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

April 2007

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.)

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March 2007

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 (Mar 2007) 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. (Mar 2007) 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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April 2007

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 (Apr 2007) 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.)

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May 2007

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.)

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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.)

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June 2007

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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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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August 2007

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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November 2007

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."

In the end, rice was taken off the table -- though the US negotiators claimed it wasn't -- and the poultry, pork and oranges ended up with a five-ten year tariff elimination. South Korea will abolish its 40 percent tariff on U.S. beef over 15 years and the pork tariff over 10 years. In Mar 2007, the ROK government promised that they would assist the farmers with special farmer financial support. However, I remind the US that the ROK under the WTO agreement in the mid-1990s agreed to a ten-year delay before fully opening of its rice market -- but then reneged on its promise. When the deadline arrived, the ROK renegotiated the opening of the rice market with another ten year "deal" -- promising a smaller market opening for an extension. In 2006, we said:

"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."

The "boneless beef" controversy -- that occurred during the FTA negotiation process -- ended with an agreement that will now allow the market to be opened with a ten percent tariff reduction spread out over a ten year period -- with the ROK to "consider" the conditions in May 2007. How the ROK has handled this fiasco is the RULE -- and NOT the exception. Given the way the ROK agreed to open the beef market after the mad-cow disease scare to "boneless beef" -- and then pulled a "read the fine print" maneuver by rejecting ALL shipments. This illustrates the tactics that the ROK government will resort to to protect its markets. In the end, the beef growers of America got shafted -- and the consumers of Korea also got shafted with some of the highest beef prices in the world. 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" by President Roh -- for whatever that is worth. In 2006, we said:

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."

At the end of the FTA negotiations, we feel that our negative opinion of the process was correct. The picture is very clear that the ROK government supports the chaebol "old boys club" by its actions pardoning business group leaders who have embezzled millions of dollars because of their "contributions" to society -- while the economy has fallen into a recession for the past four years. Look at the xenophobic business environment that the ROK has created where any business that dared to turn a profit in Korea was penalized (i.e., Lone Star) -- and any attempt at foreign representation in management was resoundingly defeated. Though Roh Moo-hyun promised to rein in the chaebols, they have continued to abuse their positions of power -- and in 2006, the ruling Uri Party changed its position to support the chaebols because it needed the funding for its 2007 Presidential campaigns. Corruption remains rampant. Foreign companies are bailing out of Korea and direct foreign investment (FDI) is plummeting. By Jul 2007, inflows of FDI fell by almost a third in the first six months of 2007, the Ministry of Commerce, Industry and Energy said on 3 Jul 2007. FDI dropped 32 percent to $3.4 billion in the six months to June 30 from the same period a year ago, the ministry said. The number of investments gained 5.5 percent, it said. However, the Ministry was placing its hopes of attracting investors on the ROKUS FTA that was supposed to add $29 billion a year to two-way trade.

We remind the US how the ROK has flaunted intellectual property rights and had its ROK computer chip businesses sentenced in US courts for price-fixing and collusion within the borders of the US. To illustrate the US trust in the ROK ability to keep trade secrets, one only needs to ask why the US will sell its Predator UAVs to Japan, but will not sell them to the ROK. The ROK businesses have even bribed US Congressmen through illegal campaign contributions -- Jay Kim amongst others. The FTA agreement may look good on paper, but does the element of trust truly exist between the US and ROK? Look to the ROK's protectionist actions in the past decade and the answer on how the ROK will uphold the provisions of the FTA are obvious.

In the area of textiles, we worry that the term "different country" will apply to the Kaesong Industrial area with its emphasis on textile companies operations -- and the "fine print" acceptance of these materials used in "made in Korea" products. Deputy U.S. Trade Representative Karan Bhatia 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.'' However, the ROK has a nasty habit of "reinterpreting" the "fine print" -- and coming to conclusions that are opposite of what was opposing negotiators believed they agreed to. The "boneless beef" issue speaks for itself. This nasty quirk of Korean businesses has been documented in US college business textbooks for over thirty years, but no one seems to pay much attention. True to form, on 4 Apr Yonhap News 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 2006, we said:

"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."

All we say to the US Congressmen when considering this agreement for approval/disapproval is to NOT simply look at the agreements' terms, but also consider the actions of the ROK in every area negotiated during the past five years. Then think about what the ROK will do in the future even with an FTA agreement in place. What we are stating is that what is written on paper is one thing, but an agreement is only as good as the willingness of the parties to abide by the conditions of the agreement. The ROK record of actions in all areas speak for themselves. Make no bones about it -- this FTA is a bad idea.

One never knows with a Democratic Party controlled Congress if the FTA will be approved or not. In Apr 2007 the U.S. Congress pressured the Bush administration to be tougher on issues like beef and automobiles -- and what came out in the end may not be satisfactory to some Congressmen. The FTA must pass the Senate Finance Committee before it is voted on by the Senate -- and it is headed by Max Baucos, who hails from Montana, a state whose major industry is cattle. Baucos has vowed the FTA will be doomed unless the beef issue is resolved. And the beef issue still lingers in the air with a warning from Deputy U.S. Trade Representative Karan Bhatia that Congress would not approve the FTA without the full reopening of Korean beef market. Remember that the automotive industry went to the President to beg the opening of the automotive market in Korea. Though the Democrats will tend to be hard on the auto industry if it comes to Congress begging handouts or special favors, they will support them against the Koreans because of the 3 million autoworkers/voters who provide a large constituency in America. Within the auto sector, Ford has been the most vocal critic of the pact while General Motors has taken a neutral stance. Most other U.S. business groups strongly support the agreement, and labor groups are opposed.

However, in the US, it's an election year and lots of campaign funding is available for both parties from the newly created ROK government lobby in Washington. In Korea, the votes are already in -- with 66 against, 88 for, and 117 undecided (with 11 unknown). However, most of the undecided will probably vote for the FTA. Korean political analysts say the chances of ratifying the FTA is high, given the backing from both the Uri Party and the GNP. (Source: Korea Times.) However, the National Assembly vote is really wobbly because in a presidential election year -- with the Uri Party self-destructing in July 2007 -- legislators may pay politics and side with the "people" -- and against Roh -- if it looks like the anti-FTA fever is spreading. BUT there is a point that should be considered. Roh staked his political reputation on forging ahead with the FTA to make it the only legacy of his administration. However, if the Congress blocks this FTA, then the next round will be very different. The incoming conservative president (based upon polls that the GNP far outstrips any proposed candidate from the other parties) will be part of the chaebol side of the fence. As such they will foster protectionist policies. The present FTA may have its faults, but most certainly there will not be much openings under the future administration.

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January 2008

USTR Says Korea FTA Should Not be Sacrificed by Opposition of Few (Jan 2008) The Korea Times on 8 Jan reported that the top US trade negotiator stood firmly by a free trade agreement (FTA) signed with the ROK, saying the benefits from the deal should not be sacrificed under the opposition of some. "This is clearly a winner" for Americans from farmers to service providers, Susan Schwab, the U.S. trade representative, said in a teleconference from Las Vegas. Some will oppose it, include those who will be negatively affected by the FTA, Schwab said. "We have an obligation and desire to look after them, but the rest of the economy should not be punished by virtue of that, should not have to pick up the cost in terms of the U.S. not opening its market," she said. (SITE NOTE: 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. No action was to been taken until after Lee Myeong-bak takes office as President in Feb. 2008. President Bush stated in Dec 2007 that the ROK-US FTA would be one of the top agenda items for his administration. SEE US-ROK FAIR TRADE AGREEMENT (FTA) NEGOTIATIONS for 2007 FTA chronology of events.)

Time Running Out for FTA with U.S. (Jan 2008) Experts say Korea's National Assembly should ratify the free trade agreement with the United States ahead of the U.S. Congress, during an extra month-long parliamentary session starting Jan. 28. They say ratification of the deal should come before Korea's parliamentary elections slated for April 9, citing that the United States could delay the process due to the November presidential election. Congress should ratify the agreement before July at the latest. (SITE NOTE: Lee Myeong-bak wants the FTA passed through the National Assembly while Roh Moo-hyun is still in office so as not to be levied with the baggage that comes along with it. If it doesn't pass, Lee would have to bear the flak from farmers over the problems created by the FTA. But the key point is that the ROK must pass the FTA BEFORE it is submitted to the US Congress.)

