before they physically arrive. These commitments reflect the importance of the express shipment industry to the functioning of our respective industrial and service sectors. It provides an agreement to allow importers, exporters and producers the ability to obtain binding advance rulings from each side's respective customs authorities on matters such as tariff classification, whether a good qualifies for preferential tariff treatment and country of origin marking, among a list of items. This provision will provide unparalleled transparency, predictability, and certainty to bilateral trade between the United States and Korea.

The FTA agreed to trend-setting origin procedure commitments governing how importers will make claims for preferential tariff treatment. These trade facilitative customs procedures rely on importers to make claims for preferential tariff treatment, while allowing importers, exporters and producers the flexibility of issuing certifications that need not be in a specific, stylized format. The United States and Korea also agreed to allow importers to make claims based on the importer's knowledge that the good is originating, which reflects the fact that importers today have intimate knowledge of the production process, and the source of the inputs/components from which comprise their goods, and therefore possess the necessary information to make a claim for preferential treatment.

The FTA provides an agreement to clear and comprehensive product-specific rules to determine which products can benefit from the preferential tariff treatment of the FTA. (Source: Synopsis of ROKUS FTA.)

Signing of FTA by Roh and Bush -- and Rough Road in Congress On 5 Apr it emerged that Korea and the U.S. were discussing a Roh visit to Washington in late June, where he and U.S. President George W. Bush would sign the FTA. According to diplomatic sources, the two countries were discussing a stopover during Roh's overseas tour in late June. The idea has apparently been under discussion through diplomatic channels since last month, even before the FTA was concluded. The FTA will be subject to a parliamentary ratification only after the two governments review it for two to three months, and either the president or an authorized government representative signs it officially.

When the negotiating parties finally sign the agreement in late June, the U.S. executive is expected to submit the bill to enact the agreement between the end of July and August. Then, a vote on the bill will take place through several stages, including the House ways and means, the House of Representatives, the Senate finance committee, and finally, the Senate.

The U.S. Congress has 90 days to review the agreement before making their decision. Seoul and Washington anxiously concluded a deal on 2 Apr, just in time to meet the absolute deadline for meeting the July 1 deadline of the Bush administration's trade promotion authority. This so-called fast-track authority gives the White House the right to expedite trade deals because Congress can only approve or reject the deal, but cannot alter it.

(SITE NOTE: Though the DLP and Uri Party have some staunch objectors to the FTA, there is a 2:1 advantage for acceptance of the FTA. Acceptance of the FTA is expected in the National Assembly. Major political parties in South Korea initially backed the deal, but as opposition to the deal grew, they said that they would first examine the details of the trade pact before deciding whether or not to vote for it. The Uri Party and GNP both chose to study the FTA impacts before deciding. The GNP said they will soon launch an in-house panel to study ways to reduce damages the trade deal will likely inflict on South Korean farmers and workers. A group of lawmakers who recently defected from the Uri Party also said they will operate a task force to assess the pros and cons of the FTA. Analysts say it is unlikely the pact will be ratified before the December election, as political parties and politicians cannot risk either explicitly supporting or rejecting the deal, which would cause them to lose votes from some interest groups. Some even speculate that the deal will be voted on after the parliamentary elections, set for April 2008.

However, U.S. industries and legislators expressed varying degrees of discontent at the free trade agreement (FTA) with South Korea, with some senators with their constituency's interests at stake immediately vowing to block the deal. The agreement leaves for future negotiations South Korea's full resumption of American beef imports. It excludes rice for the Seoul side but lowers South Korea's tax regime for U.S. automobiles. These three items became the target of congressional attacks. The car industry also expressed discontent at the level of agreed terms. The Automotive Trade Policy Council said its member companies are waiting for the undisclosed elements of the auto provisions in the FTA. "However, based on what we know, this agreement does not appear to meet our expectations," it said in a statement.)

Both sides have said that they would aim for a high-quality FTA that is mutually beneficial.

Benefits of FTA According to a Korea-U.S. trade study by The Heritage Foundation, a U.S.-based economic think tank, a Korea-U.S. FTA is expected to benefit both partners by injecting new competition into their domestic economies, lowering consumer prices, and leveling the playing field for exporters. The authors of the study, published in May 2005, also tout the timeliness of a bilateral pact. The Korean government expects the FTA to increase the share of Korean passenger cars, LCD monitors, camcorders, polystyrene, earphones and color TVs in the U.S. market, as tariffs on all manufacturing products will be abolished within 10 years. They agreed to lift tariffs on all IT products. In a press conference on Monday where two countries announced the conclusion of the trade talks, Korean top trade negotiator Kim Jong-hoon predicted tangible effects, calling the extent of tariff removal “very high.

"While free trade is certainly best pursued globally to minimize barriers and distortions in trade, the slow pace of negotiations in the World Trade Organization (WTO) has led many nations to pursue free trade through bilateral and regional agreements, allowing countries to customize agreements that meet the needs and concerns of individual countries," according to the report.

A USTR report released in February 2006 showed that reducing Korea's average applied tariff of 11.2 percent, three times greater than the U.S. average of 3.7 percent, on all products will be of significant benefit to U.S. businesses, farmers and workers.

Korea is the world's 11th-largest economy, and the United States Korea's second-largest export market after China. Korea is America's seventh-largest export market. In 2003, Korea was the United States' fifth-largest market for agricultural products, and third-largest beef market, according to U.S. Department of Agriculture data. (Source: Korea Herald, Chosun Ilbo, Korea Times, Korea Times, and Bloomberg.com.)

Impacts of FTA U.S. President George W. Bush has notified Congress that trade talks have been concluded. Negotiators in Seoul announced the deal that will eliminate nearly 85 percent of tariffs on the trade of industrial goods between the two countries. With the 2 Apr notification, the Congress will soon go into its 90-day review of the FTA before approving or rejecting the deal. In a letter notifying the U.S. Congress of the FTA, President George W. Bush said, "The U.S.-South Korea free trade agreement will generate export opportunities for US farmers, ranchers, manufacturers and service suppliers, promote economic growth and the creation of better paying jobs in the U.S." He pledged to cooperate with Congress, which is controlled by the Democrats, to see the trade deal ratified. American exporters also welcomed the news. The National Association of Manufacturers (NAM) and the Coalition of Service Industries (CSI), the oldest business lobby groups in the U.S., urged Congress to ratify the FTA as soon as possible. The NAM said the FTA will further enhance U.S. competitiveness in Asia. The American Farm Bureau Federation also welcomed it, recalling that the share of American agricultural produce in the Korean market dropped to 30 percent in 2004, from 45 percent in 1996, due to China and Australia. The FTA offers an opportunity to rectify that, it added.

The FTA was expected to serve as a catalyst for Korea to rescue its economy from a protracted downturn. (SITE NOTE: This "protracted downturn" is the recession that the ROK government under Roh Moo-hyun refused to admit to for over three years until conditions got so bad that it could not deny it. The only thing supporting the ROK statistics was the export driven economy -- while the domestic economy has gotten to a state where the lower-income families can no longer pay their bills and now 48 percent of the populace feel they are in the lower-income bracket. Though there will be trickle down improvements in the economy, unless the chaebols and large industries stop the use of temporary hires -- and terminating them at the two-year mark to prevent them from becoming permanent employees -- there will be no change in the plight of the average person. Given that fact that its rapidly aging populace, lack of a viable society due to a 1.2 birth rate, multi-billion dollar military upgrades, falling FDI, jobs fleeing the country, and overly-ambitious, ill-advised and costly social programs, this FTA will have limited impact in the big picture on what experts call a prematurely "middle-aged" economy.)

The response from all business-oriented organizations in the ROK was positive. (Source: Chosun Ilbo.) Yonhap News reported on 9 Apr that Prime Minister Han Duk-soo said the ROK government would make public the full texts of its free trade agreement with the US in May. A team of 210 private experts were reviewing the documents, and the analyses were slated to be finished by the end of this month, the prime minister said. In the meantime, the local newspapers were providing their analysis of the FTA agreement -- category by category -- to report on the impacts to the Korean economy.

Concerns of ROK Neighbors to FTA News of the Korea-U.S. FTA has already increased the concerns of neighboring countries. Chinese Commerce Minister Bo Xilai recently indicated his nation’s determination to clinch a free trade deal with Korea, reportedly saying in a private conversation China would “run into the FTA with Korea with its eyes closed.” His remarks hint at Beijing’s view that binding China and Korea into a single economic bloc would allow China to check the Korea-U.S. economic alliance. The Japanese, meanwhile, are worried that the deal could sharpen the competitiveness of Korean firms, accelerating the “hollowing out” of Japan’s manufacturing industry. Korean chief negotiator Kim Jong-hoon likened the FTA to an expressway junction. “When you miss an expressway junction, you are bound to lose time and money,” Kim said. “The junction Korea cannot afford to miss is the Korea-U.S. FTA.” (Source: Chosun Ilbo.)

Chinese trade experts believe that China may see its exports to the U.S. decline in the short term but foresee no inevitable disadvantages in the long term. Wang Yong, the director of the Peking University Center for International Political Economy Research, said, "With the conclusion of the South Korean-U.S. FTA, China may see exports of machinery to the U.S. or exports of agricultural produce to South Korea decline. But from the Chinese standpoint, this will offer Chinese enterprises an opportunity to make efforts to enhance their corporate competitiveness." Economist Su Dongpo said, "It seems the U.S. made many concessions to Korea in the negotiations in an effort to curb China's rapid growth by using South Korea." Chinese experts predict the deal will also spur Korea-China FTA talks, which are in their initial stage.

Japan’s Nihon Keizai Shimbun said South Korea, which worries about being “squeezed” between Japan and China, is affirming its presence as a “hub” with the FTA. The newspaper said the FTA puts Japan at risk of lagging behind South Korea in the market for some products, including cars and components. It criticized the Japanese government for failing to keep pace with the global trend of trade liberalization due to its tariffs on agriculture and fisheries products. The Kyodo news agency said South Korea concluded the FTA with the U.S. based on President Roh Moo-hyun's determination to get there before Japan and China. Jiji Press said that the bilateral FTA will likely make up for the politically shaky Korea-U.S. alliance in economic terms. (Source: Chosun Ilbo.)

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SEE Synopsis of ROKUS FTA from the US Office of Trade Representative.

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What the FTA Will Mean for Consumer Prices (Apr 2007) How much cheaper will American goods get now Korea and the U.S. have concluded a free trade agreement? Of course, consumer prices of imported American goods will not drop immediately as much as tariffs even after the FTA takes effect. It’s possible, for example, that separate taxes may be levied on imported goods, or importers may set their prices strategically high. Tariffs are normally imposed on the import price, so there naturally exists a gap between import and consumer prices -- plus importers tend to be cagey about the exact import price. Taking all that into account, the Chosun Ilbo studied possible price changes of some items to show how consumers could benefit.

Goods where tariffs are scrapped immediately

This category includes items which Korea does not make or where Korea has an advantage over the U.S. Thus a 5-8 percent tariff will be scrapped on Gold Hills almonds. Their current price of W3,970 (US$1=W936) per 170 g will drop to W3,661-W3,781. Refrigerators also come under this category. An 8 percent tariff immediately lifted on a 703-liter GE refrigerator will lower the current price of W2.2 million to around W2 million. Currently, a mere 5,000 American cars are sold in Korea per year, though that could change due to price cuts. A Ford 500 currently costs W39.8 million. With the 8 percent tariff gone, the price will drop to W36.86 million. A Ford dealer said, "We’re already getting a dozen calls a day asking how much the price cut will be." With the tariffs lifted, Japanese cars made in the U.S. could also be imported. A Toyota Camry 2.4 sells in the U.S. for about W26 million.

Wines are also in this category. The price of Napa Valley Cabernet Sauvignon, the bestselling American wine, will likely fall to W63,700 per bottle, down 15 percent from the current W75,000 when the FTA goes into effect.

Goods where tariffs are lifted in three to five years

Tariffs for most daily necessities will be lifted in three to 10 years' time. Tariffs of toothpaste and perfume will drop over three years. Glister Multi-Action Fluoride Toothpaste is currently W5,500 per 200g. But when the 8 percent tariff is lifted, its price will fall to W5,060. Polo Black perfume costs 96,000, dropping to W88,320. Tariffs on golf clubs, lobsters and electric shavers will be scrapped completely in five years. Thus a Gillette Fusion razor is currently W12,000 but will drop to 11,040 three years hence. The price of lobsters will plummet. Currently, a 20 percent is levied on Alaska lobsters, so two 650 g Alaska lobsters sell for W65,000. That will drop to W52,000 in five years. But a lobster dealer said, "Most of the lobsters sold in the country are from Canada. In the past, we used to deal in American lobsters a lot, but it’s not easy to find them now because they don’t taste so good."

