RESTRICTED
WORLD TRADE WT/TPR/G/19
28August 1996
ORGANIZATION(96-3366)
Original: English
TRADE POLICY REVIEW
REPUBLIC OFKOREA
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), theKorean Government 'sinitial
policy statement isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onRepublic ofKorea.Republic ofKorea WT/TPR/G/19
Page iii
TABLE OFCONTENTS
Page
1. INTRODUCTION AND SUMMARY 1
2. ECONOMIC ENVIRONMENT AND TRADE TRENDS 2
2.1Economic Trends inKorea 2
2.2Recent Foreign Trade Trends 3
3. MAIN TRADE POLICY OBJECTIVES 5
4. TRADE POLICY DEVELOPMENTS: 1992-96 7
4.1 Implementation ofWTO Agreements 7
4.2 Quantitative Restrictions 7
4.3 Import Procedures 8
4.4 Tariffs 8
4.5 Customs Clearance Procedures 8
4.6 Standards andTechnical Regulations 9
4.7 Rules ofOrigin 10
4.8 Agricultural, Forestry andFishery Products 11
4.9 Sanitary andPhytosanitary Measures 11
4.10 Safeguards 12
4.11 Anti-dumping andCountervailing Duties 13
4.12 Subsidies 14
4.13 Government Procurement 14
4.14 Competition Policy 15
4.15 Overseas andForeign Direct Investment 15
4.16 Services 17
4.17 Intellectual Property Rights 18
5. FUTURE DIRECTION OFTRADE POLICY 20
5.1Multilateral andRegional Cooperation 20
5.2Sectoral Policy Direction 20
6. NON-TARIFF BARRIERS OFMAJOR TRADING PARTNERS 22
6.1Anti-dumping andCountervailing Duties 22
6.2Rules ofOrigin 22
6.3Trade-related Investment Restrictions 22
6.4Countries under negotiations forjoining theWTO 23
6.5Impacts onEUExpansion onNon-EU Countries 23Republic ofKorea WT/TPR/G/19
Page 1
1. INTRODUCTION AND SUMMARY
1. After experiencing aperiod ofeconomic sluggishness in1992-93, theKorean economy showed
signsofrecoveryin1994-95.However,thecountry'scurrentaccountcontinuestodeteriorate,recording
$4.5billion (Alldollar amounts denoted inthisreport areinU.S.dollars) in1994 and$9billion in
1995. Despite theexpansion ofthecurrent account deficit, theKorean government continues topursue
itslong-term goalofbalanced tradeexpansion inthebelief thatthiswillcontribute tothemaximization
oftheoverall welfare oftheKorean andworld economy.
2. Thecivilian government, launched in1993, announced twobroad-based policy initiatives which
arenowbeing implemented: theFive-Year Planforthe“NewEconomy ”andSegyehwa (globalization).
These initiatives areaimed atcoping effectively withchanges intheenvironment athome andabroad,
andatseeking ways torevitalize theKorean economy. The“NewEconomy ”Planwasformulated
toprovide anewmechanism foreconomic development based onthecreative initiative oftheprivate
sector, replacing government direction andcontrol. Thesegyehwa policy aimstodrastically change
Korea 'sexisting political andsocio-economic institutions tomake themmore compatible withtoday's
rapidly changing world. Theultimate aimofthesegyehwa policy istoenable Korea tomake greater
contributions totheadvancement ofallhumanity byactively pursuing faircompetition combined with
evercloser worldwide cooperation. Korea 'strade policy isinkeeping withthisfundamental national
policy direction, andwillenable thecountry toassume aroleandresponsibility commensurate with
itseconomic status.
3. Korea wasanactive participant intheURnegotiations, andisdoing itsbesttoreflect theresults
oftheURnegotiations initsdomestic laws, andtofaithfully implement itsWTO obligations. Korea
hasalmost completed itswork toimplement theWTO Agreement byreforming itsdomestic lawsand
institutions.
4. TheKorean government hasbeenpursuing abroad range ofderegulation andliberalization
measures, recognizing theneedforbasic reforms intheeconomic sphere. Aspartofsuchefforts,
theCommitteefortheDeregulationoftheeconomicadministrationsectorwasestablishedinMarch1993,
andtheSpecial ActforDeregulation ofCorporate Activities wasenacted inJune1993. TheCommittee
sofarhastaken action on1,753 regulations affecting allaspects oftheeconomy.
5. TheKorean government isalsoplacing highpriority onpromoting competition. Inseeking
torestructuretheKoreaneconomytowardfreercompetition,thegovernmentisstrengtheningsurveillance
oflargecompanies, restraining theireconomic concentration, andpreventing themfromabusing their
advantageous market position vis-a-vis smaller firms. Thegovernment isalsoenhancing itsprotection
ofsmall andmedium-sized industries, including theprevention ofunfair subcontract transactions.
6. TheKorean government hasalsoaccelerated itsimport-liberalization efforts. Thenation 's
import liberalization ratioincreased to99.3% in1996from97.7% in1992. Theremaining items under
restriction willbefullyliberalized by2001, orwillbebrought intoconformity withtheresults ofUR
negotiations andGATT regulations.
7. Korea hasreduced tariff rates instages. Presently, lowtariff rates of1-3% arelevied on
imported rawmaterials, while arateof8%isapplied tomost manufactured goods.
8. Korea isearnestly pursuing foreign investment liberalization anddrastically simplifying related
procedures, while steps arebeing taken tofurther strengthen theprotection ofintellectual propertyWT/TPR/G/19 Trade Policy Review
Page 2
rights. Korea isalsomaking efforts toharmonize domestic standards andtechnical regulations with
international norms. Inaddition, Korea signed theWTO Government Procurement Agreement in
April1994,andwillbesubjecttotheAgreementfromJanuary1997.Accordingly,therelevantdomestic
regime isnowbeing revised toensure fullconformity withtheAgreement.
2. ECONOMIC ENVIRONMENT AND TRADE TRENDS
2.1 Economic Trends inKorea
9. Entering the1990s, theKorean economy began toexperience aseries ofdifficulties onboth
theexternal andinternal front. Athome, theinflation ratesoared tonearly 10%in1990 and1991.
Contributing tothiswasasurge inrealestate speculation andpersistent demands forsharp wage
increases. Furthermore, thecurrent-account balance reverted toadeficit atthebeginning of1990.
Also, duetoasluggish world economy, theKorean economy experienced adrastic slowdown. The
GDP growth ratedropped from 9.5% in1990 to9.1% in1991, 5.1% in1992 androseslightly to
5.8% in1993.
10. Prolonged government intervention wasseenashaving reduced theflexibility andefficiency
oftheeconomic system, while itdiscouraged private-sector initiative. Italsocame tobeclosely linked
totherapid decline inKorea 'sinternational competitiveness attheendofthe1980s andearly 1990s.
Assuch, thegovernment-led approach todevelopment became more andmore dysfunctional asthe
Korean economy expanded, itsstructure grew increasingly complex, andthenation 'spolitical
democratization advanced.
11. TorestoreKorea'seconomicdynamism,thecurrentgovernmentinauguratedin1993implemented
itsFive-Year Planforthe“NewEconomy ”.Thegoalofthispolicy istocreate anewmechanism
foreconomic development based onthevoluntary participation andcreativity ofalleconomic players,
instead ofgovernment intervention andcontrol.