Considering the 90-day ratification process, Washington should submit the deal to Congress no later than March. To meet the due date, Seoul should first complete ratification in February and initiate pressure on Washington for a rapid process. The situation might turn worse if Washington fails to ratify before the November presidential election and if a Democrat gets elected. Democratic candidates Hillary Clinton and Barack Obama are strongly opposed to the agreement. (SITE NOTE: As of Jan 2008, the issue could go either way. The beef issue is unresolved, but the automotive industry is also waiting in the wings to launch an anti-FTA push. However, the US automakers are not unified as some such as GM have joint ventures in Korea. Once it starts, the anti-FTA forces -- most prominently US labor -- will apply pressure.)

As the situation grows tense, Seoul has gotten jittery over the agreement and expressed worry over an unfavorable outcome. Yoon Young-gyu, chief of the domestic free trade agreement office, said, "Seoul has gone all-out to explain the agreement's ratification to the National Assembly and promote it to the media. The figures in charge of the deal have individually persuaded lawmakers every week." "Their efforts have paid off, as the lawmakers submitted ratification. If the new administration starts by not ratifying the deal, we have to start the whole process over from the beginning." A government official also said, "If ratification falls into the hands of the next National Assembly, Korea could get stuck in a quagmire. There is also worry over the potential failure of the agreement itself."

"Deferment and cancellation of the Korea-U.S. free trade agreement will have an ill effect on Korea's economy, foreign credibility and bilateral relations," said Ahn Choong-young, a professor at Chung-Ang University in Seoul. "The fundamental frame of the government policy on striving to become an advanced trading nation might crumble." A report by the Korea Chamber of Commerce & Industry last year said Korea will suffer an opportunity cost of 15.2 trillion won if ratification is delayed a year.

If ratification is postponed, the next administration must conclude negotiations with the National Assembly, when it should put more effort into drafting strategies and creating a framework for national administration. To make matters worse, the agreement and other economic negotiations might not be high on the agenda of the next administration, and thus failure to reach a conclusion is possible. (SITE NOTE: The FTA is high on the Lee agenda simply because of the high stakes involved and the protential benefits that would provide an economic stimulus to the economy. If it does get delayed, the US public will view the ROK-US FTA as something that is perhaps a mistake since the ROK itself doesn't want it. The PR campaigns could prove disastrous in the US for the FTA passage through the US Congress.)

"Countries trying to reach a free trade agreement with Korea usually do so to advance to the U.S.," said Choi Nak-gyun, chief researcher at the Korea Institute for International Economic Policy. "If ratification fails, the countries might cast doubt on negotiations with us." Economic circles are urging immediate ratification of the agreement. Members of a non-governmental committee on the deal, including Federation of Korean Industries Chairman Cho Suk-rai and Korea International Trade Association Chairman Lee Hee-beom, visited the National Assembly last week. They told lawmakers that it will be easier to persuade Congress if Korea ratifies the agreement first, asking for ratification within the next parliamentary session. Economists from both countries issued a joint statement at an academic conference in Hawaii that both sides must ratify within the first half of the year.

Opening the Korean market to American beef is a major barrier to ratification. Seoul permits only meat from cattle aged younger than 30 months, but Washington wants all restrictions lifted on American beef before ratifying the agreement. The import of U.S. beef has become a test for Korea to open its market. To complicate the matter, ratification must be approved by Montana Senator Max Baucus, who is also chairman of the Senate Finance Committee. His state is nicknamed the "Beef Belt" since it mass-produces the meat. Moreover, since beef is produced throughout the U.S. mainland, it is impossible to ratify the agreement while banning American beef. The presidential transition committee of President-elect Lee Myung-bak has devised plans to resolve the problem, but the results have bore little fruit. The Agriculture and Forestry Ministry suggested to the committee recently that adding a clause on prohibiting animal feed to the agreement might lift the restriction on cattle age. The committee rejected the idea, however, saying the United States will not accept that. Experts are urging both countries to take a more lenient stance on the opening of the Korean beef market, and devise better strategies by resuming high-level talks. (SITE NOTE: The ROK still was only promising to "consider" opening the beef market further, while the US was flatly saying the FTA would fail without the beef market opening resolved. To be truthful, it is becoming more and more evident that the ROK populace wants US beef because of its low cost and doesn't really care about the "madcow disease" hoopla. For the life of me, I cannot figure out who in the ROK government is getting bribed so much that they are fighting the US beef -- but perhaps its the Australian and New Zealand beef producers who are filling the voild. I really don't know, but the ROK reluctance simply has not made sense since 2007 after public polls showed the ROK housewives resoundingly swarmed to buy up all the US beef that hit the market.) (Source: Donga Ilbo.)

Legislators Seek Ratification of US-ROK FTA by Feb (Jan 2008) Joongang Ilbo on 15 Jan reported that the National Assembly should ratify the free trade agreement with the US by the end of Feb, Ahn Sang-soo, the floor leader of the Grand National Party, said, as lawmakers on both sides of the aisle talked about passage of the deal. Sohn Hak-kyu, the new chairman of the liberal United Democratic New Party, said he would back the agreement as long as measures are passed to help people who will be hurt by it, mostly rural farmers. The hard part, now, may be convincing the United States Congress to approve the agreement amid a presidential election year there. Democratic leaders and some Republicans have criticized the free trade deal, saying it doesn't provide automakers with enough protection.

Korea-U.S. FTA Faces Crisis (Jan 2008) The Korea-U.S. free trade agreement, which has been rated one of the Roh Moo-hyun administration's achievements, is now in danger of being scrapped. Ruling and opposition parties remain passive about it as they are focused on the upcoming general election. Political schedules in Korea and the U.S. make it all the more difficult to ratify the pact before its deadline.

If one of the Democratic candidates who are negative about the FTA, such as Hillary Clinton or Barack Obama, wins the U.S. presidential election late this year, the two countries will probably have to begin FTA talks all over again. The ratification has been cold-shouldered by political circles in Seoul, although chiefs and senior executives of business associations have been visiting the National Assembly and political parties since early this year to reiterate the importance of ratifying the deal.

Since the beginning of this year, senior executives of four major business associations -- the Federation of Korean Industries, the Korea International Trade Association, the Korea Chamber of Commerce and Industry, and the Korea Federation of Small Business -- have made it a rule to start their days with telephone conversations with ruling and opposition lawmakers. They have been lobbying the politicians to ratify the FTA bill, which was submitted to the house in September last year, in an extra house session in February, the last session of the 17th National Assembly.

The four major business associations, including the FKI, and the Korea Federation of Banks on Jan. 9 issued a statement calling for the bill's ratification. On Jan. 14, the heads of the associations, such as Cho Suk-rai, chairman of the FKI, visited the house speaker, the chairman of the house unification, foreign affairs, and trade committee, and leaders of ruling and opposition parties, asking them to ratify the bill in the extra session.

"Every day, we're trying to persuade senior members of ruling and opposition parties, including their chief policy makers, of the need to ratify the Korea-U.S. FTA bill," said Lee Yoon-ho, vice chairman of the FKI, looking frustrated as he spoke. "Lawmakers are not so enthusiastic probably due to the upcoming general election."

Business circles have been making all-out efforts to get the FTA bill ratified by the house in February. Unless it is ratified by that time, it seems highly likely that the bilateral trade pact, which was signed after years of mutual efforts, may be scrapped. With the U.S. presidential election scheduled for November, the U.S. Congress will effectively cease functioning during the Republican and Democratic national conventions slated for August. If the FTA is to be ratified by the end of July, the bill should be submitted to the U.S. Congress no later than late April, considering the 90-day period needed for both the House and the Senate to review it.

Moreover, in the U.S. it is the current administration alone that still remains enthusiastic about the FTA. Congress is presently led by the Democratic Party. If the bill is to be ratified by Congress while the Bush administration is still in office, the surest way would be for the National Assembly in Seoul to ratify it first in the extra session in February and then pressure the U.S. Congress to follow suit.