Goods where tariffs will be lifted in 10 years or more

The tariffs of most agricultural produce will be lifted in 10 or more years. But due to the wide gap in prices between Korean and American products, imported American agricultural produce will likely affect consumers greatly as soon as they are imported at all. Thus domestic beef sirloin is about W32,000 per kg, 2.7 times the price of American product (W12,000). Even if a 40 percent tariff is levied, American sirloin is still half the price of the variety. Domestic samgyeopsal (fresh bacon) is W12,000 per kg, but the American product W7,500. However, samgyeopsal is unlikely to be affected greatly, because it is imported in large quantities from Chile and Europe at similar prices. The tariff on pork will be lifted in an unusual way. The two countries agreed to scrap tariffs on pork by 2014. But Korea will decide on its own to what extent it will lift them in the meantime.



On oranges, the tariff is a very high 50 percent. From September to February, when oranges are in season here, the current tariff rate of 50 percent will be maintained. In other months, a tariff rate of 30 percent will be levied for seven years. Thus Dole oranges, which are currently imported, will be sold for W580 to W800 apiece from September to February, but once the tariff is gone, they will be about half the price. (Source: Chosun Ilbo.)

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20-40 laws need revision -- or is it 169??? (Apr 2007) Kim Jong-hoon, the chief South Korean negotiator in free trade talks with the United States, said on April 11 that South Korea is believed to need to about 20 laws in the wake of the South Korea-U.S. free trade agreement (FTA) signed on April 2. In an interview with Yonhap News Agency, Kim said, "Four categories, including agriculture, aren't totally decided upon yet. After analyzing the remaining 15 categories, about 15 laws will need revision. In total, about 20 laws need revision. Including ordinances and notices, about 40 will need revision."

Kim's remark is in contrast with estimates made in January by civic organizations that said 169 laws will need to be revised because they are in conflict with the terms of the South Korea-U.S. FTA. The Ministry of Foreign Affairs and Trade also said previously that 36 laws should be changed.

Lee Tae-ho, an official at the People's Solidarity for Participatory Democracy, said, "At this point, it's hard to believe that only 20 laws need to be changed. In the category of automobiles alone, five laws on taxation and environmental standards should be revised." Lee urged the government to disclose the agreement's original text to verify the government's one-sided explanation. "It's also problematic that the government seems to think that having to change 20 laws isn't that many," Lee said. "The U.S. didn't change a single law because of a possible conflict with Congress. However, the Korean administration infringed upon the National Assembly's constitutional rights because the administration negotiated with the U.S. to change domestic laws without consultations with the Assembly." (Source: Hankyoreh News.)

US Businesses Urge Ratification, while ROK thinks Potential Gain/Loss Lower than Expected (Apr 2007) Donga Ilbo reported on 30 Apr that Bloomberg reports that U.S. business leaders in banks, insurance, and pharmaceuticals sent a joint letter to Congress on April 25 to urge the ratification of the KORUS Free Trade Agreement (FTA). The letter says that the KORUS FTA is all about eliminating trade barriers blocking exports to the ROK and that the FTA is economically important to both sides and helps to develop a strategic relationship. (SITE NOTE: The automotive industry is not all that thrilled and the first of the make-or-break beef shipments entered Korea without interference of customs inspections for "bone chips." The FTA ratification remains tenative.)

Joongang Ilbo reported on 30 Apr that the potential gains and losses for the ROK from a free trade pact with the US will be smaller than expected, 11 state-run think tanks said yesterday, because a large number of service industries were excluded from the agreement and many exceptions for agricultural and marine products were allowed. According to the think tanks "joint estimate, the agreement will lift the ROK's annual gross domestic product by just 0.6 percent on average for the first 10 years" lower than an earlier forecast of 0.8 percent.

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Possibility of US FTA Renegotiation Rears Head -- BUT nixed (Apr 2007) The U.S. chief negotiator in trade talks with Korea, Wendy Cutler, hinted her government wantsed to renegotiate part of the just-concluded bilateral free trade agreement on 11 Apr. But the Korean government said there would be no additional talks except to fine-tune technical terms. HOWEVER, on 14 Apr, Wendy Cutler, the U.S. chief negotiator for the Korea-U.S. FTA talks, cleared up the U.S. position on a possible renegotiation, saying, "The U.S. has never mentioned a renegotiation of the Korea-U.S. FTA talks." She pointed this out in a press conference with Korean reporters who visited Washington, saying, "Some Korean people say that the U.S. will return to the negotiating table, but such remarks are very inaccurate."

Cutler said that there was consultation going on between the U.S. administration and Congress over labor and other issues in the FTA. "We made Korea aware of these discussions, and once the discussions are concluded, we will then be in a position to figure out with Korea the best way to move forward." She admitted that there are some conflicting opinions between the two nations over some issues after the initial agreement of the talks and said, "We are going to release the previous agreement in order to eliminate all confusion."

But Prime Minister Han Duck-soo brushed off the hint on 12 Apr, saying, "We can't accept a proposal for a renegotiation of the FTA with the U.S." Foreign Minister Song Min-soon said, "We can't completely rule out that the U.S. might propose a renegotiation. But we have made it clear that there won't be additional talks. We are of the view that the talks have now come to an end." "We can't rule out the possibility that the US might propose a renegotiation in the labor and environment sectors following consultations between the US administration and Congress," Song told a parliamentary committee. "But we've already told the U.S. there won't be additional talks on the FTA."

Korea may accept a proposal to fine-tune provisions in the agreement, but not one to revise key parts. The Democrats, the majority party in the U.S. Congress, are pressuring the Bush administration to insert provisions such as a ban on child labor and reckless environmental destruction for exports into FTAs with foreign countries. Under pressure from the Democrats, the administration has recently asked Peru, Panama and Colombia, with whom it has concluded FTAs, for renegotiations to reflect U.S. views in the labor and environmental sectors.

Korean officials interpreted Cutler's statement as not so much hinting at a proposal for a renegotiation but as aimed at pacifying the American automobile and meat industries or politicians. But the issue could flare up if Congress intensifies pressure on the White House. A senior South Korean government official said, "We might possibly consider (a renegotiation) if the U.S. Congress gets serious to the point that it could vote down the agreement." (Source: Chosun Ilbo.)

U.S. to Notify S. Korea Soon of Possible Changes to FTA from New Policy (May 2007) The United States will soon notify South Korea and other partners of potential changes in bilateral free trade agreements (FTAs) required under a new trade policy, senior negotiators said on 11 May. Officials at the U.S. Trade Representative (USTR), in a news conference conducted over the phone, reaffirmed that the new trade policy announced 10 May applies to all four FTA waiting congressional approval -- South Korea, Panama, Peru and Colombia.

The text of the new policy would be sent to these countries within a couple of days, officials said, speaking only on background. They emphasized that the required changes would have to be legally binding and not be made in the form of side letters. "There are multiple ways to skin the cat in terms of making an agreement legally binding," one official said. "We can find ways to do that." For the Korea FTA, necessary changes would go in the preamble, the official said.

U.S. negotiators have said that labor and environment chapters weren't completed when the two countries struck the dealand may have to reopened with South Korea, pending negotiations with the Congress. Officials in Seoul, however, said there would be no re-negotiations.

The USTR said FTA partners are free to decide whether to accept proposed changes but at their own risk. "If they decide they don't want to accept these changes, they can always refuse them," the official said. "Of course, at that point I think the prospects that their FTA would pass the Congress could diminish quite significantly," he said. But he refused to speculate what may happen if South Korea does not accept the new policy.

The bipartisan policy announced on 10 May covers intellectual property, port security, pharmaceuticals and government procurement, among other issues. It also includes labor provisions requiring the U.S. and its FTA partners to abide by core standards of the International Labor Organization. Seoul-side negotiators do not expect major problems under the new policy, confident that South Korea's labor standards already meet the necessary requirements. "But the U.S. Congress needs to understand that. Some congressmen still have images of violent labor demonstrations in the past," he said. (Source: Yonhap News

U.S. Congress Wants Renegotiations of FTA With Korea (May 2007) The U.S. Congress has written to the Bush administration urging wholesale changes in the free trade agreement with Korea, especially on cars. Charles Rangel, chairman of the House Ways and Means Committee, and Sander Levin, chairman of the trade subcommittee, wrote to U.S. Trade Representative Susan Schwab last Thursday to call for renegotiations of the FTAs with Korea, Peru, Panama, and Colombia, the Korean Embassy in Washington, D.C. said. The letter urged additional negotiation with Korea on systemic barriers in automobiles, industrial products, agricultural and service markets. (SITE NOTE: The ROK remained firm that there would be no renegotiations -- but such is politics. The FTA could collapse if Washington requests that Seoul make changes to the agreement, South Korea's chief negotiator in the free trade talks with the U.S. warned. Ambassador Kim Jong-hoon, in a telephone interview with Yonhap News Agency, reiterated that his government won't accept any renegotiation of the FTA, which the two sides reached last month after 10 months of tough negotiations."If the U.S. demands renegotiation it would lead to a failure of the agreement," Kim said. Kim added that the U.S. side hasn't yet requested modification of terms of the agreement.)

The letter also said that despite suggestions from both Democratic and Republican parties, the U.S. administration has failed to make Korea open its auto market. Congress had asked the U.S. administration on March 1 to demand that Korea open its car market. Washington is expected to make demands on South Korea according to a new trade policy that prevails on countries with which the U.S. has concluded FTAs to abide by international labor and environmental standards. In the wake of the letter, renegotiation will likely deal not only with labor, the environment and medicines, but also with cars and other sectors.

Yet some worry that if the U.S. officially calls for a renegotiation, the implementation schedule for the Korea-U.S. FTA -- including the release of the letter of agreement slated for May 21-25 and the official signing slated for late June -- could hit a snag. The letter of agreement will be released as scheduled, but without the parts that the U.S. side is demanding a renegotiation on,” a Foreign and Trade Ministry official said. “It will be difficult to delay the signing until after July 1, when the deadline for the U.S. administration's Trade Promotion Authority expires." The TPA allows the Bush administration to fast-track trade deals without congressional revisions. (Source: Chosun Ilbo.)

In what appears as a semantical game, the US started referring to any opening of talks over the FTA as "wording negotiations." Basically, the US wants to renegotiate certain elements dealing with labor while the ROK stance is no renegotiations on the FTA. The possibility of a renegotiation was raised after the administration of U.S. President George W. Bush and the Congress agreed on new trade policy guidelines, opening a window for the Democrat-controlled Congress to boost labor and environmental rights in free trade deals before it approves them. The new guidelines will affect pending free trade deals that the U.S. has reached with Peru, Panama, Columbia and South Korea. The U.S. Congress and government released the alternative trade policy embracing seven areas including labor, environment, intellectual property rights and government procurement on May 10.

Controversial points of South Korea-U.S. free trade agreement (May 2007) South Korea publicized on 26 May the full text of its free trade agreement with the United States, with the move expected to further fuel criticism of the deal. The following are some controversial points of the agreement that were posted on the Web site of the Ministry of Foreign Affairs and Trade.

• Definition of `National’_ The agreement stipulates that ``national’’ means with respect to Korea, ``a Korean national within the meaning of the National Act.’’_ Under the agreement, there is no chance that North Koreans will be subject to the proposed trade pact in the future.
• Automobiles _ South Korea and the U.S. agreed to immediately eliminate tariffs on imported cars with engine displacements of less than 3,000 cc. _ Both sides agreed on a so-called "snap-back" system, which allows one of the two sides to withdraw the tariff-elimination measure if one party keeps its restrictions that materially affect sales, purchases and distribution.
• Textiles _ Under the agreement, the U.S. is allowed to exercise safeguard measures against South Korean textiles and clothes. The safeguard measures will be sustained for as many as 20 years after the pact comes into force.
• North Korean industrial park _ South Korea wants the U.S. to recognize goods made at an inter-Korean industrial park in North Korea as originating from South Korea. In principle, the deal raised the possibility of giving special tariff treatment to goods made in the Kaesong industrial complex. _ The two sides agreed to establish an "outward processing committee on the Korean peninsula" to discuss the Kaesong matter later. _ However, the deal requires goods made outside South Korea to follow international labor standards, a measure expected to dim the prospects for the North Korean industrial complex.
• Intellectual property rights _ To strengthen law enforcement measures on intellectual property rights concerning U.S. films, South Korea agreed to legally punish any person who attempts to record a movie at a theater using a video camera.
• Trade Remedies _ South Korea and the United States agreed to apply a safeguard measure more than once against the same product. _ The agreement also says that a party taking a global safeguard measure ``may exclude imports of goods from the other party’’ if such imports are not a substantial cause of serious injury or threat of thereof.
• Agricultural Goods_ Under the agreement, South Korea maintains import safeguards on 30 types of agricultural products. But such protection measures on other agricultural goods is not stipulated in detail.

(Source: Yonhap News and Korea Times.)