12. The“NewEconomy ”Planpushes forfundamental reforms inKorea 'soverall economic system,
including thefiscal, financial andadministrative spheres inorder topursue deregulation andtoestablish
economic justice. Thisentails fiscal, financial, andadministrative deregulation, aswellasprivatization
efforts, which areintended togivetheprivate sector control overmore areas ofeconomic activity.
13. Deregulation ofeconomic administration wasdesignated asoneofthereform tasks ofthe
Five-Year Plan forthe“NewEconomy ”.Toaccomplish thetask,theKorean government enacted
"theSpecial ActforDeregulation ofCorporate Activities" inJune1993, andestablished theCommittee
fortheDeregulation oftheeconomic administration sector. Thegovernment alsointroduced the
Real-Name Financial transaction System inAugust 1993 topromote economic justice. Andinthe
same spirit, itannounced theReal-Name System forRealEstate Registration inJuly1995.
14. Policy measures havebeenpursued toupgrade industrial competitiveness. Such programs
have included manpower andtechnology development andtheexpansion ofsocial infrastructure
investment. These aretasks which aredifficult fortheprivate sector toimplement onitsown, but
which areessential tomaintaining acompetitive edge. Thegovernment increases flexibility inthe
labormarket andencourages greater participation oftheidlepopulation intheworkforce. Private-sector
R&D efforts aresupported, andtheinformation services formanpower, industry, andscience are
expanded within thescope oftheWTO system tofacilitate domestic technology development. To
expand social infrastructure investment, thegovernment raises therequired funds byinducing private
capital andbyallocating agreater share offiscal expenditures toinfrastructure projects.Republic ofKorea WT/TPR/G/19
Page 3
15. Newdevelopments intheinternational trade order haveasignificant andgrowing impact on
theKorean economy, which isheavily dependent onforeign trade. Around thetimetheWTO was
launched, theKorean government initiated anational reform strategy ofglobalization encompassing
allmajor sectors ofsociety. Thisstrategy isdesigned tohelpKorea adapt successfully totheemergence
ofamoreintegrated world economy following theestablishment oftheWTO. Theglobalization policy,
which isreferred toasSegyehwa inKorean, aimsatdrastically changing Korea 'sexisting political
andsocio-economic institutions tomake them more compatible withtoday'srapidly changing world
asthe21stcentury draws near. Theultimate aimofthestrategy istoenable Korea tomake greater
contributions totheadvancement ofallhumanity byactively pursuing faircompetition combined with
evercloser cooperation onaglobal scale. Intheeconomic sphere, thestrategy callsfortheopening
ofdomestic markets anddrastic reforms infiscal, financial, andmonetary policies. Throughout the
economy, thegovernment ismaking concerted efforts toreform institutions andpractices, soasto
bring them intolinewithglobal norms andstandards.
16. The“New Economy ”Planisablueprint fortheoverall economic policy ofthecurrent
government. Itestablishes theeconomic basis forKorea tojointheranks ofindustrialized countries
and,ultimately, toprepare fornational unification. Ontheother hand, Segyehwa isanational reform
strategy tohelpKorea risetotheleveloftheworld 'smostadvanced nations. Inthisregard, Segyehwa
isabroader andmore far-reaching project thanthe“NewEconomy ”Plan. Through these policy
initiatives, theKorean government aims toreform theentire economic system intoamore
market-oriented one. Themajor objectives ofthese newpolicies aretointernationalize thedomestic
economy, particularly bystrengthening theroleoftheprivate sector, andtoenhance itsinternational
competitiveness.
17. Largely thanks toaseries ofneweconomic policies, economic recovery inadvanced countries,
rapid demand growth indeveloping countries, andthehighyen,theKorean economy began torecover
itsdynamism from themiddle of1993. However, thecurrent account deficit continued toexpand
andreached $8.95 billion in1995.
2.2 Recent Foreign Trade Trends
2.2.1 Overview
18. In1994 and1995, Korea posted relatively highimport growth rates of22.1% and32%,
respectively. Exports havealsoshown impressive growth, increasing 16.8% in1994 and30.3% in
1995. Asaresult, Korea accounted for2.6% oftotalworld imports and2.4% oftotalworld exports
in1995.
Table 2.1
Summary ofKorea 'sForeign Trade
(Billion $)
1989 1990 1991 1992 1993 1994 1995
Exports (X) 62.4
(2.8)65.0
(4.2)71.9
(10.5)76.6
(6.6)82.2
(7.3)96.0
(16.8)125.1
(30.3)
Imports (M) 61.5
(18.6)69.8
(13.6)81.5
(16.7)81.8
(0.3)83.8
(2.5)102.3
(22.1)135.7
(32.0)
(X-M) 0.9 4.8 9.7 5.1 1.6 6.3 10.1
Note :1) Onacustoms-clearance basis.
2) Figures inparentheses indicate percentage changes compared withtheprevious year.
Source: Ministry ofTrade, Industry andEnergy (MOTIE) .WT/TPR/G/19 Trade Policy Review
Page 4
19. Korea 'stradebalance changed fromasurplus during 1986-89 toadeficit in1990. Since 1993,
thedeficit hascontinued togrow, rising from $1.6billion inthatyearto$6.3billion in1994 and
$10.1 billion in1995. Thelatter yearwasthefirsttimethatthetrade deficit exceeded the$10-billion
mark.
20. Ingeneral, Korea runsatrade deficit withdeveloped countries andatrade surplus with
developing countries. Korea 'slargest bilateral tradedeficit waswithJapan (over $15.5 billion in1995).
Korea alsohadasubstantial deficit withtheU.S.infouroutofthelastfiveyears almost$6.3 billion
in1995) andachronic deficit with theEU(nearly $1.9billion in1995).
2.2.2 Exports
21. Korea'sexports,whichgrewbyamoderate8%perannumduring1989-93,recordeddouble-digit
growth ratesin1994 and1995. Thisimpressive performance owed largely toeconomic recovery in
thedeveloped economies, brisk demand indeveloping countries, andtheappreciation oftheJapanese
yen.
22. Inrecent years, Korea haswitnessed asignificant change inthepattern ofitsexport markets.
Exports todeveloped economies aresteadily diminishing inrelation tototalexports, while shipments
todeveloping countries areincreasing amidbooming demand infast-growing economies suchasChina
andtheASEAN members. In1995, forthefirsttimeever, Korea exported slightly more todeveloping
countries thantodeveloped ones.
23. Thecommodity composition ofKorean exports hasalsochanged overtime, resulting, toa
significant degree, from ashiftinthedomestic industrial structure. Forexample, bothtextiles and
electronic products aremajor export commodities, buttheshare oftheformer isdeclining, while that
ofthelatterisrisingrapidly.In1995,electronicproducts,includingsemiconductors,becametheleading
export sector, accounting forone-third ofallexports. Bycontrast, theshare oftextile goods intotal
exports declined to14%in1995from21%in1991. Suchchanges inthestructure ofKorean exports
resulted from thedecline ofcomparative advantage inthelabor-intensive industries duetotherise
inwages. However, Korea hasnotyetsecured comparative advantage inthetechnology-intensive
industries toreplace labor-intensive industries. Overcoming thisproblem isamajor challenge forKorea.