Korean business circles are concerned about the ongoing U.S. presidential election as Democratic candidates seem to be winning. If a candidate from the Democratic Party, which has traditionally advocated trade protectionism, wins the election, he or she will probably call for a renegotiation of the FTA, making the future of the trade deal murky.

Lee Seung-chul, vice president of the FKI, said, "The Korea-U.S. FTA will prove much more beneficial to us than to the U.S. Since it was achieved by the Roh administration, the United New Democratic Party should take the initiative in getting the bill ratified." (Source: Chosun Ilbo.)

Despite U.S. President George W. Bush's plea for early passage of the free trade agreement with Korea on 27 Jan, the deal faces a gloomy future in Washington. The biggest obstacles are the congressional insistence on Korea's unconditional opening of its beef market before ratification and renegotiation of terms on American cars and auto parts.

A diplomatic source in Washington, on the condition of anonymity, said beef is one of the biggest problems, but that the Democrat-controlled Congress will not budge an inch without resetting auto trade terms. For example, U.S. lawmakers want to set the tariff-free quota for Korean cars based on the number of American cars sold in Korea. Seoul, however, has also refused to step back, saying further compromise of its position on auto trade will strengthen voices in Korea opposed to the accord.

The political situations in both countries are also making ratification harder. The agreement was introduced to the Korean legislature in September last year, but has remained in limbo because no lawmaker wants to discuss it with the general elections coming in April. In the United States, the primaries leading to the November presidential election are drawing all the attention. Once the two major parties hold their conventions later this year, the U.S. Congress will probably remain idle for the rest of the year. A U.S. congressman, who asked to remain anonymous, said it will take at least 104 days to push the bill through the House of Representatives and an additional 165 days through the Senate. He said that considering the timetable, the bill should be introduced to Congress at least by mid-April. Reflecting the situation, House Majority Leader Steny Hoyer (D-MD.) said it is hard to say if Congress can ratify free trade pacts with Korea and Panama within this year. (Source: Donga Ilbo.)

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February 2008

Parties to Handle US FTA Prior to Lee Inauguration (Feb 2008) The GNP and UNDP agreed on 5 Feb to handle the provisional free trade agreement (FTA) between South Korea and the United States at a National Assembly committee session on Feb. 11. But going against President-elect Lee Myung-bak's wish, lawmakers of the pro-government United New Democratic Party (UNDP) are looking to vote on the bill after the April 9 general elections, UNDP sources said.

Ahead of a probable March summit with U.S President George W. Bush, Lee is poised to make every effort to fully open the domestic market to U.S. beef. Lee, who will take office on Feb. 25, has reiterated that his transition team will resolve the problematic beef import issue ``in February.'' The President-elect's pledge means that Seoul is ready to remove ``hurdles'' for fast parliamentary ratification and effectuation of the FTA with Washington. Lee has insisted that there are more urgent issues in relations with the U.S., expressing his willingness to settle the lingering import issue as early as possible.

But the beef import could not merely be a commercial issue for Koreans who eat about 85 parts of cattle, while only about 10 parts are regarded edible for Americans. Cattle's intestines, spinal cords and backbones _ consumed by many Koreans _ are three of the few parts which might contain high ratio of specified risk materials (SRM), a main factor for mad cow disease.

Though Lee and his transition committee stress the necessity of allowing imports of ``bone-containing'' beef for fast ratification of the FTA by the U.S. Congress, they hesitated to mention food safety. Cheon Ho-seon, the spokesman of incumbent President Roh Moo-hyun, has also refused to answer whether the Ministry of Agriculture and Forestry regards U.S. beef as safe to eat.

The Lawyers for a Democratic Society is accusing the presidential office and the transition committee of not making public confidential documents or verbal reports by the Ministry of Agriculture, which is assumed to stipulate risk amid problematic sanitary conditions of U.S. meat processors. Some Korean experts worry that Congress will veto the Korea-U.S. FTA and urged the National Assembly to press Congress by passing the motion as early as possible (in February) and calling for the government to further ease beef quarantine rules.

But some say earlier ratification ahead of the U.S. is absurd. ``Even under a case of Congress' vetoing the FTA bill, the U.S. will eventually gain four prerequisites _ beef, automobiles, pharmaceuticals and the screen quota,'' said Lee Hae-young, a professor of international relations at Hanshin University.

He also mentioned the possibility that Congress will demand renegotiations on the already concluded accord even after parliamentary ratification in Korea. In contrast, Prof. Cheong In-kyo of Inha University downplayed the possibility of renegotiations, saying, ``The U.S. would not do that as it knows too well about possible adverse sentiment.'' Prof. Lee cited a case in which the U.S. revised the FTA accord with Peru via renegotiation after Peruvian lawmakers passed the bill first. (Source: Donga Ilbo.)

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FTA facing Gloomy Future (Feb 2008) Donga Ilbo reported that despite U.S. President George W. Bush's plea for early passage of the free trade agreement with the ROK, the deal faces a gloomy future in Washington. The biggest obstacles are the congressional insistence on the ROK's unconditional opening of its beef market before ratification and renegotiation of terms on American cars and auto parts. A diplomatic source in Washington, on the condition of anonymity, said beef is one of the biggest problems, but that the Democrat-controlled Congress will not budge an inch without resetting auto trade terms. Seoul, however, has also refused to step back, saying further compromise of its position on auto trade will strengthen voices in the ROK opposed to the accord.

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Parties Shun Beef Decision as FTA Review Begins (Feb 2008) The Korea-U.S. free trade agreement will be reviewed by the National Assembly's Unification, Foreign Affairs and Trade Committee on 11 Feb, starting the parliamentary ratification process 10 months after the bilateral trade agreement was reached.

Political parties are saying that they are willing to ratify the trade deal in an extraordinary parliamentary session this month, but in fact they appear to lack the will to do so. The parties are trying to avoid the issue of fully opening Korea's beef market to the U.S., hoping to pass the political burden to their rivals for fear of a backlash from cattle farmers ahead of the general elections in April.

President Roh Moo-hyun disagrees with president-elect Lee Myung-bak over the ratification of the trade treaty and opening of the beef market. Lee is pressuring the current government to resolve the beef issue in February, saying the government should tackle it as the U.S. wants full access to Korea's beef market as a precondition for its ratification of the trade pact.

However, Cheong Wa Dae is apparently unwilling to deal with the issue, saying a resolution to the problem would be difficult within its tenure since negotiations between the two countries have hit a snag. Beef talks have remained deadlocked since late January. The U.S. has demanded that Korea allow full imports of meat, intestines and ribs of cattle 30 months and older. But Seoul rejected the demand and dug in its heels, saying that it will open the beef market only with conditions.

President-elect Lee has vowed to have the trade treaty ratified by March. A key aide to the incoming president acknowledged that the beef issue is a political hot potato but said it should be resolved by late March. He added that the incoming government will try to resolve the ratification and beef issues, but stumbling blocks are the general elections and the opposition of lawmakers from rural areas.

Meanwhile a government official said that resolving the beef issue within the tenure of the current government is unlikely and the new administration will have to deal with it politically. He added that Korea will first have to lift its regulations on beef imports, which are not in line with international standards, such as the limit on the age of cattle. (Source: Chosun Ilbo.)

DLP Physically Blocks FTA Venue -- but then it moves out of Committee (Feb 2008) A scheduled parliamentary discussion on the ratification of a South Korea-U.S. free trade deal was called off on 11 Feb as members of a liberal party blockaded the meeting venue to thwart submission of the bill. Eight lawmakers of the progressive Democratic Labor Party blocked the committee room, scuffling with fellow legislators and parliamentary officials. The committee meeting was postponed without further notice.

The chances of ratifying the free trade agreement within Feb's parliamentary session are becoming slimmer as the liberal party has vowed to fend off a vote on the bill until the incoming government presents sufficient countermeasures for the nation's farming industry. President-elect Lee Myung-bak's Grand National Party has been seeking prompt ratification of the bill in a bid to wrap up the deal before Lee's Feb. 25 inauguration. The pro-government United New Democratic Party, holding 135 seats in the 299-member National Assembly, is looking to vote on the bill after the April 9 parliamentary elections, fearing possible negative fallout from voters.

Lee has said several times that he will make efforts to fully open the domestic market to U.S. beef -- a key U.S. condition for ratification -- ahead of an envisioned summit with U.S. President George W. Bush in the coming months. Lee's move to speed up ratification has been fueling fierce opposition from farmers' groups and anti-FTA civic groups here.