Renegotiation of FTA (Jun 2007) On 13 Jun, the ROK government claimed it had yet to receive a formal U.S. request for additional negotiations on a tentative bilateral free trade agreement (FTA) and would push to finalize the deal by the end of this month, the office of President Roh Moo-hyun said on 13 Jun. "The government will take steps to have the president seal the FTA deal with the U.S. by June 30 after the Ministry of Government Legislation and the Cabinet take relevant procedures," Roh's spokesman Cheon Ho-seon said in a daily media briefing.

However, on 14 Jun South Korea was told by U.S. Trade Representative Susan Schwab that Washington had officially asked Seoul to renegotiate a bilateral free trade deal to reflect Washington's new trade policy guidelines. The U.S. has officially requested additional negotiations on an already concluded free trade agreement with Korea. It wants to renegotiate seven sectors -- labor, environment, essential security, pharmaceuticals, government procurement, harbor safety and investment.

But critical issues that could hurt the balance of negotiations like cars and the inter-Korean Kaesong Industrial Complex are not on the agenda, the government believes. Washington is expected to propose not only fines but also retaliatory trade measures if one or the other side violates labor and environment-related agreements. The U.S. wants to make it obligatory for the two countries to adhere to international conventions on labor and the environment, reflecting a new democrat-led trade policy. Under the proposal, the two countries can take exceptional trade measures without taking into account trade treaties with a third country when security needs arise. They will also be allowed to override intellectual property of pharmaceuticals in emergencies like the epidemics of a contagious disease. A Trade Ministry official said Korea needs to clarify the meaning of terms in the U.S. offer and scrutinize whether the balance of negotiations can be preserved, since the U.S. proposal is ambiguous in many points.

On June 21, tensions ran high between negotiators from Korea and the United States discussing revisions of agreements on labor, environment and other fields. Cutler and her team called it a two-day explanatory session. Korea’s chief negotiator Kim Jong-hoon and U.S. trade representative Wendy Cutler began additional negotiations on the U.S. requests across seven fields, including labor, environment, and pharmaceuticals, at the Ministry of Foreign Affairs and Trade building located in Jongro-gu, Seoul.

As expected, the U.S. called on the problem of applying “general dispute procedures” to labor and environment issues. They wanted to create retaliatory measures, such as cutting off tax benefits or forcing monetary compensation on countries that breach agreements. The previous settlements agreed upon on April 2 require nations that violate agreements in those two fields to pay a maximum of 15 million dollars in penalty fees to be used to improve labor and environment conditions of the country. (SITE NOTE: The point may be that critics of the FTA provisions have pointed out the Korea has repeatedly disregarded or violated agreements -- and when faced with possible legal litigation has asked for a renegotiation of the agreement -- while still proceeding with their practices for years while the renegotiations/litigation are tied up in the courts. In 2006, Samsung executives were sentenced to prison terms for price-fixing.)

Authorities said, “The application of general dispute procedures means deleting parts of the previous contract and recreating them again. We need to carefully examine the ulterior motives of the U.S. and weigh to what degree we will accept the terms.” Excluding the labor and environment fields, both countries generally conceded the need to specify previous settlements on the rest of the five fields.

Korean representatives are planning to demand compromises on the expansion of professional occupation visa quotas depending on the position the U.S. takes. (Source: Donga Ilbo.) (SITE NOTE: The ROK seems to feel that the Visa Waiver Program -- which it will not qualify for because of its reject rate above 3.0 percent -- is important to get its citizens into the US. Unfortunately, the US Congress does not -- despite the promises of Ambassador Vershbow and President Bush to assist.)

On 22 Jun, during the renegotiations, the US wanted to insert a clause that states, "foreign investors are not protected more than their domestic counterparts.” The U.S. seems to want to protect its investors as well as its industries with this clause. (SITE NOTE: The recent xenophobic business attitudes in Korea is the impetus behind this clause. The ROK actions against the Sovereign Fund which pulled out of Korea completely in disgust over its failure to have management decision making power -- when the convicted chaebol President of LG returned to power with the help of the "old boys club." (Source: CNN.) Currently Lone Star Fund is receiving this same treatment over the purchase and resale of the Korean Exchange Bank (See Lone Star Affair).)

Kim Jong-hoon, Korea’s chief free trade negotiator, and his American counterpart Wendy Cutler, launched renegotiations in seven different areas at the Ministry of Foreign Affairs and Trade building located in Jongno-gu, Seoul. The two sides discussed “general dispute procedures,” which will introduce retaliatory measures such as cutting off tax benefits or forcing monetary compensation on countries that breach agreements.

A Korean official from the ministry said, “Suggestions made by the U.S. on June 21 and 22 related to additional KORUS FTA renegotiations are not very different from what we had expected.” U.S. trade representative Wendy Cutler said in a press conference, “Additional negotiations will not undermine the interests of one country while providing more benefits to the other.” (SITE NOTE: This statement was to pacify the opponents to the FTA in Korea. However, in our opinion, if the ROK concedes some of the points such as foreign investors having the same treatment as domestic investors coupled with punitive actions if they don't, there may be far-reaching impacts to the way business has been traditionally done in Korea for the past forty years.)

In the meantime, there is controversy over a U.S. suggestion that the two conclude negotiations before June 30, the date when both were scheduled to sign the trade accord. Korea’s strategy is not to be in a hurry to conclude the negotiations. However, with the Trade Promotion Authority (TPA) no longer valid after June 30, and U.S. Congress discontent with the KORUS FTA’s automobile sector provisions, the Korean government may give in to U.S. demands. The government will soon convene meetings with related government agencies and discuss how long they will hold negotiations and what to demand from the U.S. (Source: Donga Ilbo.) (SITE NOTE: The ROK had previously said that they would refuse to renegotiate. It is now apparent that they are using their "stall and conquer" negotiating technique. This means that the ROK will stall on any decision until the 30 Jun signing date and simply walk away without an agreement -- leaving the US with nothing. We are surprised the US negotiators don't realize that this is what is happening -- because this technique has been used by the Chaebols, businesses and ROK government since the 1970s. And even if they agree to a point, they will later renege on it if it proves disadvantageous -- and demand a renegotiation. This is the reason there is a distrust of Korean businesses in negotiations throughout the US and Asia. However, the ROK in doing its "stall and conquer" technique is playing to into the hands of the US opponents of the FTA (the auto and beef industries -- along with the textile industry in the background).)

Some experts predicted that even though the United States government has a June 30 deadline it’s possible that the U.S. Congress will extend the TPA because congress are the reason the administration asked for a renegotiation in the first place. Even with a renegotiation on the table, the signing ceremony is still scheduled to take place in Washington on June 30. (SITE NOTE: Our opinion is thta one shouldn't hold their breath especially since it is the ROK that is deliberately slowing down the renegotiation process. The delays have played right into the hands of the opponents of the FTA in the automotive, beef, and textile industries.)

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U.S. trade committees give mixed reviews to proposed Korea-U.S. FTA (May 2007) American advisory committees gave divided and mixed evaluations of a proposed South Korea-U.S. free trade agreement (KORUS FTA), the opinions sometimes differing even within an industry. Labor group representatives registered one of the strongest opposition to the FTA, saying the agreement "fails to meet the negotiating objectives laid out by Congress."

The division was clear in the auto sector, in which Ford Motor expressed disappointment but General Motors, while neutral, concluded the FTA addresses U.S. car industry's main concerns. Autos turned out to be one of the toughest negotiations as U.S. industries pushed hard for measures to level the heavy imbalance in South Korea's favor. Last year, South Korea exported over 700,000 automobiles to the U.S. while importing some 4,000 American-made vehicles. Negotiation outcome includes tariff removals and dispute settlement mechanisms. "In the agreement, the U.S. does not include a performance metric approach," a report by the automotive industry trade advisory committee said. Ford said it was disappointed the U.S. did not accept the recommended approach to use leverage of preferential access for Korean automakers to ensure the full opening of the Asian country's market. "Ford is also concerned that this agreement may at best perpetuate small volume opportunities for import manufacturers into Korea while completely opening the U.S. market to Korean imports," it said. General Motors, on the other hand, said KORUS FTA "has addressed the auto industry's concerns. "In addition, it provides a deterrent to future Korean non-tariff barriers with a special accelerated dispute settlement mechanism containing snap back provisions," it said.

The textile and clothing committee said its members could not make a unified statement either in support or opposition and thus withheld announcing a consensus. The textile committee report said the members were unable to reach a consensus and expressed concerns that they did not have sufficient time to make a full assessment. "Given that this agreement appears to be the most complicated FTA yet negotiated, at least with respect to the textile and apparel industries, this shortened time period creates considerable concern," it said.

Individual reports of 26 advisory committees, providing recommendations to the White House, U.S. Trade Representative and the Congress, were made public with the release of KORUS FTA draft text on Thursday. Their reports were submitted in the last week of April. South Korea and the U.S. concluded their FTA negotiations on April 1, pledging to remove trade barriers across the board. When ratified by respective legislatures, it would be the first U.S. FTA with an Asian partner and the largest for the U.S. since the North American FTA signed in December 1994.

Labor is one sector the two countries may have to negotiate further to reflect trade policies presented by the new Democrat-controlled Congress, and its committee reacted harshly to the proposed FTA. "Indeed, in terms of our national economic interest, the KORUS FTA presents the potential for significant negative economic impact on the United States, particularly on jobs and wages," said the report by the labor advisory committee. "In this respect, the KORUS FTA is the most economically problematic trade agreement negotiated since NAFTA."

The agriculture sector, another area of tough negotiations, was rated satisfactory overall but was criticized for exclusion of rice and the yet-to-be-settled South Korean beef market reopening. The majority opinion is that the KORUS FTA will benefit American farmers and ranchers by increasing export opportunities, the report by the agricultural policy advisory committee said. "However, we are disappointed that rice was excluded from the agreement and note that the benefits will only occur for the beef industry if meaningful science-based trade is fully restored prior to the approval of this agreement by Congress," it said. (SITE NOTE: The US gripe is South Korea will maintain import safeguards on 30 types of produce after a free trade pact with the United States goes into effect. The safeguards for the 30 farm good are automatically activated if the quantity exceeds certain levels, and can be repeated every year.)

The intergovernmental policy advisory committee said its members "in principle" support the trade deal but noted their reservations on some of the provisions, including market access and investor-state dispute settlement. (Source: Yonhap News.)

Opposition in Congress over Korea-U.S. FTA Rising (Jun 2007) Officials from both sides have indicated Washington needs to reflect tougher labor and environment provisions to improve the chances of getting approval from the Democratic-led U.S. Congress. The deal, expected to be signed on June 30, still requires ratification by the legislatures of both countries. Though initially adamant that there would be no renegotiations, South Korean officials have opened the door for renegotiation, saying they would get more in exchange for adding tougher labor and environment provisions to the agreement. Studies suggest that if the deal comes into force, it could increase two-way trade, already at US$79 billion a year, by as much as 20 percent.

Besides the issues of labor and environment, local newspapers reported, citing unidentified officials, that the U.S. may ask South Korea to revise provisions on auto trade during the upcoming renegotiation as the majority of Democratic lawmakers criticized the U.S. administration for failing to sufficiently open up Korea's auto market. "Renegotiation of auto provisions won't happen," Lee Hye-min, South Korea's deputy chief negotiator in free trade talks with the U.S., told SBS radio. "The renegotiation would only clarify some language in the labor and environment provisions." Source: Yonhap News.)

Senator Hillary Rodham Clinton, the Democratic front-runner in the U.S. presidential race, on 9 Jun expressed her opposition to the ratification of the Korea-U.S. free trade agreement. Clinton was speaking at an event in Detroit, Michigan, hosted by the American Federation of Labor and Congress of Industrial Organization (AFL-CIO), America's largest labor confederation. The FTA would harm the U.S. auto industry, she said. According to Clinton, South Korea last year exported 700,000 cars to the United States while U.S. carmakers sold 6,000 in South Korea. Such lopsided figures accounted for more than 80 percent of a US$13 billion trade deficit with South Korea, she said.

The current deal does not go far enough to scrap "the multitude of informal barriers that severely restrict the sale of American vehicles," Clinton said. "Unless those barriers fall, American carmakers will face increased competition at home and won't get greater access to South Korea's market." Clinton also reiterated the importance of taking a wiser and tougher stance against South Korea for its restricted imports of American cars. In contrast, Wendy Cutler, the chief U.S. negotiator at the FTA talks, has emphasized that there is no plan for re-negotiations, saying that the deal on automobiles was strong for both sides. (Source: Chosun Ilbo.) (SITE NOTE: The Jun 2007 Boneless Beef Row and the automotive industry opposition to the FTA are starting to heat up.)

Congressional Hearings (Jun 2007) An inter-Korean economic project and auto trade imbalances overshadowed a hearing on 13 Jun on a proposed South Korea-U.S. free trade agreement (FTA) that has to be signed by the presidents by the end of June. Members of the House subcommittee on terrorism, nonproliferation and trade lodged harsh complaints at the draft FTA they argued opens the U.S. market to North Korean-made products but fails to widen access to the South Korean market. However, as only seven of the 15 members of the House Subcommittee on Terrorism, Non-proliferation and Trade attended the hearing, it would be premature to conclude that the hearing was largely about anti-FTA, since just 435 of the total congressmen were present.