Table 2.2
Export Trends
(%)
1991 1992 1993 1994 1995
Total Exports 100.0 100.0 100.0 100.0 100.0
Developed Countries
(U.S.)
(Japan)
(E.U.)62.2
(25.8)
(17.2)
(13.5)55.9
(23.6)
(15.1)
(12.0)52.2
(22.1)
(14.1)
(11.4)50.8
(21.4)
(14.1)
(11.1)49.9
(19.3)
(13.7)
(12.9)
Developing Countries
(ASEAN)
(China)37.8
(9.9)
(1.4)44.1
(11.2)
(3.5)47.8
(11.4)
(6.3)49.2
(11.9)
(6.5)50.1
(13.3)
(7.2)
Primary Goods 4.6 4.3 3.9 4.0 4.9
Manufactured Goods
(Electric &Electronics)
(Textiles)
(Motor Vehicles)95.4
(28.0)
(21.5)
(3.2)95.7
(28.2)
(20.5)
(3.7)96.1
(29.5)
(19.3)
(5.5)96.0
(32.8)
(18.0)
(5.6)95.1
(35.3)
(14.9)
(6.7)
Source: MOTIE.Republic ofKorea WT/TPR/G/19
Page 5
2.2.3. Imports
24. Korea 'simports in1992and1993 recorded lowgrowth ratesof0.3% and2%,respectively,
butsurged by22.1% in1994 and32%in1995. These steep increase rateswere dueinparttothe
strong export performances inthelattertwoyears, entailing substantial increases infacilities investment
andgrowing purchases ofimported capital goods.
25. In1995, more thantwo-thirds ofKorea 'simports came from developed countries. Among
them, theU.S.andJapan werethelargest import sources, withmarket shares of22.5% and24.1%,
respectively. Imports from theEUhaveincreased inrelative terms, rising from 12.1% in1991 to
13.5% in1995. Developing countries havealsosteadily expanded theirshare ofKorea 'simport market.
Theproportion ofimports, notably fromChina andtheASEAN countries, hasbeenrising considerably
since 1991. Asaresult, thesources ofKorea 'simports havebeensignificantly diversified inrecent
years, compared withtheprevious concentration onJapan andtheU.S.
26. Aswithexports, thecomposition ofKorea 'simports hasalsochanged inlinewiththeprogress
ofindustrialization. Theleading category ofmanufactured imports ismachinery, which accounted
foralmost one-fourth oftotalimports lastyear,followed bychemical products andelectronic products.
Theshare ofrawmaterials inoverall imports, though stillthelargest single category, hassteadily
decreased from 53%in1991 to50%in1995.
Table 2.3
Import Trends
(%)
1991 1992 1993 1994 1995
Total Imports 100.0 100.0 100.0 100.0 100.0
Developed Countries
(Japan)
(U.S.)
(E.U.)69.8
(25.9)
(23.2)
(12.1)66.3
(23.8)
(22.4)
(11.7)66.7
(23.9)
(21.4)
(12.1)67.5
(24.8)
(21.1)
(12.9)67.7
(24.1)
(22.5)
(13.5)
Developing Countries
(ASEAN)
(China)30.2
(7.5)
(4.2)33.7
(8.6)
(4.6)33.3
(8.6)
(4.7)32.5
(11.9)
(6.5)32.3
(7.3)
(5.5)
Machinery &Transportation Equipment
Chemicals
Electric &Electronics23.4
18.8
16.023.5
18.5
16.522.1
19.1
17.024.0
18.5
18.123.5
18.7
18.6
Source: MOTIE.
3. MAIN TRADE POLICY OBJECTIVES
Long-Term GoalofBalanced Trade Expansion
27. Korea 'seconomic development haslargely beenachieved through trade expansion. Inthe
early 1960s, Korea adopted anoutward-oriented development strategy based onimporting resources
andrawmaterials forprocessing intoexports. Atthattime, many developing countries werepursuing
astrategy ofeconomic self-sufficiency which relies ondomestic resources orimport-substitution for
economic growth.WT/TPR/G/19 Trade Policy Review
Page 6
28. While Korea 'seconomic growth isoften referred toasexport-led, itwould bemore accurate
tosaythatitwastrade-led, since itwould havebeenimpossible toachieve suchrapid growth without
anincrease inimports aswellasanexpansion inexports. Korea 'sindustrial development andexport
growth wasmade possible byanexpansion inimports andtheirefficient distribution. Thus, exports
created further demand forimports. Successive expansion ofimports andexports, inturn, created
“virtuous circle”through which theKorean economy wasabletobenefit fromanincreasingly efficient
allocation ofresources. Consequently, tradeexpansion hasbeenthedriving force forindustrialization
andeconomic growth inKorea.
29. Similarly, Korea responded totheoilshocks inthe1970s andtheforeign debtcrisis inthe
middleofthe1980snotthroughdrasticausteritymeasures,butbypromotingtradeexpansion.Likewise,
Korea 'smassive 32%import surge in1995, accompanied byatrade deficit surpassing $10billion for
thefirsttime, willnotprovoke ananti-import backlash. Korea, which hadthesecond highest import
growth rateamong countries withtrade volumes over$200 billion in1995, emerged asthe6thmost
important contributor totheexpansion ofworld trade, accounting fora0.81 percentage-point
contribution1tototalworld import growth of18.8% lastyear.
Trade Policy ofHarmonizing Competition andCooperation
30. TheKorean government pursues harmonization ofcompetition andcooperation toachieve
balanced tradeexpansion. Thispolicy recognizes thefundamental changes indomestic andinternational
conditions, particularly intensifying competition, andattaches importance tothenecessity ofcooperation
withtrading partners. Inthisregard, theKorean government established thefollowing fourbasictrade
policy objectives.
31. First, Korea ’slong-term policy goalofbalanced tradeexpansion willbebased ontheprinciple
offreetrade. Korea focuses notonlyonexports butalsoonimports, inorder tomore efficiently
distribute resources andtoenhance consumer welfare. Accordingly, Korea minimizes restrictions in
itstrade-related system andpractices andensures theirconsistency withinternational norms. Asfor
export policy, Korea willencourage development ofindustrial technology anddesign within thescope
allowedbyinternationalnorms,ratherthanthroughprovidingdirectsubsidies.Koreawillthusstrengthen
industrial competitiveness byminimizing production costs ofenterprises.
32. Second,Koreamakesgreatereffortstopromoteindustrialcooperation,aswellastradeexpansion.
Thegovernment willpromote trade notonlyincommodities andservices, butalsointechnologies
andinward andoutward direct investment. Inprinciple, thegovernment willtakefurther stepstocreate
anattractive climate forforeign investors through deregulation andbyimproving theconditions under
which foreign-invested firms operate. Atthesame time, theglobalization ofKorean industry willbe
fostered bygradually removing obstacles tooverseas investment facing domestic firms.
33. Third, Korea contributes tothestrengthening ofthemultilateral trading system. Inasserting
itslegitimate rights under theWTO system, Korea isfully prepared toassume itscorresponding
obligations. Thegovernment willalsocontinue toreform domestic lawsandregulations tobring them
intoconformity withmultilateral norms, especially theWTO Agreements. Korea iswilling totake
anactive partintheprocess ofglobal economic integration andpolicy coordination.
