U.S.-Korea FTA Talks Bogging Down

During the third round of FTA negotiations between Korea and the U.S. that started on September 6, local time, the U.S. required that trade related laws including fair trade laws should be strictly applied to the Korean companies including large conglomerates (known as Chae-bol) and this be clearly stated in an FTA agreement.

The Korean delegation immediately refuted, “The U.S. has wrong perception.” However, as the U.S. raised issues with private enterprises following public companies, the corporate governance and management of the entire Korean corporations has emerged as a new issue in the Korea-U.S. FTA negotiations.

The U.S. Chief Negotiator for Korea-U.S. FTA, Wendy Cutler said prior to the third round of negotiations on September 5 (local time) at a press conference at the Westin Hotel in Seattle, “We are requesting that both large corporations and small and medium sized companies in Korea be subject to anti-trust law.”

This requirement was first made to the U.S. government by U.S. manufacturers, auto and fabric industries during a public hearing on the Korea-U.S FTA held by the U.S. International Trade Commission (ITC) in Washington last April.

Including the provision on fair competition in a FTA agreement to guarantee a leveled playing field to companies can be seen as fundamental requirement.

However, some analysts think differently. They say that the U.S. can have hidden intentions of weakening the competitiveness of Korea’s large conglomerates such as Samsung and LG.

Korea’s Chief Negotiator Kim Jong-hoon responded to this issue by saying, “With regard to the regulation on large conglomerates, the U.S. perspective is clearly wrong. Large conglomerates in Korea are currently subject to reverse discrimination, in terms of Korea’s fair trade law and a law that puts limits on the total amount of corporate financing.

The Korean economic community also responded similarly by saying, “This absurd requirement is absolutely not acceptable.”

Dr. Lee Byeong-wook of the Federation of Korean Industries (FKI) said, “In negotiations between countries, there has been no precedence that one country asks for another to regulate the counterparty’s companies.’ and emphasized, “Since the U.S. government made the absurd requirement with the intention to raise its own companies’ competitiveness, the Korean government must not accept the requirement.”

An official of the Korea Chamber of Commerce and Industry (KCCI) also said, “Korean companies are under unprecedentedly numerous regulations. Therefore, further strengthening regulation will never be helpful in increasing investment and creating more jobs.”

A senior official of the Fair Trade Commission, the authority in charge, flatly said, “Since Korea’s fair trade law is already applied to large conglomerates, there is no need for another provision to stipulate this point. The U.S. also asked for the opening of 10 service markets including home-delivery, telecommunications and legal service.”

The third round of Korea-U.S. FTA was officially launched in Seattle on September 6, starting with negotiations on 14 sectors including commodity, agriculture, and finance.

The U.S. representatives told their Korean counterparty that they are interested in about 10 sectors including home-delivery, telecommunications and legal service among the service and investment fields on the savings lists (with items that each side does not want to open) exchanged by each side.

With regard to home-delivery service, whether U.S. companies such as FedEx could advance into Korea’s home-delivery service market, especially for small-sized items, is likely to be a hot issue. In the telecommunications sector, limits on the share that can be held by foreigners, which currently stands at 44 percent, will be high on the agenda. The emerging issue in the legal service sector is whether to open the market earlier or not.

An additional remaining issue is in the pharmaceutical sector. Whether for Korea to adopt a new system that stipulates specific medicines to be covered by health insurance is still undecided.

The U.S. Chief Negotiator Wendy Cutler said, “There is still the unresolved issue in the pharmaceutical sector.”

To the U.S. argument that U.S. SAT (Scholastic Aptitude Test) scores should be acknowledged in Korea, Chief Negotiator Kim replied, “As long as Korea’s College Scholastic Ability Test (CSAT) scores are acknowledged by Harvard University.”

The two sides couldn’t bridge the difference in the issue whether products made in Gaesong Industrial Complex should be considered Korean products.

However, regarding the U.S. request that public companies also trade product at market price as private companies do, the two sides ironed out their differences and agreed that the public companies that serve their establishment purposes will be exempted.

Meanwhile, the Korean demonstration group, which went to the U.S. in protest of FTA, started their protest in earnest this day by holding a press conference and marching the streets near the place where negotiation was underway.

To this, Chief of Police Office of the western district of Seattle, Steven Brown stressed, “Even if the demonstration has gained permission in advance, I will order demonstrators to disperse when they infringe on ordinary citizens’ rights or cause inconveniences to traffic or commercial activity and if they refuse to follow my request, I will arrest them.”

This measure seems to be prepared by considering the 1999 WTO ministerial level talks, which were marred by violent demonstrations.