"My focus here today in these hearings is not only that this agreement will have a devastating effect on America's working families," subcommittee chairman Brad Sherman said in his opening statement, "but that it will transfer to the executive branch the power to decide whether goods manufactured in North Korea... enter the United States" under FTA provisions. Ranking member Ed Royce bluntly said this was out of the question. "I don't think anyone seriously thinks the United States would accepts goods coming in from North Korea," he said. Committee Chairman Sherman said, “It is unacceptable given our serious efforts to prevent North Korea’s nuclear development.” “If goods produced in the Gaesong complex are recognized as the products of South Korea, it will be no different to handing out cash to the North. This is unacceptable,” David W. Scott (D. Georgia) added. (Source: Donga Ilbo.)

The proposed FTA works around the issue by establishing a panel to consider "outward processing zones" (OPZs) on the Korean Peninsula sometime in the future. Sherman went into details, arguing that South Korea could technically claim Kaesong as under its sovereignty by citing its Constitution that considers the entire Korean Peninsula its territory. He also argued that the FTA draft gives a "convenient red herring," allowing the administration to simply name Kaesong an OPZ without seeking congressional approval. Karan Bhatia, deputy U.S. Trade Representative, strongly denied Sherman's claims. "The issue is very simple. There is no coverage of North Korean goods in this agreement," he told the subcommittee

Rep. Donald Manzullo, a Republican from Illinois, called the FTA, as it is now, a "fatal problem," naming the auto sector as an example. Chrysler, which has a manufacturing facility in Illinois, exported 222 of its vehicles to New Zealand last year, Manzullo said. In South Korea, the American automaker sold 102, he said. "This is astounding, when taking into account that Korea's auto market is 10 times the size of New Zealand's," said Manzullo. Rep. David Scott, a Georgia Democrat, said the proposed FTA "is a long way from being acceptable." His state hosts a factory for Kia, one of South Korea's major automakers. Georgia "bent over backwards" and offered millions of dollars in tax breaks for Kia to locate there to replace American competitors that were closing shop, he said. "If the U.S.-Korea free trade agreement is ratified as written, this scenario will be repeated over and over again in communities all across this country," he said. (Source: Yonhap News.) David W. Scott (D. Georgia) said, “The KORUS FTA is a bad deal for the U.S. and is one-sided,” mentioning the closures of GM and Ford auto manufacturing factories in his district. In Georgia, Kia Motors, a Korean automaker, is building its manufacturing plant. Donald A. Manzullo (R. Illinois), though he is a Republican Party member and an advocate of free trade, urged renegotiation, saying “The U.S. responded properly on the tariff issues but not on the nonsense of South Korean non-tariff barriers.” Chrysler manufacturing plants are located in his district. (Source: Donga Ilbo.)

Bhatia disputed the claim, projecting an eventual decline in South Korea auto exports to the U.S. "In reality, over the course of the next year or two, you will see a substantial, probably, diminution in the balance of their sales here that come from imports," he said. (Source: Yonhap News.)

A senior U.S. congressman expressed strong concerns on 13 Jun at South Korea's investment ties with Iran as a House resolution was being circulated to prevent free trade agreement (FTA) partners from investing in the Middle East country suspected of trying to build nuclear weapons. "I am extremely troubled by South Korean investment in Iran," Rep. Brad Sherman told Yonhap. (Source: Yonhap News.) Ron J. Klein (D. Florida), the Middle East expert in the Democratic Party, pointed out that South Korea signed several contracts with Iran to supply oil tankers. This marks the first time that the issue has been touched upon by U.S. Congress. Mr. Klein said, “The KORUS FTA conflicts with Congress resolution No.1400 that disallows an FTA with any country that trades with Iran. The U.S. should not allow South Korea to undermine its priorities.” The resolution is not mandatory. He said that a Korean company invested $1.6 billion in oil field development in Iran and signed a contract to deliver to Iran several oil tankers in 2008 and 2009. Immediately after the hearing, Brad J. Sherman (D. California), committee chairman, said, “For South Korea, the Iranian nuclear development may not be threatening, but for the U.S., the nuclear issues of North Korea and Iran are equally serious non-proliferation problems.” (Source: Donga Ilbo.)

Failure to include a free trade agreement (FTA) with emerging economies like South Korea "could have unfortunate consequences" for the United States, a senior U.S. trade negotiator said on 13 Jun. "It would likely result in a shift of the region's (Asia's) attention away from strengthening their relationships with the United States to doing deals with other major trading partners," Karan Bhatia, deputy U.S. Trade Representative (USTR) said at a House hearing. (Source: Yonhap News.)

"A successful FTA with South Korea could provide an important boost to U.S. efforts to remain an active economic presence in a strategically vital region" that last year accounted for over 37 percent of global production, Bhatia said. Christopher Hill emphasized the geopolitical implications. "While the agreement achieves many of our economic goals, it is important to note that the impact of this FTA will go far beyond bilateral commercial benefits," Hill told the House subcommittee.

Besides the above there is growing concern that the objections to the FTA is based on anti-Americanism. When the negotiations for the European Union-ROK FTA, there was nary a peep from the farmers and activists. According to some studies, this implies that the massive frenzy against the US-ROK FTA in Korea was based in part on anti-Americanism rather than any objections to the FTA itself. This has not gone unnoticed by the US Congress which has voiced concerns of growing anti-Americanism in Korea.

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U.S. Auto Industry Wants Korea to Open Its Market (Jun 2007) The American auto industry and lawmakers representing the auto sector have made “nonnegotiable” complains about the Korea-U.S. Free Trade Agreement (KORUS FTA). They have showed disagreements over a wide range of FTA provisions, indicating a bumpy road ahead to be ratified.

The United States International Trade Commission (ITC) held a hearing presented over by industry leaders regarding the FTA on June 20 in Washington D.C. The ITC is an independent organization that submits an analysis report to the U.S. president and Congress within ninety days after signing of a bilateral trade agreement according to U.S. Congress rules.

The hearing has drawn mixed responses from industries. Potential beneficiaries of the deal, such as banking, insurance, movie and pork industries, and economic organizations like the U.S. Korea Business Council, Business Coalition and American Chamber of Commerce, have shown strong support for the deal.

On the other hand, automobile and beef industries, and environment and labor organizations are among the strong opponents of the KORUS FTA.

Democrat, and House Trade Subcommittee member Sander Levin, a Michigan Democrat, said that the Korea government has imposed an ‘economic iron curtain’ on all imported cars. And he went on to say that the current deal will not get Congressional support and that both sides should renegotiate.

Various statistics were presented, such as: Korea sold the U.S. 700,000 cars last year, but the U.S. only sold 4,556 cars in Korea last year; Among the total U.S. trade deficit to Korea ($11 billion), 87 percent came from automobiles; While 30 OECE member states average a 40 percent imported car rate, Korea ranks among the lowest with 3.6 percent.

Steve Biegun, Ford’s vice president of international governmental affairs, has made many criticisms about the current status of the Korean auto market.

“Ford entered the Korea market 12 years ago but sold only 1,700 cars last year, smaller than a decade ago. I have seriously thought for a decade about why imported cars do not sell in Korea- Do Korean cars have better performance? Are our cars too expensive? Or do Korean consumers have unique needs? My answer was No. That’s because that the Korean market has multiple layers of ever-changing non-tariff barriers. And the market has safety regulations inconsistent with global standards and tax structures. Korean automakers can adapt to regulatory changes as they sell in large numbers. But foreign counterparts can’t maintain a stable supply.”

He went on to say, “Who would be willing to be a Ford dealer in Korea? While Hyundai and KIA motors have 1,300 dealer shops in the U.S, Ford has only one in Korea. The Korean government promised to remove non-tariff barriers in 1995 and 1998. But new barriers have been introduced like “slippery eels.” The Korean auto market should be as open as the U.S. one. Korea should immediately lift its eight percent tariff and all non-tariff barriers. And the U.S.’s elimination of the current two percent tariff should be made only after Korea maintains a meaningful and sustainable market opening.”

The U.S. auto industry wants the same level of market opening from Korea, not a partial revision of Korean system. Moreover, the industry didn’t hide their intention to use the KORUS FTA as an excellent opportunity to get their demands accepted. (Source: Donga Ilbo.)

US House Speaker and Democrats against FTA (Jun 2007) The U.S. House speaker and other Democrat leaders on 29 Jun stated opposition to a free trade agreement (FTA) with South Korea, saying the deal as negotiated does not address trade barriers, particularly in the auto sector. "Properly negotiated, a South Korea-U.S. FTA would provide key benefits to American workers, farmers, and businesses," they said. "Unfortunately, the FTA as currently negotiated is a missed opportunity."

With this statement, the U.S. House of Representatives Democratic leaders quashed White House hopes on 29 Jun for quick renewal of "fast track" trade negotiating authority and said they cannot support trade pacts negotiated with South Korea and Colombia. Just a day before the FTA signing on 30 Jun, the joint statement was issued by House Speaker Nancy Pelosi, Majority Leader Steny Hoyer, House Ways and Means Committee Chairman Charles Rangel, and Ways and Means Trade Subcommittee Chairman Sander Levin.

House Speaker Nancy Pelosi and other senior Democrats said renewing President George W. Bush's expiring authority to negotiate trade agreements, such as faltering efforts to reach a new world trade deal, was NOT an immediate priority. "Before that debate can even begin, we must expand the benefits of globalization to all Americans," the Democrats said in a statement asserting constitutional authority of Congress over trade. Trade promotion authority, also known as "fast track," allows the White House to negotiate trade deals that Congress must approve or reject without making changes. It is considered essential for U.S. participation in trade talks. The last time it lapsed in 1994, it was eight years before it was renewed.

House Democrats said they would focus instead on legislation to address the growing trade imbalance with China, strengthen enforcement of U.S. trade agreements and laws, and ensure American workers and companies remain the most competitive in the world.

That is particularly the case in the automotive sector, where last year South Korea exported more than 700,000 cars into the U.S., while the United States exported fewer than 5,000. The statement called this a reflection of a one-sided trading relationship. The U.S.-South Korea free trade agreement due to be signed in Washington on 30 Jun fails to dismantle nontariff barriers that have long blocked U.S. exports of automobiles and other manufactured goods to South Korea, the Democrats said. "We cannot support the (pact) as currently negotiated," they said.

US lawmakers are also threatening to kill the deal if South Korea does not fully open up its beef market. "I will not support this FTA until it does," said Democratic Senator Max Baucus, who heads the senate's finance panel, which has jurisdiction over US trade policy and considers all FTA's for presentation to the full Senate.

After taking control of the Congress this year, the Democrats have been pushing stronger requirements in FTAs with foreign trading partners. Negotiations with South Korea, wrapped up on April 1, were reopened by such congressional demands.

But Republicans are also speaking out against the FTA. "I am one of the most ardent free traders in Congress and when I have problems with this, the agreement's got problems," said Republican Donald Manzullo from Illinois. He vehemently objects to the pact's automobile provisions, which he said did not go far enough in dismantling barriers in South Korea. Though the ROK claims that the ban of US beef is over, it still only allows boneless beef -- and is "considering" opening the market fully based on the new World Organisation for Animal Health (OIE) report that there is minimal risk of "mad cow disease" from US beef. (Source: Reuters and Channel News Asia.)

The FTA signing completes negotiations that took nearly a year, with unexpected last-minute complications. The U.S. sought revisions based on a new trade policy established by the U.S. Congress, now controlled by Democrats after an election last November. Negotiators of the two countries worked out a set of amendments, mostly in the areas of labor and environment, to improve the chances of U.S. congressional approval.

Congress can vote only yes or no on the FTA, without demanding amendments because it was signed before the expiration of the U.S. trade promotion authority. Unlike in South Korea, where only a legislative endorsement is required, the U.S. administration and Congress need to draw up a set of laws on implementing the FTA. Once these laws are submitted by the president, the Congress must vote within 90 "legislative" days, which means only the days when Congress is in session. There is no ratification deadline for either country. Stephen Norton, USTR's spokesman, said Washington's legislative approval progress would begin in the fall at the earliest. (Source: Yonhap News.)

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Protests over FTA Resume (Jun 2007) On 20 Jun, thousands of farmers took to the streets in downtown Seoul to call on the National Assembly to reject a free trade agreement between Seoul and Washington. According to Yonhap News, about 10,000 RO Korean farmers took to the streets of the capital, demanding the government scrap the US free trade pact which they say will destroy their lives due to an influx of cheaper American farm goods. Chanting anti-FTA slogans, the farmers marched along roads leading to the City Hall late in the day. No major clashes were reported.