1Thecontribution ratio wasbased onthevolume andgrowth rateofimports.Republic ofKorea WT/TPR/G/19
Page 7
34. Lastly, theKorean government increases thelevelofdevelopment cooperation andassistance
itextends tolessdeveloped countries. Korea iswilling toshare itsdevelopment experience, transfer
thetechnology necessary forindustrialization, andexpand financial assistance.
4. TRADE POLICY DEVELOPMENTS (1992-1996)
4.1 Implementation ofWTO Agreements
35. Upon theconclusion oftheURnegotiations inDecember 1993, Korea began torevise relevant
lawsandsystems inaccordance withmultilateral agreements. Asaresult, Korea hadalmost completed
itswork related toitsURobligations asofDecember 1994, before thelaunch oftheWTO. Even
inareaswhere theimplementation period hasnotyetexpired, Korea hasrevised related lawsorpresented
measures toreform domestic systems inadvance. Assuch, Korea ismaking efforts forfaithful
implementation oftheWTO Agreements. AsoftheendofDecember 1995, Korea hadrevised a
totalof24laws.
State ofRevisions forCompliance withWTO Agreements
i) Revisions in1994
Agriculture: Customs Act,Agro-Fisheries Marketing andPrice Stabilization Act,FeedManagement
Act,Forestry Act,Food Grain Management Act,Ginseng Business Act,Seedling Management Act,
Major Agricultural Crop Seeds Act,Sericulture Act,Livestock Farming Act
Manufacturing andServices: Foreign Trade Act
ii) Revisions in1995
Agriculture: Livestock Epidemics Prevention andControl Act,Agrochemicals Management Act,Plant
Protection Act,Food Sanitation Act,SeedIndustry Act
Manufacturing andServices: Licensed Architect Act,Customs Act,ActRelating toContracts inWhich
theStateisaParty,ActConcerningtheLayout-DesignofSemiconductorIntegratedCircuits,Trademark
Act,TaxAccountant Act,Copyright Act,Computer Program Protection Act,Patent Act
4.2 Quantitative Restrictions
36. KoreamaintainssomequantitativerestrictionsonimportsunderGATTArticleXVIIISectionB.
These restrictions wereexamined inregular consultations withtheGATT/BOP Committee. Since 1990,
Korea hassteadily reduced itsquantitative restrictions onmanufacturing andagricultural products.
Asaresult, only81items --just0.7% ofthetotal10,859 HS10-digit tariff items --facequantitative
restrictions in1996.
37. Theexport offiveproducts including silkfabric isvoluntarily regulated inorder tomaintain
export order. Korea notified thedetails oftheVoluntary Export Regulation (VER) andthetimetable
forphase-out totheWTO Secretariat inaccordance withtherelevant WTO Agreement. Exports
oftextile products areconducted under thetextile quota system setforth intheMultilateral Fiber
Agreement, though thiswillalsobeliberalized according totheschedule ofWTO Agreements.WT/TPR/G/19 Trade Policy Review
Page 8
4.3 Import Procedures
38. Individual lawsstipulate requirements andprocedures forimporting certain products regarding
“standard andtechnical regulations, ”“sanitation andinspection systems, ”etc.They areintended to
ensure theprotection ofpublic health andsanitation, national security, safety, andtheenvironment.
These requirements areallowed under international agreements andrulessuchasGATT Articles XX
andXXI, WTO Agreements onTBT(Technical Barriers toTrade), SPS(Sanitary andPhytosanitary)
andtheBasel Convention. Theindividual lawsareincorporated intotheConsolidated Notice and
published sothatallinterested parties mayhaveaccess tothisinformation. Thishasincreased the
transparency ofimport procedures, facilitated customs administration, andbrought Korea 'simport
system intoconformity withinternational rules.
39. Inaccordance withtheWTO Agreement onImport Licensing Procedures, since 1994 Korea
hasremoved andsimplified import requirements andprocedures stipulated inindividual laws. From
1994to1995, Korea streamlined import procedures contained inthelawswhich weredeemed tohave
anadverse impact onmarket access. These efforts included theabolition oftheimport-restrictive
nomination andeligibility oftrade requirements intheFood Grain Management Law. Korea also
strengthened thearticles oftheForeign Trade Actconcerning consultation andmodification, thereby
bringing import-related procedures ofindividual lawsintoconformity withinternational rules.
4.4 Tariffs
a) Uruguay Round Tariff Concessions
40. Korea made asubstantial contribution totheUruguay Round negotiations concluded in
December 1993byoffering anumber oftariffconcessions. Asfortariffbindings, Korea hasincreased
thebinding ratioto91.2% in1995 from thepre-UR binding ratioof7%bymaking concessions to
theWTO on9,580 items ofthetotal10,502 HS10-digit tariffitems. Withanaverage tariff reduction
of54.2% onatrade-value-weighted basis--significantly higher thanthe33%minimum reduction rate
agreed uponintheUR--Korea 'saverage concessionary rateformanufactured products willdecrease
from 17.9% in1986 to8.2% bytheyear2004.2
b) Tariff Reduction
41. TheSecond Advance Notice ofTariff Reduction Plan, which wasimplemented from 1989
to1994, resulted inlowering theaverage general tariff ratefrom 21.9% in1984 to7.9% in1994.
Asof1995, lowtariffratesof1-3% wereimposed onrawmaterials, while mostmanufactured products
arenowsubject toan8%tariff rate.
c) Flexible Tariff System
42. Topromptly meet thechanges initseconomic environment, Korea hasemployed asystem
offlexible tariff ratesonspecific goods within thescope andlimitation oftheCustoms Act. The
Customs Actprescribes tenflexible tariff rates, including price-stabilization duties. Among the
10flexible duties, however, countervailing duties, retaliatory duties andseasonal customs duties have
never beenimposed. Furthermore, price-stabilization duties wereonlyapplied onceinthefirsthalf
2Thenumber ofitems wasbased on94HS.Republic ofKorea WT/TPR/G/19
Page 9
of1984. Anti-dumping duties, emergency duties andspecial emergency duties, which serve asremedial
measures forindustrial injury, arebased ontherelevant WTO Agreements.
43. Thetariff quota system isdesigned tostabilize domestic commodity markets. According to
thecurrent system, customs duties maybeadjusted foracertain quantity ofimported goods within
thelimit ofthegeneral rate,plusorminus 40percent. However, inthecaseofagricultural, forestry,
marine andlivestock products, customs duties maybeimposed within thelimitoftheratecalculated
byadding aratecorresponding tothemargin ofdomestic andforeign price ofthesame orsubstitute
goods tothegeneral rate. AsofDecember 1995, there were46HS4-digit items withcustoms duties
lower thanthegeneral rates. Thesoleitemwitharatehigher thanthegeneral ratewasbananas.
44. Theadjustment dutysystem wasintroduced tocorrect problems thatariseduring theprocess
ofimport liberalization, suchasdisruption ofdomestic markets andserious injury todomestic industry
caused bytheimportation ofspecific goods. Adjustment duties maybeimposed temporarily within
thescope ofconcessionary tariff rates. AsofDecember 1995, adjustment duties were imposed on
34HS4-digit items, including “P’yogo”(mushrooms), bracken, etc.
