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 a