According to the Stars and Stripes, eight thousand South Koreans gathered downtown on 20 Jun to protest the FTA with the United States, saying it would put the country's farms out of business. "The agreement is a nuclear bomb to wipe out all the Korean farmers," said Lee Sang-duk, a 48-year-old livestock farmer from a small town in the southeastern corner of the country, near Busan. Farmers from across the country traveled by tour bus to Seoul City Hall for the peaceful afternoon rally and march, some waving flags and wearing headbands condemning the agreement. South Korean riot police attended the rally, but no major clashes were reported as of the evening of the 20th.

Automotive and Metal Workers trade unions announced that they would also join in the protests against the FTA -- and threatened strikes which the government threatened would be met with punitive actions. Critics in the ROK slammed the renegotiations as kowtowing to US demands and giving unilateral advantages to American companies. The RO Korean government, which had previously said such revisions were impossible, is insisting on describing the renegotiation as "additional negotiation."

International Herald Tribune on 21 Jun reported that the ROK warned a key labor union not to go on strike against a free trade agreement with the US, as the two countries began talks aimed at amending the accord. The Korean Metal Workers' Union, the country's largest with 150,000 members, planned to walk off the job for five days from 26 Jun in protest against the free trade deal. "The general strike is a so-called a political strike and is obviously illegal as it has nothing to do with improving working conditions and aims to block the conclusion of the Korea-US FTA," Labor Minister Lee Sang-soo said in a statement. "The government will deal sternly with the general strike according to laws and principles," Lee said.

As a result of the promised crackdown, on 25 Jun the union conducted a scaled-down participation in the protest. More than 3,000 members of the Korean Metal Workers' Union started the week-long protest against the FTA walking off the job for two hours on 24 Jun in Chungcheong and Jeolla provinces. The walkout plan dictates that unionists halt their work for two hours on 25 Jun in Seoul and the surrounding Metropolitan areas and for two hours in Gyeongsang provinces on 26 Jun. It will then be extended to a nationwide four-hour strike on 27 Jun and a six-hour stoppage on 28 Jun. The Hyundai Motor Group union dropped out of the protest due to dissention amongst its union members and opposition from civic groups.

However, there was a backlash against the Korean Metal Workers' Union strike on 26 Jun when some 4,000 members from 140 civic, social and economic groups staged a rally in front of the Hyundai Motor plant in Yangjung-dong in Ulsan on 26 Jun, urging the union to cancel the strike. It's the first time Ulsan residents have gathered in such force against the union, which has staged strikes almost every year since it was founded 20 years ago. Members of civic groups wearing shoulder bands chanted slogans and held signs saying, "Withdraw from the political strike." They also handed out flyers against the strike to union members and local shopkeepers. The demonstrators urged the union to cancel its plan to participate in a strike scheduled for Thursday and Friday to protest the Korea-U.S. free trade agreement. The union, however, refused to call off the strike. In 2006, the union strike nearly bankrupted many companies dependent on the contract work from the Hyundai plant with ripple effects throughout Ulsan's economy.

Meanwhile, the Korean Metal Workers' Union continued to strike in the Seoul metropolitan area and South Jeolla Province. However, only 3,300 or 5.4 percent of 61,000 union members participated in 26 Jun's actions, down from 11.5 percent the day before.

On June 29, one day before the signing of the free trade agreement between Korea and the U.S., approximately 13,000 people, including workers, farmers and college students, among others, take to the streets in downtown Seoul, in a protest against the signing. South Korea and the U.S. reached an agreement on the trade deal on April 1. Last-minute renegotiations between South Korea and the U.S. in seven fields, including labor and the environment, were newly agreed upon on June 28. The KOR-US FTA has still to pass each nation’s legislature before it can be adopted.








Protest of FTA in Seoul (29 Jun 2007)

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Wall Street Journal: Democrats will NOT support the US-ROK FTA (Aug 2007) The Wall Street Journal stated, "Washington's political class likes to fret about China's rising influence, especially in Asia. So it's nothing short of astonishing that the U.S. Congress seems prepared to kill a U.S.-South Korea Free Trade Agreement that would strengthen America's economic and strategic position on China's doorstep for years to come. Only two months after pressuring Seoul to insert labor and environmental concessions, House Democrats now say they won't approve the FTA in any case. Their nominal excuse is that the car import provisions aren't good enough, but Senator Hillary Clinton also claims the pact will increase the U.S. trade deficit..."

The perception in Congress -- rightly or wrongly -- is that the US-ROK FTA doesn’t do enough to open Korean markets as compared to the benefits Korea gets from US. On the other hand, the Korean critics view the US-ROK FTA as an American giveaway. Both sides critics are posing the same arguments -- and both are working behind the scenes to undermine the FTA agreement.

The Wall Street Journal attitude though is that "something is better than nothing." This means that at least the FTA partially opens the markets -- which is better than the protectionist state it was in before. It stated,

In any case, the U.S.-Korea FTA is a big new opportunity for American goods and services. As soon as the deal goes into force, 95% of tariffs on consumer and industrial goods will be eliminated. Within a decade, almost all remaining tariffs will hit zero. In financial services, U.S. firms will have carte blanche to start up or acquire South Korean companies, part of Seoul’s aspiration to become a regional financial hub.

Agriculture has long been a bulwark of Korean protectionism, but under the deal more than half of all U.S. farm exports will receive duty-free treatment. The pact also guarantees that U.S. investors will be treated on a level playing field in Korean courts. And it sets up an international arbitration panel for U.S. firms that believe they’ve been wronged by the Korean government.

Even in autos, the pact is a big improvement over South Korea’s current protectionism. Last year Korea imported 4,344 U.S.-made passenger vehicles, while the U.S. imported more than 695,000 from Korea. Seoul has also failed to follow through on its 1995 and 1998 auto agreements with the U.S., but the biggest losers on that score have been Korean consumers. The free-trade pact would eliminate South Korea’s 8% tariff on passenger cars (versus 2.5% in the U.S.), and it would introduce a new mechanism to provide a head’s-up about Korea’s bad habit of imposing non-tariff import barriers.

The problem with U.S. autos in Korea is more than trade barriers, by the way. European car makers are subject to similar barriers, but their sales are doing just fine. It’s also worth noting that, while Ford and Chrysler oppose the FTA, General Motors does not, perhaps because it is doing well in its joint venture with Daewoo.

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Police, protesters battle in streets and on highways (Nov 2007) Originally, 60,000 protestors were expected, but the amount that showed up was about 20,000. Bringing traffic to a grinding halt in Seoul, an estimated 20,000 protesters held an unapproved rally yesterday and fought with police who used water cannons to disperse them. The event, billed as the "Great National Rally," also jammed the highways leading into Seoul, as police tried to block the group of mostly union workers, farmers and student activists from attending.

About 15,000 protesters were barred from coming to Seoul by police. In Geochang, an estimated 100 farmers occupied the 88 Olympic Expressway interchange, paralyzing traffic more than an hour, police said. Police also banned trains from stopping at several subway stations in the center of Seoul. Pedestrians and drivers raged about the congestion. "I am sick of these protesters who force people to put up with all of these inconveniences," said Woo Wi-ja, 27, a store owner. "I think today's traffic was five to six times worse than usual," said Kim Jong-hoe, 56, a taxi driver.

At about 1 p.m. yesterday, the 16-lane road connecting Namdaemun to Seoul Plaza near City Hall was completely occupied by an estimated 20,000 protesters, according to a press release from the National Police Agency. Police blocked the grassy plaza with 300 buses and 23,000 riot policemen. They also closed the roads from City Hall to Gwanghwamun, one of the busiest spots in the country. Protesters attempting to enter into the plaza scuffled with riot police, causing dozens of injuries on both sides, according to the release. More than 110 protesters were arrested.


Helicoptors above Namdaemun-ro telling protestors via megaphones to disperse (11 Nov 2007) (Donga Ilbo)

Screaming slogans such as "Cancel the Kor-U.S. FTA" and wielding multicolored flags, the protesters called for the South Korea-United States free trade pact to be canceled, the removal of Korean troops from Iraq and the implementation of pro-labor policies. "Today's protest was blocked because President Roh Moo-hyun is afraid of me, a presidential candidate, standing in front of the people," said Kwon Young-ghil, the presidential candidate of the Democratic Labor Party, on a makeshift podium on a truck. Han Na-in, a manager at Dunkin' Donuts near Deoksu Palace, where police and protesters battled, said, "Today's sales were less than half of what they usually are."

Although police had declared the rally illegal, protesters began gathering in central Seoul around 3:30 p.m. After some 23,000 riot police blocked the roads surrounding Seoul Plaza to halt the rally, demonstrators then occupied roads between Namdaemun (South Gate) and City Hall. Later the protestors moved to Taepyoung-ro street and called for abolition of the Korea-U.S. FTA, fair treatment for non-regular workers and abolition of the National Security Law.

Some protestors climbed atop police buses and scuffled with police while others hurled chunks of pavement. Some protestors set fire to handbills in the road. Police responded with blasts from water cannons. Police blocked roads to Gwanghwamun and City Hall for three hours to prevent protesters from gathering, leading to traffic jams. Some drivers downtown before the rally started couldn't get out of the area until it ended around 8 p.m.


Protestors at Seoul Plaza area (11 Nov 2007) (Joongang Ilbo)


Protestors battling with Riot Police (11 Nov 2007) (Tongil News)


Protestors battling with Riot Police (11 Nov 2007) (Tongil News)

After the rally near City Hall, the protesters divided into several groups and marched through the streets in Seosomun-ro, Euljiro and Namdaemun. At about 5 p.m., they all gathered again near the Gwanghwamun intersection and tried to march to the U.S. Embassy building. Police stopped them by shooting water with water cannons. "We reported to the police that we will hold a peaceful rally at Seoul Plaza about a month ago," said Yoon Ji-hye, publicity official at the Korea Alliance for Progressive Movements, a co-organizer of the rally. "The police banned the rally and they blocked the roads, causing traffic congestion." Jhe Seong-ho, a professor of law at Chung-Ang University, said the protesters should be punished. "I think they need to pay compensation for interfering with traffic and business of stores," he said. (Source: Joongang Ilbo.) (SITE NOTE: The battlelines are being drawn for the FTA with the upcoming Presidential elections 30 days away. Lee supports the FTA while Chung and the progressives do not. With the cold weather approaching, this will probably be the last major protest until next spring. The FTA question has NOT surfaced in the National Assembly and the US Congress is still awaiting the outcomes of the USTR and beef industry efforts to open the beef market.)


Protestors battling with Riot Police (11 Nov 2007) (Joongang Ilbo)


US Flag Burning (11 Nov 2007) (Tongil News)


Candlelight Rally with Activist Leaders (11 Nov 2007) (Tongil News)



Police said they arrested some 100 protesters and that more than 10 riot police were hurt. Organizers said some 50 demonstrators were hurt, mostly suffering head injuries. Other rallies took place in South Gyeongsang Province, Daegu, North Gyeongsang Province and Chungcheong Province. Police said they arrested 40 other protesters.

Chosun Ilbo on 12 Nov reported that UNDP presidential candidate Chung Dong-young said it is unlikely the current regular session of the National Assembly will ratify the ROK-U.S. free trade agreement. GNP spokeswoman Na Kyung-won said it will be impossible for the ongoing regular session to deal with the FTA since various supplementary measures need to be devised and it will take time to persuade lawmakers who oppose the trade pact. This was the case even though GNP presidential candidate Lee Myung-bak "is strongly in favor of the trade treaty and is determined to ratify it."

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OPINION: OUR SKEPTICISM OVER ROKUS FTA (May 2007) -- From the beginning we have been very skeptical of an FTA agreement with the ROK -- simply because of the track record of the ROK in NOT keeping its agreements whenever the treaty, Memorandum of Understanding (MOU), or international agreement goes against its interests. The US negotiators are claiming a victory after the elimination of the taxes on engines over 2000cc. Now the US will remove its 2.5 percent tariff on imports under 2000cc IMMEDIATELY, while the ROK removes its tariff on cars imports over 3000cc over three years. Unfortunately, the FTA does nothing about the "informal barriers" that the ROK erects to to prevent the auto industry from entering Korea -- like threatening people with "luxury taxes" or special audits under the guise that they are purchasing "luxury" cars.

However, we remind the US automotive interests that the ROK in the past has reneged on EVERY "concession" on the automotive markets by agreeing to increased "quotas" of imports, but then levying special "luxury taxes" -- and even tax audits on people who purchased foreign "luxury autos". They have done this repeatedly in the past to block the entry of foreign autos. The element of trust between the US and ROK on the automotive issues is such that Seoul agreed with the U.S. to introduce expedited procedures whereby tariffs will be restored if the other side violates an auto-related agreement. Within the auto sector, Ford has been the most vocal critic of the pact while General Motors has taken a neutral stance -- perhaps because the GM-Daewoo joint venture is successful for now.