4.5 Customs Clearance Procedures
45. TheKoreangovernmentrevisedtheCustomsActanditsEnforcementDecreeinDecember1995.
Asaresult, customs clearance procedures havebeensimplified. Thecontents oftherevisions are
asfollows:
- Theimport license system wasreplaced bytheimport declaration system sothatanimport
declaration filedwithout defects isimmediately accepted forrelease ofthegoods. Under this
newcustoms clearance system, withtheexception ofhigh-risk goods, goods imported by
companies withnorecord ofhaving violated trade-related lawsaretobereleased upon the
acceptance oftheimport declaration without customs inspection.
- Thenewsystem allows import declarations tobefiledatthecustoms house when acarrier
arrives atportbuthasnotyetunloaded thegoods intobonded areas. Import declarations also
befiled evenbefore thevessel enters port. Inbothcases, goods arereleased directly from
theportwithout being stored inbonded areaiftheimport declaration isaccepted.
- Toalleviate thefinancial burden oftheimporters, thepre-payment system wasconverted into
apost-payment system, which allows customs duties tobepaidwithin 15daysaftertherelease
ofthegoods when security deposits aremade. Furthermore, security deposits areomitted
ifimporters ’credit ratings fulfill specific requirements.
- TheEDI(Electronic Data Interchange) system hasbeeninoperation since July1996 and
contributes torapid import clearance procedures. Importers canmake animport declaration
bycomputer without visiting thecustoms house.
4.6 Standards andTechnical Regulations
a) Standards
46. Korea 'sstandardization regime isoperated forthepurpose ofprotecting consumers 'rights
byguaranteeing product quality andservice. Atpresent, about 9,400 national standards (KS: KoreanWT/TPR/G/19 Trade Policy Review
Page 10
Industrial Standards) havebeenpublished. Theestablishment ofnational standards ismade through
consultation with related manufacturers, consumers, andacademic experts, andalsotakes into
considerationrelevantinternationalstandards.Koreaismakingongoingeffortstoharmonizeitsstandards
withISOandIECstandards.
b) Technical Regulations
47. Korea hasestablished andapplied legally binding technical regulations relating tonational
security, consumer safety, protection ofhuman health andsafety, protection ofanimal andplant life,
andtheprotection ofenvironment. There isnounified lawthatcovers allofthese areas. Each law
oract,including theElectrical Appliances Safety Control Act,High Pressure GasSafety Act,
Pharmaceuticals Act,andRadio-waves Act,stipulates technical requirements foreachareawithin the
sphere ofactivity necessary tofulfill alegitimate objective. Allofthese lawsoractsarebased on
theAgreement onTBTandtheAgreement onSPS.
c) Conformity Assessment Systems
48. Conformity assessment systems inregulatory areas aredesigned toensure consumer safety
andtheprotection ofenvironment through typeapproval andsafety inspection systems. Conformity
assessment isapplied according totheassessment criteria andprocedures stipulated ineachindividual
lawandact.Conformity assessment systems innon-regulatory areasconsist oftheKSmarking system
atthenational levelandthequality certification marking system attheprivate-sector level.
d) Efforts toward International Harmonization
49. Korea joined theISOandIECin1963 andhasactively participated inthese international
standards bodies inaneffort toharmonize Korea 'sstandards andtechnical regulations withrelevant
international ones. Inaddition, since signing theGATT Agreement onTBTinOctober 1980, Korea
hasmade every effort tofaithfully carry outitsobligations under thatagreement.
50. Korea hasalsojoined theIECEE (IEC System forConformity Testing Standards forSafety
ofElectrical Equipment) andtheIECQ (IECQuality Assessment System forElectronic Components).
Thusfar,KoreahasnotconcludedanMRA (MutualRecognitionArrangement)withforeignaccreditation
bodies, butismaking efforts toconclude MRAs withrelevant foreign bodies, including those ofNew
Zealand andPoland.
51. Korea hasactively taken partintheAPEC Medium- andLong-Term Action Plan/SCSC
(Sub-Committee onStandards andConformance). Thatsub-committee hasmade efforts toharmonize
thestandards ofAPEC members withinternational standards toimprove technical substructures and
transparency.
4.7 Rules ofOrigin
52. Korea hasintroduced andoperated rules oforigin since joining theAnnex D.1.andD.2.of
theInternational Convention ontheSimplification andHarmonization ofCustoms Procedures (Kyoto
Convention) adopted bytheCustoms Cooperation Council (CCC) in1991. Korea 'srulesoforigin
areoperated onlyfornon-preferential purposes. TheKorean government notified itsrulesoforigin
totheWTO inaccordance withtheWTO Agreement onRules ofOrigin inApril 1995, andhasbeen
anactive participant intheWTO/WCO work onharmonizing rulesoforigin. Korea strongly supportsRepublic ofKorea WT/TPR/G/19
Page 11
theefforts oftheWTO andWCO toestablish neutral andpredictable rules oforigin, andwillmake
ongoing efforts forthesuccessful completion ofthework program within thescheduled timeframe.
4.8 Agricultural, Forestry andFishery Products
4.8.1 Import System ofAgricultural Products
53. Korea 'sagricultural import system wasextensively overhauled inaccordance withtheWTO
AgreementonAgricultureandtheCountryScheduleconcededbytheKoreangovernment.Thenon-tariff
measures onsome agricultural products arebeing eliminated according totheliberalization process
asfollows, withtheexception ofrice. Thericemarket waspartially opened. Minimum market access
forricewasallowed andwillbeexpanded asspecified inKorea 'sCountry Schedule.
Table 4-1
Agricultural Import Liberalization byYear
Total
ItemsNumber ofItems Liberalized
Asof1994 1995 1996 1997 2001
1,417
(100%)1,183
(83.4)161
(94.8)15
(95.9)34
(98.3)8
(98.8)
Note: 1)Numbers arebased onHS10-digit.
2)Numbers inparentheses aretheliberalization ratio.
54. Tariff quota quantities which areallowed withlowtariffs areoperated inaccordance withthe
non-discriminatory principle andinatransparent manner. Specifically, importing rights under tariff
quotas ofsome products areallocated tothebidders whooffer thehighest tender atanauction held
bythegovernment-designated agency. There arenoqualification requirements forparticipating in
theauction.
4.8.2 Fishery Products
55. Sixty-three fishery products were liberalized during the1992-94 period inaccordance with
theimport liberalization planonBOP items, irrespective oftherelevant WTO Agreements. The
additional liberalization planfortheremaining 57items during the1995-97 period wasannounced
inAugust 1994. Asoftheendof1995, 338items outofatotalof387fishery products hadbeen
liberalized. Among theremaining 49items, 19items areliberalized in1996, and30items in1997.
Thus, allfishery products willbefullyliberalized byJuly1,1997. Inconformance withtherelevant
WTO Agreements, tariffratesfor144fishery products werereduced by33%fromthe1986baserate.