Meanwhile, Lee Suk-haeng, head of the Korean Confederation of Trade Unions -- a militant labor umbrella group -- left for a four-day trip to the United States Monday, vowing to nullify the motion in cooperation with U.S. labor groups. Lee is scheduled to meet with Sandy Levin, Democrat chairman of the House Trade subcommittee, John Sweeney, president of the American Federation of Labor-Congress of Industrial Organizations, and Anna Burger, Change to Win Federation president during his visit. (Source: Yonhap News.)

On 14 Feb lawmakers sent the bill to approve the Korea-U.S. free trade agreement to the National Assembly's main session, moving the controversial trade pact closer to ratification. But the trade pact still has a long way to go. Lawmakers have to first hold a public forum, scheduled for 15 Feb. The pact also needs a series of approvals from the legislative review subcommittee, the standing committee and the general assembly. It remains uncertain whether the lawmakers, facing a national election in April for every legislative seat, would be willing to risk losing votes from rural-area farmers by supporting the trade pact. Also, the incumbents plan to leave Seoul and start campaigning by early March.

The GNP has been seeking prompt ratification of the bill in a bid to wrap up the deal before Lee Myeong-bak's Feb. 25 inauguration, while the pro-government United New Democratic Party and the Democratic Labor Party -- together holding a majority in the 299-member legislature -- are looking to vote on the bill after the April 9 general elections. "If the deal is not approved by the National Assembly this month, it will be difficult for the accord to get parliamentary approval within the year," said Song Won-keun, a researcher at the Korea Economic Research Institute. "It is feared that South Korea will lose its chance of boosting exports," he said. Observers say that on the U.S. side, proponents are up against a de facto deadline to win legislative approval before the Congress goes into summer recess, after which the presidential election will dominate the political calendar. Considering the 90-day ratification process, Washington should submit the deal to Congress no later than March. To meet the time table, Seoul should first complete ratification in February and then initiate pressure on Washington for rapid approval. Fears are that if a Democratic president is elected in Nov, the FTA is in deep trouble as both Clinton and Obama are against the US-ROK FTA. (SITE NOTE: Lee Myeong-bak had hoped that the UNDP would put its weight behind the ratification of the FTA bill, but politics -- and fear of the Apr Election results over loss of the farmer vote -- detered them from acting. It appears that the next time the FTA will come up will be AFTER the April elections.)

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No deal on FTA if ban on U.S. beef not lifted (Feb 2008) The chief U.S. negotiator for the Korea-U.S. free trade agreement is repeating the same message: Korea has to open its market to U.S. beef imports if it wants the U.S. to ratify the deal. In an interview with the JoongAng Daily yesterday, Wendy Cutler said U.S. legislators are refusing to approve the deal because Korea has not yet lifted its ban on U.S. beef. The ban was imposed after an outbreak of mad cow disease in the United States in 2003.

"In the U.S., we need active and strong support from our agricultural community to really move the FTA through our Congress," said Cutler, who attended President Lee Myung-bak"s inauguration ceremony on Monday. "It's critical that we resolve our beef issue so we can get the necessary support from key legislators, key congressmen and important stakeholders for the FTA," she said. The resumption of U.S beef imports was not on the agenda during FTA negotiations last year. But many U.S. lawmakers with farmers in their constituencies are threatening to vote against the bill unless the beef import issue is resolved. "Certain senators and congressmen told us, "If you resolve the beef issue, we will vote yes on the FTA. But if you don't resolve the beef issue, don't count on our support," she said.

Under pressure, Seoul is considering allowing bone-in beef from cattle aged 30 months or younger, according to the proposal by the Agriculture Ministry to the new administration. But Cutler said the proposal is not going to please Washington. "Frankly, we are not interested in partial market opening," she said.

Efforts in Korea to ratify the pact, the nation's largest-ever trade agreement and the second largest for the United States, have also stalled. The Korean government submitted the bill this month to the National Assembly, but lawmakers, also mindful of rural voters and April"s general election, are dragging their heels. The World Organization for Animal Health (O.I.E.) now considers the U.S. a "risk-controlled country" for mad cow disease, which gives a green light to eating U.S. beef. But several Asian countries, including Korea, argue that the U.S. has not yet fully established safety measures against a possible mad cow outbreak. "We would like to resolve the issue based on science, put it behind us and get the FTA deal ratified in both countries," Cutler said. "Even if we did not have the FTA, we would still be urging our Korean colleagues, like we're urging our Chinese, Japanese and Taiwanese counterparts, to open up their beef market fully in accordance with O.I.E. guidelines."

Korea's new president, who officially took office on 25 Feb, is a long-term proponent of the trade bill, which is projected to increase Korea's gross domestic product by 9 trillion won ($9.6 billion) a year. President Lee expressed his support for the free trade in his inauguration speech. "Opening of the market to the foreign sector is an unavoidable mega-trend. Such an economy as ours, which depends so much on exports, should increase our national wealth through free trade pacts," Lee said.

The political waters, however, are less favorable in the United States. Both Democratic presidential hopefuls -- Senators Barack Obama and Hillary Clinton -- have repeatedly voiced opposition to the bill. However, Cutler expressed optimism to the fate of the pact, stressing the different legislative procedures in the United States make it more difficult to submit the bill hastily. "I remain hopeful that we are going to do it [ratify the FTA] this year under President Bush"s leadership," she said. "I think the prospects are good. They are tough but good." Korea's National Assembly has no deadline to review a legislative bill, while the U.S. Congress, once the bill is submitted, has only 90 days to mull over a proposal before it is either passed or rejected. "We have to think very carefully when to submit the bill and do everything we can to assure we have an accurate vote count for the agreement before the bill is submitted," Cutler said. (Source: Joongang Ilbo.)

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Hopes for Korea-U.S. FTA Dimming (Feb 2008) U.S. President George W. Bush on 26 Feb met some 20 experts including congressmen and a former secretary of commerce to discuss a last-ditch strategy to win ratification of free trade agreements with Korea and Colombia. White House spokeswoman Dana Perino on 26 Feb said the president was to “discuss the importance of free trade to our economy and our national security, and the need to pass” the FTAs. But there are growing concerns in Washington that the Korea-U.S. FTA might not be ratified. The Korean Embassy and Korea experts in Washington are saying prospects are bleak.

First of all, concerns are rising over unemployment in the U.S. amid the increasing possibility of “stagflation” at a time when the economy shows signs of recession despite a 0.4 percent increase in the consumer price index in January. American blue-collar workers oppose FTAs with foreign countries because they believe they will deprive workers of their jobs.

Second, both Democratic presidential rivals, senators Barack Obama and Hillary Clinton, have expressed their opposition to the deal. Workers are major supporters for the Democratic Party. In the Democratic Party's primary in Cleveland, Ohio on 26 Feb, Obama and Clinton even expressed their opposition to the long-existing North American Free Trade Agreement (NAFTA), calling for renegotiations of the deal.

Some pessimists are worried that it is becoming difficult to get Congress to vote on the FTA with the political calendar focusing on the upcoming presidential election. In a press conference Tuesday, Korean Ambassador to the U.S. Lee Tae-shik said, "The Korea-U.S. FTA ratification issue has in effect lost momentum in the wake of delay of the resolution of U.S. beef imports” in Korea. “The prospect of ratification seems very dark due to time constraints on Congress with the approach of U.S. presidential election." A source in Washington said, "People are now talking about the possibility of the Korea-U.S. FTA falling prey to looming stagflation and the Democratic Party's primary schedule.” (Source: Chosun Ilbo.)

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May 2008

Ruling party presses for ratification of S. Korea-U.S. FTA (May 2008) South Korea's ruling party repeated on 21 May its call for prompt parliamentary ratification of a free trade deal with Washington, accusing the main opposition party of politicizing the issue. Both the U.S. and South Korean legislatures are split over whether to ratify the trade deal which was struck last June under the liberal Roh Moo-hyun government. On 20 May, the UDP head told President Lee that his party would not support the ROKUS FTA. The UDP is formed from Roh's old Uri Party which disintegrated just prior to the Dec 2008 elections. Since that time the vote on the FTA was put off because of the April 2008 elections where the conservatives won a landslide victory. The legislators-elect are waiting in the wings, but this last session is one in which the UDP still holds the majority.