At the start of the negotiations, the ROK government moved quickly to halve the screen quota from 146 days to 74 -- but then also moved to propose a plan to subsidize the theaters. It also announced that it would start importing US beef that contained no bones -- but then started throwing up barrier after barrier to NOT import US beef. The Congress need only look at the ROK track record for the past five years and the future of the US-ROK FTA will stare it in the face. In 2006 we stated:

"We are very, very, VERY skeptical of the outcome of the FTA negotiations from the beginning. After years of watching the ROK drag its feet on doing away with protectionism and erecting trade barriers; watching it being repeatedly added to the US Trade Representative (USTR) "watch list"; watching it reduce tariffs and then raise the customs inspection criteria; watching it promise the moon during negotiations -- and then renegotiate anything that is disadvantageous even before the ink is dry on their signatures. We are NOT such great believers that the ROK will uphold its side of "fair" negotiations."

"The farmers are very vocal against the FTA which they look upon as the same as the WTO accord in threatening agriculture. The government will try to convince them that they need to "sacrifice" for the good of the country -- but this is laughable as the farmers are at the point of extinction with falling rice demand, falling prices, increased costs, inability to make a living and other hardships BECAUSE of the government. Do a web-search on the ROK over the past ten years and see for yourself. It's all a matter of public record -- and the track record for dealings with the EU is just as bad -- if not worse."

Another "concession" was the allowing of beef imports into Korea. However, the ROK immediately made stipulations and closed the door again when a case of mad cow disease was reported in the US. Then in May 2006, it only reopened the market for beef WITHOUT bones. This eliminates the short ribs (kalbi) market which is the best seller. However, Korean inspectors in May visited 37 U.S. meat processing facilities that want to export beef to Korea. But the Agriculture Ministry said the inspections revealed shortcomings in some sites. This made Seoul delay the resumption of U.S. beef imports, just as the meat was ready to hit the market in late June."

"The ROK excels in implementing the "fine print" -- but not necessarily the intent -- of an agreement. The ROK businesses from chaebol to small businesses have done this repeatedly over the years -- but no one says much about it for the sake of good business relations."

(SITE NOTE: If one asks enough people if the sky is falling, you will surely find someone who will agree -- and that is what the ROK did. If accepted the views of those "scientists" who backed up their decision to reject the shipments by any means.)

SITE NOTE: What makes this inspection so outrageous is that the bone fragment was NOT from a portion of the beef that causes BSE -- meaning the spinal column. The bone fragment found was between portions of boneless beef meaning it was picked up during the packing process -- not the cutting process. The objections ahead are that the agreement was that if parts found that were linked to BSE, the shipment could be stopped. This was NOT one of those parts. There is no commonsense in this ruling that followed the "letter of the law" in their interpretation. A 1-centimeter (0.4-inch) beef bone fragment in a shipment of U.S. beef totaling 9 tons will result in the banning of the entire shipment from entering Korea.

This is flagrant misuse of the Customs inspectors is not new in the Korean protectionist actions. However, this has to be viewed as a test case in Korea. With the current FTA negotiations going on, this case cannot be overlooked. It presages future protectionist practices even though where the ROK will sign an agreement -- renege on it knowing full well that the disupt process can take a decade. By then they renegotiate and the process continues. The ROK word on signed agreements remains questionable in all areas.

The ministry also canceled the export license to Korea of the U.S. plant that processed the beef in question. The other 35 meat processing businesses can continue to export beef, but all of it will be subject to inspections. Another 3.6 tons of beef await inspection in quarantine in Yeongjongdo. (Source: Chosun Ilbo and Donga Ilbo.)

Under the agreement on beef shipments from the United States, brains, spinal cord marrow and certain internal organs are also banned from trade because of concern that they could allow the disease to be spread from infected animals and develop into a human form of the disease called variant Creutzfeldt-Jakob disease. All but 10 of the 153 cases of the disease, linked with consumption of infected beef, were found in Britain beginning in the mid-1990s. The transmission of mad cow disease in animals is believed to have been caused by the addition of beef by-products to animal feed, a practice now banned. Korean authorities had said that U.S. beef would be sold only to restaurants and some butcher shops where the country of origin did not have to be identified. They cited consumer resistance to U.S. beef, saying supermarkets and discount stores had resisted selling it. (Source: Joongang Ilbo.)

US Expresses Outrage (Nov 2006) In a nutshell, the US government and the beef exporters are saying that Korea's inspection standard is outrageously rigorous. "We are very disappointed. It was just a small piece of cartilage in nine tons of beef. I'm not sure whether the inspection should be that stringent," said Chuck Lambert, USDA deputy undersecretary. After his remarks expressing disappointment to the Korean government, USDA Secretary Mike Johanns also expressed his agreement to Lambert.

"The Korean government invented a standard that the US hasn't agreed to. A small bone was found and they knew that it posed no harm for anyone. The government refused to let in the entire shipment even though the beef's safety was acknowledged. Besides, the inspection took as long as three weeks. We cannot continue to trade with Korea in this situation," Johanns said to reporters.

Some say that the strong criticism from the U.S. reflects complaints from U.S. beef exporters and lawmakers representing them. However, underneath is a strong dissatisfaction over the rigorous inspections of U.S. beef despite the international practice of sample testing. "From the U.S. point of view, Korea promised to import beef and then changed the rules," said USTR Deputy Assistant Amy Jackson at a discussion meeting on November 28. It is too early to tell how the U.S. government's criticism will change its trade policy. Chances are high, however, that it will adversely affect bilateral trade. "A huge trade dispute is likely to occur if Washington starts to conduct a detailed inspection on all Korean goods entering the U.S.," said one trade expert. (Source: Donga Ilbo.)



Second Shipment Rejected over Bone Chips (Nov 2006) Korea has found bone fragments in a second shipment of U.S. beef and decided to return or destroy it, only a week after it made the same decision over the ill-fated first lot of beef that arrived here when the import ban was lifted. The National Veterinary Research & Quarantine Service (NVRQS) on 1 Dec said it discovered three bone fragments while inspecting 3.2 tons of beef imported from the U.S. on Nov. 23. "We believe the bone fragments did not come from parts with a high risk of spreading BSE like the spinal cord, but we did not pass it according to an agreement with the U.S." that allows only import of boneless meat. The Ministry of Agriculture will cancel the export license to Korea of the plant in Nebraska that processed the beef in question.

The decision will add to tensions between Korea and the U.S. over trade as the next round of free trade agreement negotiations on Dec. 4 looms. Already U.S. Agriculture Secretary Mike Johanns on Nov. 28 criticized Korea for applying "invented" standards. "They found a small piece of cartilage, rejected the whole shipment, notwithstanding the fact that this is not a threat to anyone. They acknowledge it's not a threat to anyone," he said. "South Korea has been, until this arose, pretty straightforward to deal with, but you can't trade under these circumstances."

NVRQS chief Kang Mun-il said Korea's standards are if anything less strict than those of other nations. "Taiwan also returned U.S. beef products after it discovered a bone fragment in April," he added. A ministry official also warned against putting the cart before the horse. "The reason we keep discovering bone fragments in U.S. beef is that U.S. processing plants are not as careful in inspecting their products as they should be because they want to cut costs," he said. Korea and the U.S. agreed in January that Korea can renew its ban on all U.S. beef imports if parts linked to a high risk of BSE are found in shipments, and stop individual U.S. meat processing plants from exporting to Korea if proscribed parts are found in their beef. (Source: Chosun Ilbo.)

Third Beef Shipment Rejection After Bone Chips (Dec 2006) On 6 Dec a third shipment of 10 tons of beef in quarantine in Yeongjongdo was rejected after finding bone fragments in the meat. The National Veterinary Research and Quarantine Service said it discovered seven bone chips in three cases of ribs out of a ten-point-two ton shipment. The agency said the fragments passed an X-ray test because they were small and thin, but were found upon visual inspection with the naked eye. It added that while the bone fragments do not pose serious risks of transmitting mad cow disease, the entire shipment will be returned to the United States or scrapped. (Source: KBS News.)

Outrage over Beef Rejection (Dec 2006) It appears that the latest rejection of beef will definitely impact the FTA negotiations -- though the ROK claimed it wouldn't. The US is lining up against the ROK action and has called on the President to exert his influence. Amazingly, the ROK attitude is that the US should have read the fine print before agreeing. Besides, there was only an agreement to import the beef without any implementing regulations so the ROK feels it can "interpret" the wording any way it wants. However, most trade experts agree that "beef without bones" meant "beef without ribs" when the agreement was reached -- NOT "beef without that tiniest speck of bone regardless that the bone specks are NOT mad cow disease related."

Wendy Cutler, U.S. head of the Free Trade Agreement delegation dealing with Korea has basically said, "there can be no FTA with Korea if it doesn't open its markets to U.S. beef imports. Meanwhile, the Korean head, Kim Jong-hoon, insisted that the beef quarantine, which started after mad cow disease was discovered in the United States, is not on the FTA negotiating table. Though admitting that beef issue is not part of the trade talks, Cutler said that for a free trade agreement to be ratified by the U.S. Congress, the Korean market for U.S. beef must be fully opened. (Source: KBS News.)

Trade Discord over Beef Import Continues

DECEMBER 05, 2006 07:07

"This steak is made from U.S. beef," said U.S. Senator Max Baucus one day before the fifth round of KORUS FTA negotiations. On December 3 (local time), he invited Lee Tae-sik, Korean ambassador to the U.S., and Susan C. Schwab, United States Trade Representative, to a restaurant in Big Sky, Montana. "U.S. beef is safe whether they have bone or not," he emphasized while slicing the steak, saying, "Mashisummida (tastes good)" five times.

This event was followed by his warning in a speech: "Korea should tear down the import barrier for U.S. beef if it wants successful FTA negotiations."

Trade discord between the two countries shows no signs of abating. Washington says Seoul's refusal is an unprecedented response, while the Korean government argues that the agriculture authority implemented the bilateral agreement.

Arising Complaints-

"This beef issue is not included in the KORUS FTA agenda. For sure, however, lawmakers are going to put pressure on me and Ms. Schwab," said Mike Johanns, head of the U.S. Department of Agriculture.

"I would have strong doubt on even trade or diplomatic agreements between Seoul and Washington," wrote Senator Pat Roberts in a letter of complaint to Ambassador Lee.

One U.S. beef expert sarcastically said, "It is technically impossible to have completely no bones while slicing huge amount of beefs with a sawing machine and processing them. I wonder what would happen if bone powder were discovered."

Who's Right?-

"We understood 'boneless beef' as 'beef without ribs' when we agreed to that term," said one U.S. trade expert. He added that the unprecedented X-ray scanning of beef was not understandable, as sample testing was the normal practice.

However, Bae Jong-ha, leader of the International Agricultural Office in Korea's Agriculture and Forestry Ministry, emphasized that the term was based on mutual consensus.

"Thorough testing is inevitable because of Korea's widespread negative perception of U.S. beef. What should we do if an opponent of U.S. beef import secretly puts a small bone in the imported goods after we go through simple sample testing and allow the distribution. He or she can argue that the U.S. broke the promise and the Korean government failed to safeguard public health," said one trade official under the condition of anonymity.

Just like Korea, Taiwan imports only boneless beef from the U.S. The Taiwanese government once returned shipped meat when some bones were found, and the size of the bone was too big for the U.S. government to complain. Canada imports raw beef, and Japan imports U.S. beef with bones.

Calls for Detailed Regulations-

It was confirmed that both countries did not make detailed regulations after reaching an agreement on the import of "boneless beef" on January 13 this year. This is similar to passing a law without any implementation rules.

"Three hundred million American citizens, two million Koreans living in the U.S., and 700,000 Korean visitors to the United States every year eat American beef without any problems. Rational detailed standard should be rolled out as soon as possible," said one Washington trade expert.

"This time the amount of beef subjected to testing was only nine tons. If we import 200,000 tons like in the past, we cannot test all of them even if all civil workers participate," one Korean official warned.

However, some strongly claim that linking this beef issue to the KORUS FTA negotiations by some American officials is against the objective of free trade agreement, abetting more anti-FTA sentiments in both countries. (Source: Donga Ilbo.) (SITE NOTE: The third US case of mad cow disease was found in a Saudi-born man living in Virginia. How this will be played up in the Korean press was yet to be seen. The U.S. government-affiliated health agency said the man was likely infected from contaminated cattle products consumed as a child in Saudi Arabia. The CDC added that a public health investigation has determined that there is no risk of transmission to U.S. residents from the patient. According to the CDC, some two-hundred variant Creutzfeldt Jakob Disease cases have been reported worldwide as of November 2006, including 164 in the United Kingdom. (Source: KBS News.))