4.9 Sanitary andPhytosanitary Measures
56. TheKorean government hasamended relevant domestic lawsandregulations inconformity
withtheWTO/SPS Agreement. Itrevised thePlant Quarantine Actinaccordance withinternational
standards, suchastheIPPC (International PlantProtection Convention) standards. Related regulations
arealsobeing revised. Foranimal quarantine, theAnimal Epidemic Prevention Actwasamended
onJanuary 5,1995 inaccordance withinternational standards, suchastheIOE(International Office
ofEpizootics) standards.WT/TPR/G/19 Trade Policy Review
Page 12
57. TheKorean government isdoing itsbesttominimize theadverse effects ofsanitary inspection
andquarantine onagricultural trade. Toensure amore scientific andspeedy quarantine andinspection
process, Korea continues tomodernize itsequipment andfacilities andimprove theexpertise ofits
officials inthearea. Thefacilities andcapabilities oftheNational Animal Quarantine Service and
theNational Plant Quarantine Service havebeenexpanded. Also, topromote speedy inspection,
theSanitary Inspection Department wassetupunder theNational Animal Quarantine Service.
58. InApril 1996, theKorean government established theKorea Food andDrug Administration
(KFDA), which isincharge ofcomprehensive safety management offoodproducts. Thegovernment
alsoestablished Regional Food andDrug Administrative Offices inthenation 'ssixlargest cities to
strengthen themanagement offoodsafety.
59. TheKorean government hasundertaken far-reaching reform measures toimprove theimported
food management system, toconform withtheWTO/SPS Agreement, andtoensure smooth trade
infoodproducts. Toharmonize Korea 'sfoodstandards andspecifications withinternational standards
andspecifications suchasCODEX, thegovernment hasextensively amended theFood Code.
60. Toharmonize itsinspection system forfoodimports withinternational standards, theKorean
government hasalready introduced aseries ofimprovement measures, suchasrecognition oftest
certificates ofauthorized foreign testing agencies (Aug. 1995), theexpedited clearance system forfresh
fruits andvegetables (April 3,1995), andthepre-arrival inspection application system. Asaresult,
theperiodforimportinspectionandcustomsclearancehasbeenshortenedconsiderably.Also,shelf-lives
forallfoodproducts willbeliberalized by1998 withtheexception ofsome easily perishable food
products. Furthermore, arandom sampling scheme forlaboratory testing isscheduled tobeintroduced
inOctober 1996tosignificantly shorten theperiod forimport inspection. Tostreamline theprocess,
thegovernment isworking tosetupadata-base containing information ondomestic andforeign food
products by1997.
4.10 Safeguards
61. Korea revised itsForeign Trade ActinDecember 1994anditsEnforcement Decree inJuly1995
toimplement theresults oftheURnegotiations. InNovember 1995, theWTO Committee onSafeguards
reviewed Korea 'ssafeguards system tomonitor theimplementation oftheAgreement, andKorea revised
theCustoms ActinDecember 1995 inaccordance withtheresults oftheCommittee 'sreview.
62. Therevised contents oftheForeign Trade ActandEnforcement Decree include thefollowing:
- indetermining injury, theincrease ofimports must bethecause ofserious injury orthreat
totheindustry oftheproduct concerned (Decree Article 69(1))
- provides thecriteria under which remedial measures maybeundertaken (Decree Article 72-2)
- the“annual review system ”waschanged toa“review system ”described inArticle 13ofthe
Agreement onSafeguards (Decree Article 74)
- creation ofaprovision forconsultation withexporting countries before remedial measures are
undertaken (Decree Article 75-5(3))
- creation ofaprovision fordetermining thebases ofquotas among exporting countries andfor
determining theextent andduration ofimport restriction measures (Decree Article 74-6).Republic ofKorea WT/TPR/G/19
Page 13
63. Therevised contents oftheCustoms Actinclude thefollowing:
- clarification ofthecriteria under which emergency duties maybeundertaken (ActArticle 12(1))
- emergency duties shallbeimposed onlytotheextent asdeemed tobenecessary toprevent
serious injury andtofacilitate adjustment (ActArticle 12(1))
- creation ofaprovision fordetermining bases ofprovisional emergency duties (ActArticle 12(2))
- creation ofaprovision fordetermining bases ofreview fordetermination ofemergency duties;
therevised emergency duties shallnotbemore restrictive thantheywereintheinitial period
(ActArticle 12(6))
- creation ofaprovision ontheduration ofemergency duties andprovisional emergency duties.
(ActArticle 12(7)).
4.11 Anti-dumping andCountervailing Duties
4.11.1 Anti-dumping Actions
64. Korea began theprocess ofimplementing theURAnti-dumping Code immediately afterthe
introduction oftheDunkel Draft, which served asthefoundation forthebasic principles ofthenew
Anti-dumping Code. OnDecember 31,1993, theCustoms Actwasamended sothatitcould more
easily incorporate theresults oftheURnegotiations, andtheEnforcement Decree wasmodified to
make itcompatible withtheDunkel Draft. OnDecember 31,1994, aftertheestablishment ofthe
newAnti-dumping Code, theEnforcement Decree andEnforcement Regulations oftheCustoms Act
were amended toimplement theWTO Anti-dumping Agreement.
65. InJuly1995, theWTO Committee onAnti-dumping Practices reviewed Korea 'sAnti-dumping
SystemtomonitortheimplementationoftheAgreement.InDecember1995,KorearevisedtheCustoms
ActandEnforcement Decree toimprove itsanti-dumping system based upon therecommendations
oftheCommittee. Therevised contents oftheCustoms ActandEnforcement Decree include the
following:
- theterm “theexporter orexporting countries ”ischanged to“thesupplier orsupplying
countries ”onthesubject ofanti-dumping duty(ActArticle 10(1) and(2))
- incaseofviolation ofundertakings, thedetermination ofdumping andsubstantial injury shall
bebased on“thebestinformation available, ”rather than“anyutmost information ”(Act
Article 10(2))
- undertakings shallnotbesought oraccepted from exporters untilanaffirmative provisional
determination ofdumping andinjury ismade (ActArticle 10(3))
- undertakingscannotberequiredforexporterstoreducethequantityofexports(ActArticle10(3))
- regarding thesunset clause, extension oftheanti-dumping measures andundertakings shall
bemade ontheauthority ofthePrime Minister 'sDecree onlyifadetermination isfound for
suchextension afterreview ofdumping margin andinjury (ActArticle 10(8))WT/TPR/G/19 Trade Policy Review
Page 14
- investigation ofdumping andsubstantial injury isconducted bytheKorean Trade Commission
(KTC) (Decree Article 4-4(1)).
4.11.2 Countervailing Actions
66. Korea wasoneofthesignatories oftheAgreement onInterpretation andApplication of
Articles VI,XVIandXXIII oftheoftheGATT inJune1980. Korea 'scountervailing duty(CVD)
system hasalegalbasisinArticle 13oftheCustoms Act.InDecember 1995, Korea revised itsCustoms
Actinaccordance withtheresults oftheWTO Committee 'sreview onCVD. Korea hasnottaken
anycountervailing actions since thecountervailing dutysystem wasintroduced.
4.12 Subsidies
67. Korea operates 26subsidies inorder tosecure astable supply ofstaple foods andtopromote
structural improvement oftheindustries withweak base. Inaccordance withtheWTO Agreement
onSubsidies andCountervailing Duties, Korea notified thedetails forits26subsidies totheWTO
inApril 1996. Thenotified subsidies areasfollows: fivecasesrelevant toexports andimports including
reserves forexport losses; 17casesrelated toparticular industries, suchastheFoodGrain Management
Program andtaxreductions andexemptions forforeign-invested companies; andfourcasesforresearch
anddevelopment area.