President Lee Myung-bak's conservative party has been striving to ratify the free trade agreement (FTA) in the last session of the outgoing parliament, which will close 24 May, to give impetus to the economic initiatives of the new government launched in February. It is becoming obvious that the FTA will have to wait until the new session is in place.

The latest row over the Boneless Beef controversy with teenagers holding nationwide candlelight vigils has created a large roadblock for the FTA as the US has stated repeatedly that without the beef imports into South Korea, there would be no FTA agreement. The nationwide protests have been non-violent, but very embarassing for the Lee administration. It has been forced to make a side-agreement (consultation) with the USTR to try to calm down the furor. It is obvious that the progressive elements wishing to block the FTA and the farmers groups have manipulated the teenagers using scare-monger tactics and the internet. Rumors and outright lies have circulated to keep the intensity up. Progressive teachers encouraged their students to participate, but conservative teachers showed up at rallies to tell their students to go home. Because the rallies were peaceful, the Police took a handsoff approach and rather promised to prosecute the leaders of the illegal rallies. (SITE NOTE: This furor has proven to be highly embarrassing to the Lee administration -- and obviously orchestrated by the progressives who had lost power in the last elections. The progressives also restarted the Dokdo controversy to further embarass Lee who had promised a "future-oriented" relationship with Japan. For his part, Lee has started to disassemble the progressive ad-hoc committees and other mechanisms put in place by the Roh administration -- along with "firing" all the public corporation heads appointed by Roh. This is a struggle where Lee has aimed at destroying the progressives power base -- in government and in academia. The FTA struggle is one between conservatives and progressives and a lot of "dirty tricks" can be expected in the future by the progressives to embarass the Lee administration and the GNP.)

The beef market was scheduled for opening on 15 May, but "delayed" because of the furor for 10 days until 25 May. Until the market is officially opened, the fate of the FTA remains in limbo. (NOTE: Notice that the date of the new market opening coincides with the date the new legislators for the National Assembly are sworn in.)

The Boneless Beef controversy seems to have cleared the hurdle for the vote in Congress. However, the Democratic Party speaker, Nancy Pelosi, wanted the FTA negotiations to be reopened on automotive issues in May 2008. However, the government stated on 20 May that the FTA would not be renegotiated -- and that if the senators wanted to vote against the FTA it was their right to do so, but because only one automotive company (Ford) and one union (the automotive workers union) has come out against the FTA, the US would not support a renegotiation.

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National Assembly in Tug-of-war Over KORUS FTA (May 2008) With the term of the 17th National Assembly coming to an end at the close of this month, the ruling and opposition parties are engaging in wrangling over the ratification of the Korea-U.S. free trade agreement. The Grand National Party (GNP) lawmakers held a protest to demand National Assembly Speaker Lim Chae-jung exercise his authority to present the motion to ratify the Korea-U.S. FTA. A group of GNP representatives visited the office of the speaker to urge his decision to call a parliamentary vote during the plenary session.

The GNP is said to be reviewing a possibility of convening an extraordinary parliamentary session from May 26 to 29. Kim Jeong-hoon, chair of the GNP public information office, said, “Now that the president expressed his regret and apologized to the public, the KORUS FTA should be passed in the 17th National Assembly.” However, chances are high that the ratification motion will be handed over to the next 18th National Assembly, given the speaker is refusing to exert his authority to call a parliamentary vote, making a pretext of the fact that many including the United Democratic Party (UDP) oppose to this.

The GNP, which holds a majority in the next parliament, decided to put the FTA high on the agenda to deal with it in June when the 18th National Assembly resumes. Apparently, the GNP’s last-minute effort is aimed at raising public awareness of the importance of the trade deal to ultimately pass it. In order words, the ruling party intends to build up foundations for national consensus by exposing the issue to the public as much as possible through the media. Such an effort is also likely to elongate the positive momentum gained through the president’s apology over U.S. beef issues.

In contrast, the UDP is expected to stick to the additional negotiations in the resumption of U.S. beef imports, saying that there are neither negotiations for the FTA, nor cooperation for state affairs without resolving the FTA first. The term of the 17th National Assembly will come to an end on May 24. The UDP’s political presence in the parliament will be reduced from the current main ruling party post with 136 seats to a small opposition party with only 81 seats in the 18th National Assembly. The strong opposition by the UDP over U.S. beef imports was in part boosted by Lee’s worsening approval ratings, which have recently soured drastically just three months into his inauguration. Kim Hyo-seok, floor leader of the UDP, warned in a meeting yesterday against the official ratification of the U.S. beef imports.

The UDP plans to deal with a dismissal motion for Agriculture Minister Chung Woon-chun over the ongoing public outcry against U.S. beef imports in National Assembly today. The UDP called all of its 136 lawmakers in an effort to encourage their participation in the session. A UDP member said, “We have secured 155 in total members to attend the session, including nine from the Liberty Forward Party and six from the Democratic Labor Party.” The dismissal motion will be approved if a majority of the number enrolled (146 seats out of 291) agree to the vote. (SITE NOTE: This is all for show. Though the progressives have the votes to pass this legislation, Lee Myeong-bak does NOT have to act on it...and he won't. This is all political show. On 23 May the motion to dismiss the minister by the UDP, LFP and DPP failed by 8 votes.)

Regarding this, GNP floor leader Ahn Sang-soo said, “We have no intention to exercise physical obstruction to the move.” What counts in the ongoing battle concerning the ratification of the KORUS FTA is how the 18th National Assembly floor will be structured. The UDP reiterated its position not to provide cooperation in electing speaker and establishing various committees including the standing committee, while shifting the responsibility of ineffective business of the parliament on the GNP, and even stage off-floor strife in the worst case scenario.

Choi In-ki, UDP`s chief policymaker, stressed, “The negotiation for the FTA will be resumed only after finalizing the issue of renegotiating U.S. beef imports.” A GNP source said, “The ratification of the Korea-U.S. FTA will not be possible in June National Assembly unless the parliament finalizes its floor formation. We need to persuade lawmakers even if we should make more concessions in the allotment of standing committee chiefs.”

Nonetheless, the GNP is expected to pressure the opposition party against its possible procrastination concerning parliamentary posts, telling the public that the opposition is hampering the national interests for the sake of its own political interest. The GNP also believes that a favorable public opinion will be created if President Lee steps up other measures to streamline state affairs and to address personnel management, which was not specified in the televised statement. (Source: Donga Ilbo.)

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Farmers in Massive Protests Against FTA With U.S. (May 2008) Downtown Seoul saw massive demonstrations by farmers against the Korea-U.S. free trade agreement and import of U.S. beef on Thursday. Some 8,000 farmers from 42 groups nationwide including the Hanwoo Association gathered at 2 p.m. in Yeouido Park, near the National Assembly. These farmers came to Seoul from all corners of the country on over 200 buses. These buses parked randomly near the park, and caused extreme traffic jam around Yeouido. The participants sat in rows and shouted, “Do not pass the FTA bill” and “No U.S. Beef to Korea.”

A farmer who gave his name as Kim (64) and had come from Gimcheon, North Gyeongsang Province, said, “I have to plant rice tomorrow: May is a very busy month for farmers and we actually have no time for this. But my colleagues and I had to come because we felt so distressed by the situation.” “We got onboard at 7 a.m. and it took us five hours to get here.” A livestock farmer who identified himself as Lee (63) flew in from Jeju Island. “I have raised cattle and pigs for 35 years, and this is my first time coming out to a demonstration,” he said. “I have made W50 million of losses in just five months because the price of animal feed skyrocketed (US$1=W1,044).” (SITE NOTE: The plight of the farmers is real. However, the government subsidy policies have assisted in prolonging the deaths of many of these dying cottage industries which have NOT moved to large scale cooperatives or other cost-efficient methods of farming. Instead, farmers in Korea are holding on to the past small farms -- and like farmers around the world, they are suffering. Though other countries complain of the "protectionism" in its subsidies to the farmers, every other country does the same -- ie, price supports for certain commodities. )

The farmers argue that the government failed to take steps to protect them while pushing for the FTA with the United States. Another farmer also named Kim (68), who cultivates rice on 20,000 sq.m. of land in Hwaseong, Gyeonggi Province, stressed that farmers do not always oppose FTAs. However, he emphasized that the government should have taken thorough protective measures for farmers and given them some time to prepare. “The National Assembly should not push the ratification through before measures to provide support to affected farmers have been devised,” he added. (SITE NOTE: This is the standard complaint. Unfortunately, the ROK upon entering the WTO negotiated a ten-year delay before the world rice producers could enter Korea. It was supposed to allow the ROK to turn their farmers to other "specialty crops" -- but instead the farmers kept producing rice at a time when Korea was eating less and less rice. When the magic date arrived, the ROK government ran around claiming they didn't have enough time, etc. etc. and negotiated another decade -- though the market was opened slightly. On the other hand, there were many who did switch to specialty crops and have survived the turmoil of switching from rice production. Overall, however, the government did little to assist the farmers to transition.)

