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Opposition still hurdle for ratifying U.S. FTA

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Published : Oct. 13, 2011 - 16:01

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Democratic Party, liberal groups demand renegotiation on 10 points


The process of bringing the Korea-U.S. Free Trade Agreement into effect is likely to be a rocky one despite receiving approval from the U.S. legislature.

According to Deputy Trade Minister for FTA negotiations Choi Seok-young, Korea’s ratification process was about a month behind that of the U.S. last week, before the houses of the U.S. legislature had given the pact their approval.

While the government and the Grand National Party welcomed the results of the additional talks in December that allowed the Korea-U.S. FTA to regain momentum, opposition parties formed a coalition against the pact.

In opposing the pact as it currently stands, the main opposition Democratic Party drew up a “10+2” plan for re-renegotiations that highlights 10 clauses that it deems harmful to Korea. The plan also calls for a new regulation allowing the National Assembly to take part in trade negotiations, and strengthening the system for mediating on behalf of Korean industries.

While the Democratic Party holds to the position that the 10+2 plan would regain “the balance the MB (President Lee Myung-bak) administration lost in the renegotiation,” the government has dismissed such claims as “unrealistic” and says the demands are tantamount to scrapping the deal all together. 
Opponents of the Korea-U.S. free trade pact protest in front of Seoul City Hall on Wednesday night. (Yonhap news) Opponents of the Korea-U.S. free trade pact protest in front of Seoul City Hall on Wednesday night. (Yonhap news)

Beef and automobiles

Regarding U.S. beef, the opposition is calling for the tariff to be maintained at the current 40 percent for 10 years after the pact is implemented, and to have it gradually removed over the following five years.

The government, however, is of the position that any renegotiation on this issue will lead to the U.S. demanding changes in other issues, which in turn will make an overall renegotiation unavoidable.

In addition, the Trade Ministry says that any such delay will be ineffectual for protecting the local livestock industry as the large difference in Korean and imported beef will drive consumers to beef from other countries, including Australia. According to the ministry, Korean beef or hanwoo cost more than twice as much U.S. and Australian beef in 2010.

The automotive issue the Democratic Party has honed in on is the safeguard clause added during last year’s additional round of negotiations.

The clause allows the tariff on automobiles to be brought back up to pre-FTA levels if a sudden rise in imports is deemed to be damaging to either parties’ auto industry.

While the Democratic Party is calling for the conditions for its application to be tightened, in order to prevent “the U.S. abusing the system,” the Trade Ministry points out that the clause can be used by both sides.

In addition, the ministry says that with Korean carmakers producing increasingly large proportion of vehicles sold in the U.S., the clause is very unlikely to be put into action.

Gaeseong and investor-state dispute system

The issue of giving products made at the Gaeseong Industrial Complex equal treatment as those produced in South Korea, and removing clauses regarding investor-state dispute or ISD settlement system included in the 10+2 plan have also been in the spotlight. The ISD system allows U.S. investors to seek settlements on disputes with the Korean government in the courts of a third country.

Under the plan, the Democratic Party seeks to have products of the Gaesoeng complex, which is located in North Korea but operated by South Korean concerns, recognized as products of Korea.

The South Korean government, however, maintains that the agreement with the U.S. allows for related issue to be discussed after its implementation. In addition, the Trade Ministry has called any attempts to gain South Korean status for Gaeseong products while North Korea continues with its aggression “unrealistic.”

The Democratic Party is calling for the abolition of the ISD system saying that it could hinder Korea from executing policies. In addition, the opposition argues that U.S. firms looking to enter areas deemed to be suitable for small businesses by the Korean government could see the special treatment of SMEs as non-tariff barriers, which could prompt U.S. investors to seek settlement through the ISD system.

The ministry is disputing such claims saying that the ISD system is an international standard, which is included in 85 trade agreements Korea has formed over the years.

Small merchant protection, school food procurement

The Democratic Party also points to the possibility of the FTA clashing with Korea’s regulations for protecting small and medium-sized enterprises. In addition, the opposition party has called for the inclusion of clauses that guarantee protection for small merchants into the pact with the U.S.

The free lunch projects pursued by some regional governments are also included in the Democratic Party’s 10+2 plan, which calls for regional governments and education offices to be recognized as the party in charge of procurement with regards to school meals be included in the FTA. According to the Democratic Party, the change will allow regional governments and education offices to bypass the FTA’s clauses regarding the opening of government procurement system.

The Trade Ministry has given both arguments little credit, saying that changing the Korea-U.S. FTA with regards to SME protection would be meaningless as all concerned areas were made open in 1995 with the implementation of the General Agreement on Trade in Services.

According to the Trade Ministry, the agreement with the U.S. makes exceptions for school meals in its government procurement clauses, making the opposition’s suggestions unnecessary.

Ratchet and patents on medicines

In addition to the more widely known issues, items the Democratic Party wants to renegotiate include the ratchet clause, which prevents the level of freedom of trade being taken back to pre-FTA levels, and issues regarding patent rights for medicines. While the opposition is calling for both to be abolished, the government is defending the related clauses of the FTA.

By Choi He-suk  (cheesuk@heraldcorp.com)

Timeline of Korea-U.S. FTA

● Oct. 12, 2011: U.S. Senate and House of Representatives approve the bill for implementing the Korea-U.S. FTA

● June. 3, 2011: MOFAT resubmits the Korea-U.S. FTA bill to the National Assembly for ratification

● May 4, 2011: MOFAT withdraws the Korea-U.S. FTA bill from the Foreign Affairs, Trade & Unification Committee of the National Assembly

● Feb. 10, 2010: Signing and exchange of the agreed documents on the December 3, 2010 deal for the Korea-U.S. FTA

● Nov. 30~Dec. 3, 2010: Trade Ministers’ meeting

● April 02, 2007: Conclusion of the Korea-U.S. FTA negotiations

● June 5, 2006 ~ March 12, 2007: Eighth round of Korea-U.S. FTA negotiations held

● Feb. 03, 2006: Joint announcement on the launch of the Korea-U.S. FTA negotiations

● Nov. 2004: Korea and the U.S. agree to launch a joint feasibility study group