4.13 Government Procurement
a) Accession totheWTO Agreement onGovernment Procurement
68. Thenegotiations onaccession totheAgreement were concluded inDecember 1993, and
accordingly, Korea joined theAgreement inApril 1994 aftersubmitting itsfinalized offer-list inthe
negotiations onbroadening theGATT Agreement onGovernment Procurement. TheAgreement will
beapplied toKorea onJanuary 1,1997. Inthenegotiations, Korea conceded 40central government
entities, 15sub-central government entities, and23government-funded orsponsored entities. Inthe
caseofcentral government entities, thethreshold is130,000 SDRforgoods andservices and5million
SDR forconstruction services.
69. Korea established the“ActRelating toContracts inwhich theStateisaParty”inJanuary 1995.
Inaccordance withtheWTO Agreement onGovernment Procurement, thisActcontains provisions
related tonational treatment, non-discrimination, andtransparency ofgovernment procurement, which
areobligatory forallparticipants oftheAgreement. Korea hasalready revised thefollowing related
Acts: Budget andAccounting Act,Construction Business Act,Local Government Finance Actand
Electrical Telecommunication Construction Business Act.
b) Principles ofGovernment Procurement
70. Thesupply ofmaterials, services andconstruction contracts arebased onanopencompetitive
tendering procedure. Forspecific tendering procedures including selective tendering ofentities covered
byWTO Agreement onGovernment Procurement, Korea willrevise related regulations before
January 1997, when theAgreement willcome intoforce inKorea, inconformity withtheAgreement.
Fortimely procurement, thegovernment publicizes ashort- ormid-term procurement planatthe
beginning ofeachyear. Currently, procurements offoreign goods arebeing carried outthrough
worldwide sourcing.Republic ofKorea WT/TPR/G/19
Page 15
4.14 Competition Policy
71. Since 1990, theMonopoly Regulation andFairTrade ActandtheFairSubcontract Transactions
Actwererevised onthree occasions, while theRegulation ofStandardized Contracts Actwasrevised
once. Thefollowing isabriefoutline oftherevisions:
- Monopoly Regulation andFairTrade Act:Torestrain theconcentration ofeconomic power,
theprohibition oncross-capital investment among affiliates oflarge conglomerates was
reinforced;limitationsondebtguaranteesamongaffiliatesoflargeconglomerateswasintroduced;
theceiling ontotalcapital investment waslowered inorder tomake therestrictions ondebt
guarantees among affiliates oflargeenterprises more effective; unfair collaborative actswere
defined more broadly toregulate suchactsmore effectively; andthescope ofunfair business
practices wasextended.
- FairSubcontract Transactions Act:Companies failing topaysubcontract payments oradvance
payments within acertain period wererequired topayinterest fordelays. Also, theapplication
oftheActwasextended tosubcontract transactions insuch newindustries assoftware
development andengineering activities. Inaddition, adeadline wassetforthepayment of
discounted notes. Such revisions resulted instrengthening subcontractors 'rights.
- Regulation ofStandardized Contracts Act:Asystem ofissuing orders toredress unfair terms
instandardized contracts wasintroduced, aswasastandard contract system.
72. Reviews were conducted ofvarious government actsanddecrees, aswellasofregulations
oftrade associations, toimprove andrevise anyanticompetitive elements. Also, investigations of
unfair practices ofenterprises andunfair contract terms pertaining tohospitals, apartments, stores,
etc.were conducted andcorrections made thereof, reinforcing competition promotion efforts. At
thesame time, monopolistic andoligopolistic market structures werereadjusted byissuing corrective
measures against abuse ofmarket-dominating power andbyincreasing thepenalties.
73. TheFairTrade Commission (FTC), which wasestablished under thenow-defunct Economic
Planning Board in1980, became anindependent, viceministerial-level central administrative agency
inDecember 1994. InMarch 1996, theFTCchairman 'sofficial status waselevated fromviceminister
leveltominister level, establishing astronger foundation forenforcing competition policy.
4.15 Overseas andForeign Direct Investment
4.15.1 Overseas Direct Investment
74. Since the1990s, Korea hasgreatly eased restrictions onandsimplified procedures foroverseas
direct investment. Allrestricted sectors foroverseas direct investment were fully liberalized by
June1996. Korea isalsoenhancing thetransparency ofthesystem andsimplifying procedures.
- Improvements inSeptember 1992: Thescope ofbusiness sectors subject togovernment
approval foroverseas direct investment wasreduced.
- Improvements inApril 1993: Prior government examination ofprofitability forsmall-scale
investment wasphased out.WT/TPR/G/19 Trade Policy Review
Page 16
- Improvements inFebruary 1994: Korea liberalized restricted business sectors foroverseas
direct investment except those which require restrictions inevitably. Thenumber ofbusiness
areassubject tooverseas investment restrictions wasreduced from17to14.Theeligible scope
ofoverseasrealestateinvestmentforthepurposeofoperatingassetwasexpandedandinvestment
procedures were substantially simplified.
- Improvements inOctober 1995: With theexception ofthreerealestate-related business sectors,
allother business sectors were liberalized foroverseas direct investment. Thescope of
investments subject tovalidation byforeign exchange banks ornotification tothecentral bank
wasexpanded. Thethreshold amount forinvestments requiring thecentral bank'sapproval
wasincreased.
- Improvements inJune1996: Theremaining restricted business sectors, which wereallreal
estate-related business sectors, were fully liberalized foroverseas direct investment.
Furthermore, thequantitative ceilings onoutward direct investment bybothindividuals and
individual entrepreneurs were raised.
4.15.2 Foreign Direct Investment
75. TheKorean government introduced theFive-Year Foreign Direct Investment Liberalization
PlaninJune1993, which presented acleartimetable forliberalization. ThePlanhasundergone three
separate revisions, incorporating additional areas ofliberalization andaccelerating theschedule. As
aresult, during theperiod of1997 to2000, 47additional businesses including legalservices andgas
station operation, willbeliberalized onagradual basis. With theexception of18businesses such
asthegrowing ofcereal grains, television broadcasting, andoperation ofgambling houses, virtually
allbusiness areas willbeopened toforeign direct investment asofJanuary 2000.
Table 4.2
Revised Five-Year Foreign Investment Liberalization Plan
(unit:No.ofbusinesses)
No.of
total
businesses1997 1998 1999 2000
Non-
liberalizedLiberalized Non-
liberalizedLiberalized Non-
liberalizedLiberalized Non-
liberalizedLiberalized
Agriculture/
Fishery/
Forestry/
Mining
Manufacturing
Service68
585
4954
3
2364
582
4724
1
1664
584
4794
1
1564
584
4803
1
1465
584
481
Total 1,148 30 1,118
(97,4)21 1,127
(98.2)20 1,128
(98.3)18 1,130
(98.4)
Note: Figures inparentheses indicate theliberalization ratioofforeign direct investment (%).