Police dispatched 74 companies of altogether 7,000 officers to Yeouido around the National Assembly and the Yeouido Park. The demonstration ended without any clashes around 5 p.m. Afterwards, some 800 farmers moved to the Cheonggye Plaza to join a candlelight vigil in opposition to the import of U.S. beef. (SITE NOTE: There were approximately 4000 people at the candlelight vigil against boneless beef.) (Source: Chosun Ilbo.)

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Hillary Clinton Says No to KORUS FTA (May 2008) It was confirmed on 28 May that U.S. presidential candidate Hillary Rodham Clinton had sent President George W. Bush a message saying she will not support a free trade agreement (FTA) with South Korea, ahead of a similar letter sent by Democratic contender Barack Obama. Clinton, along with 11 other Democratic senators, accused South Korea of being a ``repeat offender'' in trades with the United States and urged the U.S. Trade Representative (USTR) to take trade-laws-based measures against countries like Korea and China before pursuing FTAs with them.

The legislators also accused Susan Schwab, the trade representative, of asking U.S. firms to lobby lawmakers for support of the U.S.-Korea FTA. ``South Korea has a long history of blocking American goods,'' said the letter posted on Inside World Trade, a trade journal, on Monday. ``Despite repeated memoranda of understanding with the United States, it has continued to use ever-changing standards to keep American products -- from autos to apples to appliances -- out of its market. ``We simply cannot support another trade agreement ahead of enforcing our trade laws, improving product safety, and ensuring a level playing field for our businesses and workers,'' it said.

Skepticism is growing regarding whether the FTA's will be finalized this year as the Bush administration hopes, particularly with the presidential election getting ever closer. The Democrat-controlled Congress has already handed the White House a severe blow by delaying a vote on an FTA with Colombia indefinitely. Both Clinton and Obama have consistently criticized the trade pact. The New York State Senator said the agreement was ``inherently unfair'' and would in the end increase U.S. trade deficit, rob middle class people of decent jobs and make America less competitive.

Obama, the current leader in the Democratic presidential campaign, sent Bush a letter, dated 22 May and released on 23 May, in which he demanded the president not submit the ``badly flawed'' FTA to Congress for a vote claiming the terms of the pact ``fall well short of assuring effective, enforceable market access for American exports of manufactured goods and many agricultural products.'' (Source: Korea Times.)

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November 2008

Seoul Rules Out Renegotiation of US FTA (Nov 2008) South Korea's top trade official Thursday ruled out the possibility of a renegotiation of a free trade deal with the United States amid speculation that U.S. President-elect Barack Obama may demand revisions to the historic trade accord signed last year. The two countries reached an agreement in April 2007 after a year of negotiations. The pact is now subject to approval by the legislatures of both countries, but ratification has been delayed.

``There will be no renegotiations of the trade deal, and our stance (no renegotiations) will be maintained," South Korean Trade Minister Kim Jong-hoon was quoted as saying in a radio interview with Yonhap News. There has been speculation that the U.S. could move toward protectionist trade policies due to the current global financial crisis and that an Obama administration will likely request overall revisions of the FTA, especially with regard to the automobile sector.

Obama, who recently described the free trade deal as "badly flawed" in terms of fairness, has often stated that bilateral automobile trade between South Korea and the U.S. strongly favors the former. South Korea shipped about 700,000 automobiles to the U.S. last year while importing 5,000 from the U.S. Democrats also want more steel shipments to be allowed into South Korea. "The problems facing the U.S. auto industry are not new ones," Kim said, adding that U.S. automakers should make efforts to boost their competitiveness.U.S. automakers have called for a guaranteed market share, but current administration officials under outgoing President George W. Bush say the trade deal will not make such guarantees, according to Yonhap.

Obama's foreign policy advisers also said last week the new administration will submit the trade bill early next year, but set several preconditions, including the "strengthening of access by American automobile exports to the Korean market." U.S. lawmakers have been shying away from taking action during election season, while ruling party lawmakers in South Korea have been pushing for quick approval of the deal by the National Assembly.

South Korean President Lee Myung-bak and U.S. President George W. Bush agreed in April to make joint efforts to gain approval of the FTA by their respective legislatures by the end of the year. The accord, if ratified, will knock down tariff and non-tariff barriers between the world's largest and 13th largest economies. For the U.S., the deal with South Korea would be its biggest since the North American Free Trade Agreement with Mexico and Canada in 1994. (Source: Korea Times.) (SITE NOTE: As the US welcomes the new President Obama, Nancy Pellosi Speaker of the House prepared to introduce two $25 billion packages to aid the US auto industry. At stake are 250,000 US jobs -- and will mean subsidizing the US Auto Industry to some extent. However, there are strings attached as the first package is for development of "clean air" technology cars -- and the second is to prop up the retirement funds. (Source: WSJ.) Whether the packages will be passed is still in the future, but there is a definite shift in feeling to protect the homegrown industries -- and this does not bode well for Korea.)

FTA Debate Strains Korea-US Ties (Nov 2008) The governing and opposition political parties are at odds over how to handle the pending Korea-U.S. Free Trade Agreement (KORUS FTA), which is now facing increasing scrutiny in Washington. At issue is the allegedly lopsided automobile trade between the two countries. U.S. President-elect Barack Obama made it clear that saving U.S. automakers will be a top priority in his economic stimulus plan. That makes the auto trade issue a sticking point in the KORUS FTA. Before lending its support to the agreement, the Obama administration may try to revise the deal so that more American cars can be sold in Korea. U.S. automakers are continuing to post staggering losses. General Motors and Ford Motor both reported billions of dollars in operating losses in the third quarter. GM, in particular, even said the company might not survive after this year if it doesn't get a cash loan from the government. The U.S. auto industry was a major topic during Obama's first-ever press conference as President-elect last week. ``I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis and succeed in producing fuel-efficient cars here in the United States of America,'' he said. Obama said ``The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.''

Last month at a Washington forum, Obama's Korea policy advisor Frank Jannuzi also expressed his concern at the auto trade imbalance between Korea and the United States. ``It cannot be a good thing that the United States exports 5,000 automobiles a year to Korea and Korea exports 700,000 automobiles to here. And the price for this is not paid, with all due respect, by politicians. It's paid by American workers. So, we need to do some work.''

Many Seoul policymakers said the unpopularity of American cars here is due to their lack of competitiveness and high prices, not the protective nature of Korean laws and regulations. A Seoulite driving a foreign car says, ``Who will buy the gas-guzzling, unstylish, expensive American vehicle?'' Obama cannot force consumers to buy his locally-made car, he added. One possibility is that U.S. Congress, during its lame-duck session during the remainder of the year, might ratify the deal. But many observers say that's not a likely scenario since Washington lawmakers are now preoccupied with crafting an economic stimulus package and that there may not be enough time to bring up the KORUS FTA issue for debate.

In Seoul, the governing Grand National Party and opposition forces are divided over how best to handle the issue. The Lee Myung-bak administration and most GNP leaders want the National Assembly to swiftly approve the deal. Their rationale is that if Seoul officially ratifies the agreement, it will put pressure on American lawmakers to do likewise. South Korea's chief trade negotiator Lee Hye-min said in a radio interview that Washington has little to gain by renegotiating, even just portions concerning the automobile trade. He said the United States would lose the international business community's trust if it tries to revise the agreement.