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6th Round of FTA Opens with Dissention over Boneless Beef (Jan 2007) Going into the talks, one of the issues was whether U.S. negotiators would demand that Korea soften its rules on U.S. beef imports. Though not on the original agenda, the issue had become central to the FTA agreement. On the first day of the talks, the US laid its bombshell. With no U.S. beef in the Korean market, there will be no free trade agreement between Korea and the United States, said the chief U.S. negotiator, Wendy Cutler, on 15 Jan. "Korea must fully open its beef market," Ms. Cutler said. "We want to sit down with our Korean counterparts and discuss the matter with international standards as well as considering the health of Koreans." The ROK rejection over its interpretation of "boneless beef" as "without any bones" while the US interpreted it as "ribs without bones" as "kalbi" which was the most popular export to Korea before the ban. The US position is that bone fragments are permissible, but the ROK stand is no bone fragments at all.

Discussions of quarantine issues were suspended pending resolution of "technical" disputes over U.S. beef imports. Lifting a three-year ban on U.S. beef imports caused by the discovery of a case of mad cow disease in the U.S., South Korea allowed shipments in September on condition that no bones be included in them. South Korea has since turned back three shipments of U.S. beef totaling 22.3 tons after some bone fragments were found in the meat. U.S. officials protested that South Korea employed excessively strict rules to block U.S. imports. The South Korean agreement to allow in boneless U.S. beef is only for health reasons. Before its import ban, South Korea was the third largest U.S. beef market, with annual purchases totaling US$850 million. Scientists say that mad cow disease can be transmitted to humans through bone marrow -- but the US stated that the fragments were from portions of the beef do not transmit the disease. (SITE NOTE: Korea Times ran an article of a 70 year-old man suffering from "suspected Mad Cow Disease." But this was NOT bovine spongiform encephalopathy (BSE), or Mad Cow Disease. This article played upon the hysteria and hype. In actuality, it was a disease that was a variant of Creutzfeldt-Jakob disease (vCJD) with similar symptoms to BSE. According to the Korea Center for Disease Control and Prevention, there were 75 people in Korea from 2001 through last September who were suspected of having the Creutzfeldt-Jakob disease (CJD). Korea has had cases of CJD, which is caused by gene mutation, but not a case of variant CJD (vCJD) yet. With vCJD, brains develop holes like sponges have. "People infected with vCJD have similar symptoms to that of bovine spongiform encephalopathy (BSE), the so-called mad cow disease." )

US Wants ROK to Follow US Safety Rules on Beef (Jan 2007) The US asked South Korea on 30 Jan to ease its safety regulations and allow full U.S. beef imports, as the two countries prepared to hold "technical" talks on resolving the beef row. South Korea, once the world's third-largest buyer of U.S. beef, agreed to resume U.S. beef imports last year, ending a three-year ban prompted by the outbreak of mad cow disease in the U.S. However, South Korea has rejected all three shipments of U.S. beef totaling 22.3 tons since the ban was lifted after discovering bone fragments in them in violation of the agreement under which it resumed imports.

Under a South Korea-U.S. agreement, American meat producers are allowed to export to South Korea only "boneless" beef from cattle less than 30 months old. According to the World Organization for Animal Health, younger cattle is comparatively safe from the deadly disease. In 2003, the U.S. exported more than US$820 million worth of beef to South Korea, with boneless beef accounting for $450 million.

A 2006 Seoul-Washington agreement requires American meat producers to ship only "de-boned" beef but the three shipments that had been turned back by South Korea last fall contained small bone fragments. According to scientists, mad cow disease can be transmitted to humans through intestinal parts or bone marrow of cattle infected with the disease. U.S. trade officials and beef producers protested what they called "unscientific" Korean quarantine rules, accusing Seoul of using its overly strict safety rules to block U.S. beef imports.

The beef row is a major obstacle to ongoing free trade talks between the two countries that have entered the home stretch. A seventh round of free trade talks is scheduled for Feb. 11-14 in Washington. U.S. officials have warned that their Congress won't approve a free trade deal with South Korea unless the beef row is resolved. Though the beef issue is technically not a part of the South Korea-U.S. free trade talks that started last June, it has soured the general mood of the negotiations. Assistant U.S. Trade Representative Wendy Cutler, Washington's top negotiator in free trade talks with South Korea, has reiterated that her Congress won't approve a deal with South Korea unless Seoul fully opens its beef market.

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Global group could thwart efforts to ban U.S. beef (Feb 2007) Officials at the Agriculture Ministry said on 11 Feb that a May meeting of the World Organization for Animal Health could be crucial for Korea's attempts to keep U.S. beef on the bone out of Korea. The officials said that if the organization classifies the United States as a country where the risk of mad cow disease is under control, Korea would lose its justification for continuing to ban beef on the bone.

That condition was imposed last year when Korea agreed to end a three-year ban on the import of U.S. beef. But the first three shipments of several tons each were all rejected after small bone fragments, three in one shipment, for example, were discovered. That vigorous enforcement triggered complaints from the United States, which has now linked the issue to the conclusion of a free trade agreement with Seoul. (SITE NOTE: The US -- and most everyone reading the agreement -- understood the "boneless beef" meant the exclusion of kalbi (short ribs) which was a best-seller in Korea -- and a direct competition to Korean producers. Even though it appeared as protectionism rearing its head again, it was better than nothing to get beef flowing into Korea again.)

A powerful U.S. senator, Max Baucus of Montana, has threatened to block approval of any trade agreement unless U.S. beef is freely exportable here. The officials said if the United States wins the new designation, which they said they considered likely, Korea would be able to ban only some organs, marrow and spines from trade, and only then if the cattle were over 30 months old.

Lee Sang-kil, the head of the Agriculture Ministry's livestock bureau, said the United States had asked the organization for the redesignation in October to the middle of the three categories of mad cow disease risk. Oh Soon-min, a veterinarian at the ministry, said that Korea could still ban the import of U.S. beef if it could prove that certain beef products are still dangerous. That, he said, would be a large hurdle to overcome.

The animal health group has 168 members, including Korea and the United States. "This is why the U.S. negotiators at the beef quarantine meeting last week took a hard line," said Park Hyun-soo, a researcher at Samsung Economics Research Institute. "The Korean government should use this as leverage at the free trade negotiations, and not just try to avoid any U.S. beef imports."

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Beef Prices Highest Among 29 Countries (Mar 2007) Beef prices in South Korea are the highest among 29 countries due to a lack of diverse import routes and high taxes, a private consumer group said on 15 Mar. The price per kilogram stood at 55,800 won ($59) for domestic beef and 54,500 won for imported products, according to an international survey conducted by Consumers Korea and consumer organizations in 28 other countries. (SITE NOTE: This comes on the heels that Seoul is the 11th most expensive city in the world to live in -- so this is just part of the mix.)

Russia came second, with the price of imported beef reaching the equivalent of 50,318 won per kilogram, followed by the United Arab Emirates with 24,646 won and Vietnam with 22,823 won. Japan's average beef import price stood at 21,023 won. ``Australian beef is nearly twice as expensive as it is in Japan,'' said Kim Jae-ok, the group's chairman. ``A lack of diversity in import routes and high tariffs are blamed for high prices.''

In January, the International Labor Organization (ILO) said that as of October 2005, the average price of a kilogram of beef in South Korea was $56.44, six times more expensive than in the United States ($8.94) and five times more expensive than in Britain and Italy. The ILO survey of 13 countries also showed the price of Korean beef was roughly $15 more expensive than that of Japan. The report examined prices in 11 members of the Organization for Economic Cooperation and Development and two other large economies. (Source: Chosun Ilbo.)

(SITE NOTE: With the beef row between the ROK and the US, we contend that the ROK consumers are being duped by the ROK government. Though the emotional issue is the protection of the ROK farmers and consumers from unsafe beef, who benefits from the artificially inflated prices? Prior to 2003, it was found that many butchers were passing the cheaper US beef off for more expensive Korean beef. At that time, the ROK was the third largest customer of US beef -- mostly kalbi. Then beef consumption started to rise and US beef being cheaper became the beef of choice. The ROK cattle raisers took their plight to the streets -- and then the mad cow disease scare three years ago provided the perfect excuse to shut out American beef. South Korea banned American beef in late 2003 after a mad cow case was reported in the country. With the Americans out of the picture, the activists used the beef issue to fight the FTA negotiations -- to keep the US beef out of Korea. But who were the real beneficiaries? Most of the beef currently comes from Australia and New Zealand -- these are big winners, but are they really? No, the big winners are the beef importers with a lock on the beef import trade guaranteeing them a monopoly and steady profits. The ROK cattle raisers are still struggling to survive -- while Outback steakhouses are in every moderate city in Korea. Then in 2006, the ROK agreed to import only de-boned beef from cattle less than 30 months old into the country. Because bone chips were discovered in three shipments that were imported since late October, no U.S. beef has reached consumers. Thus the consumers are continuing to get the shaft from inflated beef prices with the current 40 percent tariff on beef imports -- and outright blockage of cheap US beef imports.)

Two out of Three Restaurants Willing to Use US Beef (Mar 2007) Two out of three domestic restaurants are willing to serve U.S. beef for Korean customers, a lobby group for American beef exporters said on Friday. In its recent survey of 997 restaurants in Seoul and Kyonggi Province, the U.S. Meat Export Federation (USMEF) found that 65.8 percent of the respondents said they would use U.S. beef for dishes. According to the USMEF, 46.3 percent of the 997 restaurants said they used U.S. beef for dishes until December 2003. The federation also said only 18.2 percent of them were unwilling to buy the beef, even under a scenario in which the market is fully reopened.

In other words, Koreans would be eating US beef in about 70 percent of the Korean restaurants. According to the USMEF, 69.8 percent of the 997 restaurants said their sales have decreased after December 2003 when Korea imposed an import ban on U.S. beef due to the outbreak of a case of mad cow disease. The federation said the respondents attributed the sales reduction to hikes in beef prices and the recent ``well-being'' health trend.

Regarding customer complaints, 62.1 percent of the restaurants cited high meat prices as the most frequently filed complaint, while 13.6 percent picked comparatively worsened taste. Despite high beef prices, the majority of Koreans do not want to consume meat from cattle raised in the U.S. where there have been three cases of mad cow disease. According to an earlier survey of 1,213 housewives conducted by the Ministry of Agriculture and Forestry, 70.2 percent of the respondents said they were disinclined to buy U.S. beef if it was available on the market. Asked about what comes to mind with U.S. beef, 35 percent of them picked mad cow disease, or bovine spongiform encephalopathy (BSE). About 10 percent of housewives said they associate U.S. beef with a lack of food safety, while 7.8 percent and 3.7 percent described it as low-quality and unsanitary, respectively. (Source: Korea Times.) (SITE NOTE: This is because of the popular hype over the beef scare. If the Korean people would use common sense and look at the US consumption of beef -- and the lack of mad cow disease -- they would realize their risk factor is very low. However, with the hype of the FTA agreement which originally had nothing to do with beef -- and the activist NGO groups and popular image of the destitute farmer, most Koreans have jumped on the hate US beef bandwagon -- just as it was popular in the US not to eat Starkist Tuna because they caught dolphins in their nets. This is mostly hype.)

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Import of American Beef Resumes (Apr 2007) A shipment of 6.5 tons of American beef arrived at Incheon International Airport on a cargo plane on 23 Apr, resuming import of American beef that had been suspended for three years and five months. Korea imported three shipments of beef from the U.S. between October and December last year, but all were sent back because they contained bone chips contrary to a bilateral agreement. In agricultural talks in March, Korea agreed to send back only the packages found to contain bone fragments rather than the entire shipment.

The 449 packages that arrived on 23 Apr will likely hit the domestic market in early May, when the quarantine procedures are complete. The Ministry of Agriculture and Fisheries said it will X-ray them to make sure they contain no foreign substances and see if the meat is really boneless beef from cattle under 30 months old, as the agreement specifies. But domestic consumers need not hold their breath. A spokesman for importer Nerp said the shipment “will be delivered to our dealers, including wholesalers, as samples, and we plan to import the meat in earnest depending on reactions in the market." Imports will start in earnest in the second half of the year, since some importers are reviewing schedules based on agreements they have already concluded with U.S. exporters to buy dozens of tons of beef.

U.S. beef at one point accounted for 50 percent of the Korean market. When imports were suspended in the wake of an outbreak of mad cow disease in the U.S. in October 2003, beef from Australia and New Zealand took its place. The imminent resumption of imports has sent the price of Korean cattle falling. According to the National Agricultural Cooperative Federation, the price of a 600 kg Korean cow has dropped to W4.92 million (US$=W926) as of April 19, from W5.21 million in December 2006. The price of a four-to-five-month-old she-calf dropped from W2.8 million to W2.25 million in the same period. "The sharp drop in the price of calves signals the high possibility that the price of cattle will fall in the long term,” an official from the Hanwoo Association, a nationwide group of Korean beef producers, said.

At a press conference, Agriculture Minister Park Hong-soo said, "We are considering abolishing the livestock slaughter tax to protect the domestic livestock industry from the opening of the market under the free trade agreement with the U.S. and to oblige all restaurants to indicate countries of origin for the ingredients of their dishes.” The system is already enforced in restaurants of 297 sq.m or above. (Source: Chosun Ilbo.)