Opposition party legislators argue U.S. lawmakers won't be in any hurry to ratify the deal just because Korea approves it first. They point to international precedents where the United States has asked for renegotiations after agreeing to trade deals. With American automakers' financial health getting worse by the day, the U.S. Congress would have little to gain politically by quickly ratifying the deal that some say would hurt American workers.

Some opposition party leaders say it would be difficult -- maybe even impossible -- for Korea to avoid renegotiation if that's what the United States really wants. They say instead of trying to dodge what is probably inevitable, Korea should instead embrace this opportunity to take another look at the KORUS FTA. Some lawmakers of the opposition Democratic Party (DP) say the Seoul government should take this opportunity and figure out other areas to renegotiate that could help Korean businesses. Opposition lawmakers say Seoul could assist the struggling agricultural sector by revising relevant parts of the agreement. (Source: Korea Times.) (SITE NOTE: Anti-FTA groups and anti-LMB supporters held a joint rally in Seoul on 8 Nov. Pro-FTA conservatives were held a small rally on 10 Nov in Seoul to protest against the ratification of the FTA.)

Trade Minister Kim Jong-hoon said on Monday that the United States wants Korea to ratify the Korea-U.S. free trade agreement (KORUS FTA) as soon as possible in order to help it reciprocate. ``There is consensus in U.S. Congress as well as the executive branch that the FTA should be ratified promptly and Seoul should initiate it through ratification at the National Assembly,'' Kim told The Korea Times during a telephone interview. However, he neither denied nor confirmed whether the Obama camp made the request. ``It is inappropriate to reveal who said that.'' It is widely believed that only Detroit-based automakers and their congressional representatives are clamoring for an altered KORUS FTA but other industries are quite satisfied with the content.

His deputy and head of Seoul's FTA negotiating team said that no such request was made by the Obama camp. During a separate interview, Lee Hye-min said, ``Time and time again, I say no such request has been made by anybody from the Obam camp,'' Lee said. Regarding reported calls by the Obama camp for renegotiations on the two countries' free trade pact, Kim said, ``My position is clear. No renegotiations.'' Under the pressure by the troubled automakers, a key constituent for the Democratic Party on whose ticket Obama won the presidency, the President-elect campaigned to fix the FTA with Korea. Korea sells hundreds of thousands of vehicles in the U.S. market per year, while U.S. automakers sell only a fraction of that figure. The Obama camp believes the trade deal is ``deeply flawed'' in Korea's favor. Kim said that he would accompany President Lee Myung-bak on his trip to Washington for the G-20 meeting aimed at tackling the ongoing financial crisis. ``I don't think that we will have a chance to talk about the FTA during that trip,'' he said. (Source: Korea Times.)

Top negotiator still refuses to revisit Korus FTA (Nov 2008) Lee Hye-min, Korea’s chief negotiator for the Korea-U.S. free trade agreement, rebutted a growing voice among local legislators that the Korus FTA should be revisited, saying it won’t be easy for Washington to demand renegotiations. The move came as opposition party lawmakers urge the government to think about renegotiating the deal.

U.S. President-elect Barack Obama has repeatedly expressed displeasure with the current pact, especially clauses on the auto industry. Seoul and Washington signed the agreement last year but neither congress has ratified it. “The Korus FTA is by no means an item for which the U.S. can easily ask for a renegotiation,” Lee said in his column that ran on the Blue House’s official Web site yesterday. “Asking for renegotiations of a pact that was already signed not only is against international protocol, but also will seriously tarnish the U.S. government’s international credibility in its bilateral and multilateral negotiations on agreements like the ongoing Doha Development Agenda.”

Ratification of the Korus FTA recently stole the political limelight after ruling Grand National Party lawmakers pledged to pass the deal by the end of 2008 despite intense objections by opposition party lawmakers. The critics say Seoul should not rush to pass the deal as long as Washington lawmakers show little inclination to follow suit. President-elect Obama’s long-standing opposition to the Korus FTA also fanned anxieties among Korean lawmakers that they may have to accept a renegotiation if Washington requests one. Lee yesterday said that worry is unfounded.

“We cannot entirely rule out the possibility that they may ask for a renegotiation since it is a fact that Obama made negative remarks about the Korus FTA’s impact on the auto industry trade,” he said. “But it is our stance that there is no renegotiation.” (Source: Joongang Ilbo.)

Farmers protest FTA with U.S. in Seoul rally (Nov 2008) Tens of thousands of farmers rallied in front of the National Assembly on 25 Nov, protesting the ruling party's move to ratify a free trade deal with the United States. Sporting rice sacks on their upper body and red headbands with anti-FTA slogans, the farmers sat on the pavement, shouting, "Stop FTA ratification!" President Lee Myung-bak's Grand National Party is pushing to ram the free trade deal with the U.S. through the National Assembly. It claims that if South Korea ratifies the deal first, it would pressure the U.S. to do the same. (Source: Yonhap News.)

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December 2008

Parliament to Use Security Forces for FTA Motion Review (Dec 2008) The National Assembly for the first time invoked its right to use security forces in its building yesterday, a day prior to reviewing a motion on ratifying the free trade agreement with the United States. Park Jin, chairman of the Assembly`s Foreign Affairs, Trade and Unification Committee, said, “The right to use security forces has been invoked to prevent physical intervention on the submission of the FTA motion, which the main opposition Democratic Party said it would take.” As a result, only members of the committee can enter the Assembly’s conference hall until its general meeting ends today. Anyone who disobeys the order will face the charge of obstruction of justice.

“It’s a matter that should be settled through discussion. It’s absurd to think that it can be deterred by physical means,” said Hwang Jin-ha, the ruling Grand National Party’s chief negotiator for the committee. “Even at the cost of exercising the right to use security forces, we have to ensure that the meeting proceeds.” At yesterday’s joint meeting with its supreme council members and lawmakers belonging to the committee, the Democratic Party decided to pass the motion for the agreement’s ratification within 30 days at the Assembly once the new U.S. administration submits a motion on the accord. “Having passed next year’s budget bill, the ruling party seems ready to wage war,” said Moon Hak-jin, the Democratic Party’s chief negotiator for the committee. “If the ruling party chooses war, it leaves us with no option.”

In preparation for physical clashes at today’s meeting, the Democratic Party replaced party leader Chung Sye-kyun and Shin Nak-kyun, who are members of the committee, with Kim Yung-rok and Kim Woo-nam. If the ruling party pushes to lay the motion before the Assembly today, its rival plans to resort to force, including scuffling and occupying the podium. Both leaders of the two parties are not budging from their stances. (SITE NOTE: That is exactly what happened as the GNP inside the conference room used chairs and tables to block the doors, while the opposition DP forces broke down the barricade to storm the room. This made international headlines about how "unbelievable" Korean politics is.)

On the handling of controversial bills, ruling party floor leader Hong Joon-pyo told a joint meeting, “To make the people fully aware that the administration has changed, we should swiftly pass them.” Having witnessed the ruling party unilaterally pass the 2009 budget bill, leaders of the opposition party, including its chairman Chung and floor leader Won Hye-young, dare not mention “dialogue and negotiations.” “If leaders show a moderate approach once again, hardliners including the Democratic Coalition could demand their replacement,” said a senior official of the Democratic Party. “Since there is strong discontent against the leadership, they cannot help but take a hard-line stance.” (Source: Donga Ilbo.)

Koreans brawl on trade pact (Dec 2008) Brawling South Korean lawmakers tried to sledgehammer their way into a parliamentary meeting room barricaded by the ruling party as the National Assembly descended into chaos 18 Dec over a free-trade agreement with the United States. Opposition parties were incensed by the ruling Grand National Party’s move to submit the agreement to a committee on trade, setting in motion the process for the accord to win approval in the legislature. Security staff and aides from the ruling party stood guard outside the room to keep opposition lawmakers away after the committee’s GNP-affiliated chairman invoked his right to use force to “keep order” in parliamentary proceedings.