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Beef Prices on the Decline (Apr 2007) With American beef expected to hit local counters soon, beef prices here are already beginning to weaken. Prices for Korean and Australian beef in supermarkets are edging down and sales are slowing. Lotte Mart said on 24 Apr that in the wake of the free trade agreement (FTA) with the U.S., sales of Australian beef are down about 8 percent from last year. "We suspect that the coming import of American beef has affected the sale of Australian beef," a Lotte Mart official said. A price comparison by Shinsegae-EMart on March 23 and April 23 shows that the price of first-class Korean beef steaks dropped from W7,850 (US$1=W928) per 100g to W7,600. Chuck roll prices fell from W3,400 to W3,120.

Some sellers are offering discounts on Australian beef in preparation for the full-scale arrival of American beef. Lotte Mart said they plan to offer 30 percent discounts between April 26 and May 2 on 10 tons of Australian beef in cold storage that arrived on four airplanes. It's the first time a large domestic supermarket has airlifted imported beef. Samsung Tesco HomePlus will offer similar specials around the same time, with 20 to 30 percent discounts on Korean and Australian beef. Shinsegae-EMart are also planning a special sale on Australian beef for mid-May.

Meanwhile, the food service industry is eager for the American beef to arrive. Park Chang-kyu is the president of Oredream, a beef importer and operator of a chain of restaurants. "Following the conclusion of the Korea-U.S. FTA, the wholesale price of Australian chuck has fallen from W7,300 per kg to W5,000," Park said. "The bubble of the domestic beef prices, which was created when imports of American beef were banned in 2003, will burst."

Experts predict that the resumption of American beef imports will deal a harder blow to Australian and New Zealand exporters, which have dominated Korea's beef market, rather than to local farmers. "In the mid- and long-term, Korean beef is unlikely to be dealt a hard blow," said Lotte Mart's meat importing team. "But American and Australian beef will compete in the import market."

America had accounted for 68 percent of Korea's beef imports until the 2003 ban. Australian beef was able to fill the void, growing from a mere 21.8 percent market share in 2003 to 76.4 percent last year.




Protest over Importation of US Beef (25 May 2007) (Tongil News)

World body says U.S. beef now safe to eat (May 2007) On 24 May it was reported that with the World Organization for Animal Health’s decision that U.S. and Canadian beef are safe from mad cow disease, the two countries are putting more pressure on Korea to fully open its beef market.

The organization, based in Paris, has decided to classify Brazil, Chile, Switzerland, Taiwan, Canada and the United States as having successfully controlled mad cow disease, or bovine spongiform encephalopathy, yesterday. An official announcement will come on Friday.

Experts are predicting that U.S. beef on the bone, previously banned, will enter Korea as early as September. Right after the decision was made known, Mike Johanns, the U.S. Secretary of Agriculture, declared that the United States would “use this international validation to urge our trading partners to reopen export markets to the full spectrum of U.S. cattle and beef products. “We are notifying our trading partners of our expectation that they commit to a timeframe to amend import requirements and expand access to their markets to reflect this controlled risk determination.”

Opening the Korean market again to U.S. beef had been a key demand of American trade negotiators during the recently concluded free trade talks. Senator Max Baucus, the chairman of the Senate Finance Committee, said U.S. beef is safe and that there is no further reason for blocking imports. “Korea, Japan and China must immediately fully open their beef markets,” said the lawmaker, whose committee is crucial to ratification of the free trade deal with Korea.

The Korean government acknowledges that current regulations on beef imports may need to be amended, said an official at the Agriculture Ministry. If so, the current guideline allowing only boneless beef from cattle under 30 months old would have to be altered to allow in virtually all American beef.

Australian beef, which is dominant in the market, may lose share if U.S. beef returns. In 2003, before U.S. beef was banned due to fears of mad cow disease, it held almost half the local beef market. The decision didn’t immediately influence the local cattle price, according to the Agriculture Ministry. “But hanwoo [Korean cattle] prices are definitely expected to drop when U.S. beef is imported in massive amounts,” said Kim Seong-ho at the livestock department of the National Agricultural Cooperative Federation. (Source: Joongang Ilbo.)

S. Korea's Quarantine Service Finds Ribs in U.S. Beef Shipment (May 2007) South Korea's quarantine service said on 30 May that it had found in a shipment of American beef two boxes of U.S. beef ribs, which cannot be brought into the country under current import rules. The boxes containing 53 kilograms of ribs were part of a 15.2 ton shipment that arrived in Busan on May 25, the National Veterinary Research and Quarantine Service (NVRQS) said. "The two boxes were packed full of chuck short ribs so they were easily noticed by our inspectors," said Kang Mun-il, head of the state-run service under the Agriculture Ministry.

He said Seoul immediately ordered a suspension of all imports from the meat processing company, Cargill, that shipped the rib-filled boxes. Notice of the decision to halt imports from the meat processing company has been forwarded to the U.S. government. The NVRQS chief said the entire shipment has been put on hold pending an investigation into the matter by South Korean and U.S. authorities. The animal quarantine expert hinted that there is a chance that the 15-ton shipment could be sent back. "If the latest incident involved bone chips, only individual boxes would be sent back but because these were sizeable bone-in beef parts, there is a need to determine whether there are any serious problems with the exporter," Kang said.

The director general, however, said Seoul did not plan to reinstate a ban on all American beef since tests on the ribs showed they were not tainted with specified risk materials (SRMs). Seoul said that if SRM materials are found in U.S. beef shipments it would halt all imports. SRMs, which pose the greatest risk of transmitting mad cow disease to humans, include head bones, brains, vertebral columns, spinal cords, dorsal root ganglions and some internal organs. (Source: Yonhap News.)

The discovery of two boxes of U.S. beef ribs, far more obvious than bone chips that cannot be brought into the country under current import rules, made Seoul suspend imports from the U.S. exporter, Cargill, and investigate how the shipment was sent. The Agriculture Ministry is to decide whether to send back only the two boxes or the entire 15.2-ton shipment after hearing an explanation from Cargill, located in Minnesota.

(SITE NOTE: The ROK needs to use some commonsense. 53kg of ribs -- which logic says was somehow mixed up by mistake in the 15.2 TON shipment -- was found not to be contaminated with SRM materials. Thus why should the ROK hold up the entire shipment??? It is obvious that it was not intentional. Simply reject the two boxes. However, the old rules are in place, but the fact that the World Organization of Animal Health provided a low-risk factor for Canada and US beef should weigh in the equation.

Some Korean lawmakers have suggested that it was a "test" by the US, but this is so ludicrous that a company would risk a rejection and loss simply to test the rules for the US national good to reopen the market. That would be just idiotic. However, the US Beef advocates and the US Congress are just waiting to see if the ROK to ship the ENTIRE shipment back. The retaliation would be an adverse one affecting the ratification of the US-ROK FTA -- which set as a precondition the opening of the beef market.)

Korea to Return 66 tons of US beef (Jun 2007) The Ministry of Agriculture and Forestry (MAF) said on June 5 that Washington asked Seoul to give number and details of quarantine certificates. The Korean government issues quarantine certificates to U.S. beef importers when receiving exported beef. The request for the certificate numbers is to compare them with what Washington's inspection authorities have on its documents. By doing so, the U.S. government will find out whether beef for domestic sales were included in the export, and who is responsible. The swift action by the U.S. is part of its effort to prevent any distrust from being created among Korean citizens. In fact, after the wrong shipment was found, Agriculture Secretary Mike Johanns said it was a "simple mistake" and acted swiftly to resolve the issue. "This is just a minor mistake that happened at the early stage of the beef import resumption. Beef exports to Korea will not be banned because of this," the secretary said to reporters on June 4 (local time). “We believe these were isolated incidents,” he told reporters.

However, on 5 Jun South Korea decided to return 66.4 tons of U.S. beef that failed to meet the export verification standards on beef agreed upon between the two countries, while suspending quarantine checks. The Ministry of Agriculture and Forestry said that the controversial beef was processed for the U.S. market but not for export. South Korea will ban further imports of beef from Tyson Foods Inc. and Cargill, Incorp., which shipped the wrong meat, said the ministry. In effect, South Korea slapped a de facto ban on imports of U.S. beef. The ministry said it had decided not to issue needed import certificates for U.S. beef after rejecting two recent shipments intended for the American market. Without a quarantine certificate, no imported meat can pass customs inspection.

"The U.S. notified our country of its findings over the weekend," Kim Chang-seob, chief veterinary officer of the ministry, said. He added that his government strongly called on the U.S. to tighten its oversight of meat exports. He said Richard Raymond, the undersecretary for food safety at the U.S. Agriculture Department, sent a letter notifying Seoul of Washington's findings. One of the two shipments to be sent back includes two boxes full of chuck short ribs that arrived in Busan on 25 May were found by quarantine inspectors on 30 May. Tyson shipped 51.2 tons of meat that should have been sold in the USreached Busan on 26 May.

The U.S. government has started an investigation to find out whether beef for domestic consumption was exported to Korea. Since U.S. beef imports resumed in Korea after the mad cow scare, Washington is moving to prevent a worst-case scenario: another ban. The Korean government, however, plans to continuously raise questions until the problems surrounding the U.S. inspection system are addressed. Spokesmen for the two companies from which the beef originated, Cargill Inc., and Tyson Foods Inc., said beef produced for the U.S. market was instead sent to South Korea by an outside distributor. Both Cargill and Tyson Foods said Monday they did not export the meat but sold it to third-party companies which shipped it abroad. U.S. Department of Agriculture officials said the shipments were made by Am-Mex International, a West Coast distributor. Am-Mex could not be immediately reached for comment.

"The product involved is boneless chuck rolls," said Tyson. "It is completely safe for consumption but was produced for domestic use and did not have the proper documentation for export to South Korea." A spokesman for Cargill declined to identify the facility that received the suspension from the South Korean government, saying the issue is "moot," since the company was not responsible for the shipment. (Source: Omaha.com.)

(SITE NOTE: The ROK has made a BIG irrevokable mistake in sending the ENTIRE shipment back for two boxes of short ribs (kalbi). Despite the "rule" in existence, there should have some commonsense involved. As for the Tyson Foods shipment that was meant for domestic shipment was a mixed up shipment -- but 55 tons is a pretty big mixup. However, to block ALL further shipments is bound to lead to some serious reprecussions in getting the FTA approved as the boneless beef issue was linked to ratification. The fact that the ministry halted the sale of three tons that had passed inspection and were just about to be released on the market makes it apparent that the intent was to block ALL shipments -- not just these two.

Sen. Max Baucus (D-Montana) on 6 Jun again criticized South Korea for rejecting American beef after Seoul decided to send back 66 tons exported erroneously. "My patience is running out," he said in a statement. On 7 Jun, the US stated the incident was a mistake and asked the ban to be lifted. The impacts will be dependent upon how swiftly the ROK opens the market again...if at all.

Four boxes of beef, weighing about 287 pounds, were mistakenly sent to South Korea as samples on June 2, although they were meant for domestic consumption, said Kim Do-soon, an official with South Korea's Agriculture and Forestry Ministry. The U.S. Agriculture Department informed Seoul of the latest mistaken shipment, Kim said.

Two U.S. meat plants, run by Tyson Foods Inc., processed the beef and have been suspended from handling meat bound for South Korea, the official said. A spokesman for Springdale, Ark.-based Tyson, Gary Mickelson, said that, "contrary to South Korean news reports, Tyson Foods did not ship the beef in question." "We produced it for domestic sale and consumption," he said Tuesday. "The product was sold by Tyson Foods to a Minnesota company, which resold the product to Iowa-based Midamar Corp. "Midamar mistakenly exported the beef to South Korea several weeks ago without our knowledge, involvement or permission," he said. "We're once again working through USDA in hopes of quickly resolving this problem." Mickelson would not say which two plants were involved. The company has several facilities in Nebraska.

A spokesman for Midamar Corp. of Cedar Rapids, Iowa, said his company did not send the four boxes to South Korea. Darrin O'Brien, who works in export sales for Midamar, said they were sent to a South Korean company in California, which he said he would not identify. He also said he didn't know what that company had done with the samples. Tyson produced the product that was acquired by the Minnesota distributor, where it was specifically identified as samples for Korea, O'Brien said Tuesday. The Minnesota company was J&B Group of St. Michael, Minn., Mickelson said. A call seeking comment from J&B executives was not immediately returned. Two of the four cases were marked with the right product code to earmark them for South Korean shipment, O'Brien said, but two bore the wrong code. The beef itself didn't violate any of South Korea's product specifications, he said. "Age was fine - everything was fine - except the product code was not right in only two cases," he said.

South Korea slapped a de facto ban on U.S. beef imports earlier this month after two shipments meant for U.S. consumption arrived in late May. The ban was lifted days later after Washington assured Seoul that the two shipments were mistakenly exported. (Source: Norfolk Daily News.)