Scuffles broke out as dozens of opposition members and their aides attempted to push their way into the office. TV footage showed people from both sides shoving, pushing and shouting in a crowded hall at the National Assembly building amid a barrage of flashing cameras. Opponents later used a sledgehammer and other construction tools to tear open the room’s wooden doors, only to find barricades of furniture set up inside as a second line of defense. Cable news channel YTN reported that an electric saw was used to open the door. YTN footage showed security guards spraying fire extinguishers at those trying to force their way inside and one man with blood trickling down his face. The attempt failed, and 10 GNP legislators introduced the bill to the committee. (Source: AP.)

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January 2009

FTA to be signed as is: U.S. lobby head (Jan 2009) There will be no renegotiating of the Korea-U.S. free-trade agreement, as the deal is already done and signed, the head of the U.S. Chamber of Commerce said in Seoul on 15 Jan. Thomas Donohue, chief of the U.S. business lobby group, assured members of the American and Korean business community in Seoul that the incoming U.S. government is not seeking to renegotiate the whole trade pact the two countries signed in June 2007. He made the comment to clarify news reports that suggested U.S. Secretary of State-designate Hillary Clinton was seeking a renegotiation of the FTA due to an imbalance in auto trade and restricted access to Korea's beef market. "There will have to be refinements, such as on autos, but I believe they can be easily resolved," Donohue told reporters on the sidelines. He added that fine-tuning on regulatory matters and details on standards would be needed, and stressed that such steps are natural in the process of ratifying any free-trade agreement.

Seoul's Ministry of Foreign Affairs and Trade has flatly said that renegotiation would be impossible, stressing that any change would offset the balance of the deal. Donohue, dubbed as the most influential business industry figure in the United States, expressed the mutual importance of the bilateral trade pact. "Even in a time of economic retrenchment, the United States and Korea must convince the global community to abide by international principles of open trade and investment," Donohue said. "Ratification of the U.S.-Korea free trade agreement would be an historic leap forward in commercial relations between our countries." He also vowed to continue to press for Congressional consideration of the accord at the earliest possible time. The world's largest economy faces a transition period, with the inauguration of President-elect Barack Obama scheduled for Jan. 20.

Experts say that the unprecedented global economic crisis would be the foremost urgent issue for Obama, pushing trade issues further down on the priority list. But the importance of invigorating international trade has been growing amid the global economic downturn. "No country ever succeeded over the long run by closing itself off from the rest of the world. Anyone who is unconvinced of the power of free trade, open markets and international engagement need look no further than Korea," Donohue said.

Two-way trade between the two countries reached $82 billion in 2007. Korea is the United States' seventh-largest trading partner. On dealing with the new Obama administration, the executive proposed that Korea drive the momentum by "taking up deliberation of the FTA soon," stressing that "prompt ratification is in the interests of both countries." "I have an optimistic view about this FTA; it's going to get done," the business guru said. (Source: Korea Herald.)

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2009

July 2009

Korus FTA hangs over the abyss (Jul 2009) Two years after the deal was signed, it’s still no closer to being ratified. Yesterday marked two years since Korea and the United States signed a controversial free trade agreement, with analysts saying the pact is unlikely to be implemented this year. The so-called Korus FTA, signed on June 30, 2007, is currently pending in the Korean National Assembly. It’s the longest period a Korean free trade deal has gone without being passed. The FTA between Korea and Chile took effect in 2004, a year and a half after it was signed. Korea’s other FTAs - with the European Free Trade Association, Singapore and Asean - took even less time.

In the U.S., the agreement has yet to be submitted to Congress. Some say the delay is somewhat justifiable, given what’s at stake. It would be Korea’s largest such deal, as the U.S. is its second biggest trade partner after China. Trade between the U.S. and Korea stood at $84.7 billion last year. Korea is currently in FTA talks with the EU, Australia, New Zealand, Canada, Mexico and Peru, but none of those potential deals would be as big as the Korus FTA.

According to the Finance Ministry, which compiled similar studies from 11 research institutes, the Korus FTA would increase Korea’s GDP by 6 percent by 2018. “It’s also expected to create 340,000 jobs by 2018,” said Kim Seong-cheol, an official with the ministry.

On the American side, the deal is also no small potatoes - it would be the biggest since the North American Free Trade Agreement in 1993. According to a survey by the nonpartisan International Trade Commission, the Korus pact could boost the American GDP by as much as $11.9 billion. And with circumstances on either end of the deal putting its passage in doubt, the protraction is of concern, say analysts. In the U.S., the ongoing global financial crisis has generated a climate of trade protectionism. Voices calling for support of domestic industries are getting louder, particularly in an auto sector hard hit by the bankruptcy of General Motors and Chrysler. The automotive industry is the biggest stumbling block for the Korus FTA, with American auto industry stakeholders claiming the pact would only benefit Korean carmakers and demanding a revision of the auto clause. The fact that the American government is now controlled by the pro-labor Democrats also lowers the chances that the agreement will be ratified, analysts say. Added to that, the FTA is being treated with less urgency than other issues such as the reform of the American health care system.

In Korea, the pact was approved by the parliamentary committee on foreign affairs and trade in April, but ratification during this month’s plenary session has been put in doubt due to mounting opposition from farmers and civic groups, analysts say. Some, however, say a solution is possible. “It is true that there is negative sentiment about the Korus FTA in the U.S. on auto and beef issues,” said Ahn Chung-hyeong, a professor at Chung-Ang University. “But without retouching the signed pact, both parties will be able to find a solution through fine-tuning.” (Source: Joongang Ilbo.)

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Kirk pledges to enforce trade agreements to help revive ailing economy (Jul 2009) U.S. Trade Representative Ron Kirk said Thursday that the U.S. was willing to enforce trade agreements with foreign governments to help revive the U.S. economy struggling with the worst recession in decades. In a speech at a U.S. Steel plant in Pittsburgh, Pennsylvania, Kirk said, "I can tell you with no reservations: the Obama administration is both willing and able to enforce our trade agreements. American workers deserve no less. Today, on behalf of President Obama, I am here to affirm this administration's commitment to trade enforcement."

The top U.S. trade negotiator did not specifically mention the pending Free Trade Agreement with South Korea, signed in 2007. Myron Brilliant, U.S. Chamber of Commerce senior vice president for international affairs, however, issued a statement to follow up on Kirk's remarks, calling for the "passage of the market-opening trade agreements with Panama, Colombia, and Korea." "The U.S. Chamber agrees with Ambassador Kirk that trade agreements mean nothing if they aren't enforced," Brilliant said. "The jobs of millions of American workers, farmers, and companies depend on access to foreign markets, and vigorous enforcement of trade agreements is critical to ensuring that access."

The Democratic Congress, which is currently focused on health-care reform and economic measures to cope with the global economic crisis, is lukewarm to the passage of the three trade deals. There are also concerns about a possible backlash from labor unions, the Democratic political power base, which fear job losses stemming from the FTA.

While meeting with South Korean President Lee Myung-bak in Washington last month, Obama said he will seek the appropriate "political timing" for submission of the Korea FTA to Congress, "once we have resolved some of the substantive issues." Obama was referring to an imbalance in auto trade and restricted shipments of beef. "In Korea, there are issues of beef imports," he said. "In the United States, there are questions about whether there's sufficient reciprocity with respect to cars. These are all understandable, legitimate issues for negotiation."

Lee, for his part, said he "welcomed the initiation of working-level consultations, to make progress on the issues surrounding the agreement," noting that both sides "agreed to make joint efforts to chart a way forward on the deal." U.S. officials have said they favor side agreements to address the auto and beef issues without revising the text of the trade deal itself. Kirk told steelworkers that "Obama has committed to a new approach to trade -- one that rejects protectionism and creates opportunities at home and abroad." "He recognizes that trade is essential to America's prosperity and has the potential to lift up workers in America and around the world," Kirk said. "The president will share more about our approach, but we already know that for trade to reach its full potential, we need to do a better job of enforcing our trade agreements."

Since 2001, the United States has entered into free trade agreements with 14 countries, he said. Kirk discussed the merits of trade promotion. "In 2008, exports generated nearly $2 trillion in income for American workers, farmers, ranchers, manufacturers, and producers... that's about one in every eight dollars Americans earned last year," he said. "Exports of manufactured goods support 6 million American jobs. Millions more high-quality jobs depend in part, or entirely, upon trade in services and American intellectual property." (Source: Yonhap News.)

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