76. Thegovernment istaking appropriate stepstomake Korea amore attractive place forforeign
investors byresolving difficulties, suchasacquisition offactory sites, labor relations, etc.Republic ofKorea WT/TPR/G/19
Page 17
- Improvement Measures Since January 1993
Partial permission ofoverseas borrowings byforeign-invested companies
Simplification ofinvestment procedures through revision oftheForeign Capital Inducement
Act
Expansion oftheeligibility forretained-income taxexemptions andreductions through revision
ofcorporate income taxrules
Expansion ofbusinesses eligible forlandacquisition through implementation oftheActon
theAcquisition ofLand byForeigners andControl thereof (April 1994), andsimplification
oflandacquisition procedures.
- MajorSubstanceofComprehensiveMeasurestoImproveForeignInvestmentClimateAnnounced
inJune1994
Greater financial andtaxincentives forforeign investments inadvanced technology fields
Strengthened administrative assistance inlabor relations forforeign-invested companies
Establishment ofindustrial complexes exclusively forforeign-invested companies
Improved support andinformation services, including theestablishment andoperation ofthe
Comprehensive Assistance Center forForeign Investment
Intensified crackdown onintellectual property rights violations
Measures toimprove thepublic 'sperception toward foreign investment.
- Major Substance ofForeign Investment Promotion Measures Announced inJune1996
Introduction oftheOne-Stop Service System
Strengthened assistance tolocalgovernments inattracting foreign investment
Expansion ofindustrial complexes forforeign investment
Establishment ofthe"Care Program" toimprove conditions forforeigners staying inKorea.
4.16 Services
a) Multilateral Commitment toLiberalization
77. TheKorean government actively participated intheURservice negotiations andsubmitted
acountry schedule which contains substantial liberalization inthisarea. Korea included onlyoneitem
initsMFN exemption list,Computer Reservation Services, thereby observing MFN obligations in
virtually allsectors. Korea hasalsoactively participated intheextended negotiations onfinancial
services,basictelecommunications,maritimeservices,andmovementofnaturalpersons.Inthefinancial
services negotiations, which concluded inJuly1995, Korea significantly improved its1993offerand
finalized it.
b) Other Liberalization Measures
78. Inaddition tomultilateral commitment under theWTO, Korea iscarrying outitsownprogram
ofliberalization measures inservices. According totheFive-Year Foreign Direct Investment
Liberalization Plan(implemented in1993andmodified inJune1994, November 1995, andMay1996),
481service industries based ontheKorea Standard Industry Classification, areliberalized by2000.
In2000, allbut14service business sectors willbeliberalized toFDI,bringing Korea 'sliberalization
ratiointheservice sector to97.2% inthatyear.WT/TPR/G/19 Trade Policy Review
Page 18
79. The14service business sectors which arenotscheduled tobeopened asof2000 areareas
withasignificantimpactonpubicinterest,suchasradioandtelevisionbroadcasting.Korea,inprinciple,
provides national treatment inthose industries opentoforeign investment, andextends MFN treatment
tomembers oftheWTO services agreement inadditionally liberalized sectors.
4.17 Intellectual Property Rights
a) Recent Developments
80. Korea 'sintellectual property rights policy hasfocused ontheprotection ofrightholders and
strengthening relevant laws. Korea hascontinued toimprove thesystem byextending protection periods
andexpanding theareassubject toprotection. Theimprovements ofrelated lawsandregulations made
incompliance withtheWTO/TRIPs Agreement areasfollows:
- Dec.1992: Revised theUnfair Competition Prevention Actandestablished aprovision for
theprotection ofbusiness secrets
- Sept.1993:EnactedtheActConcerningtheLayout-DesignofSemiconductorIntegratedCircuits
- July1994: Recognized theright tolease byrevising theCopyright ActandtheComputer
Program Protection Act
- Dec.1994: Stipulated border measure onthepiracy ofIPR.
81. In1995, Korea revised many ofitsIPR-related lawsinorder toensure better IPRprotection
pursuant totheentry intoforce ofTRIPs. Therevised lawsareasfollows:
- Copyright Act
Retroactive protection offoreign works andphonograms
Protection ofliveperformances andbroadcasting byforeigners
Providing theperformer theright ofreproduction ofthefixation oftheir performance
Elimination ofcompulsory license oftranslation rights.
- Patent Act
Expansion thescope oftheenforcement ofpatent rightfrom theproduction, use,transfer,
lease, import, andexhibition ofthepatented invention, tothecontract oftransfer orlease
oftheinvention
Including theinvention ofmaterial which canbeproduced byatomic nucleus conversion in
thescope ofpatented invention.
Extension theduration ofthepatent right from 15years from thedateofpublic notice to
20years from thedateofapplication.
- Trademark Act
Introduction ofcolor trademark system.Republic ofKorea WT/TPR/G/19
Page 19
- Design Act
Establishment ofdesign disclosure system.
- Utility Model Act
Extension oftheduration ofutility model from10years fromthedateofnotification to15years
from thedateofapplication.
- Agrochemicals Management Act
Itemnotice system ofagrochemicals wasreplaced witharegistration system sothatthose with
safety documents foragricultural chemicals canmanufacture andsellthem afterregistering
withthegovernment.
- Seedling Industry Act
A20-year protection period forbreeders ofnewkinds ofplant seedlings wasestablished
(25years forfruittreesandstanding trees). Conditions forprotection ofnewplant seedling
varieties arenovelty, distinction, uniformity, stability, andvariety denomination.
ReciprocalrightsextendedtonationalsofforeigncountrieswhichgrantsimilarrightstoKorean
nationals.
Established regulations topunish violations ofbreeders 'rights.
- Computer Program Protection Act
Theprotection period forcomputer program copyrights waschanged from50years fromthe
creation ofaprogram, to50years fromtheendoftheyearoftheregistration oftheprogram.
Distributing copyrighted programs through telecommunication networks isalsosubject to
punishment.
82. APatent Court, withtheauthority oftheappellate court, willbeestablished byMarch 1998
specifically tohandle IPR-related cases. Korea hasalsoacceded tovarious international treaties, thus
raising itsIPRsystem totheinternational level. These treaties include theConvention Establishing
theWorldIntellectualPropertyOrganization(1979),theParisConvention(1980),thePatentCooperation
Treaty (1984), andtheBudapest Treaty (1987).
b) Activities toPrevent Transaction ofCounterfeit Products
83. While improving legislation tostrengthen protection ofrightholders, theKorean government
hasalsodevoted considerable attention toprevent thetransaction ofcounterfeit products. Following
theestablishmentin1987ofadivisionwithintheKoreanIndustrialPropertyOffice(KIPO)toinvestigate
counterfeit products, Korea created ajointinvestigation teamunder theProsecutors 'Office toconduct
periodic nationwide crackdowns onIPRpiracy.WT/TPR/G/19 Trade Policy Review
Page 20
5. FUTURE DIRECTION OFTRADE POLICY
5.1 Multilateral andRegional Cooperation
84. AsKorea pursues anoutward-oriented development strategy, themultilateral trading system
based ontheWTO isofcrucial importance toKorea. Accordingly, Korea wishes tohelpstrengthen
theWTO. Inaddition toitsefforts tofaithfully implement theresults oftheURnegotiations, the
Korean government isalsoactively participating inmultilateral works, such asinternational
standardization, expansion ofmutual recognition agreements, andsimplification ofrules oforigin.
Korea plans toparticipate inmultilateral discussions onforming common ruleson,forexample, trade
andinvestment, andcompetition policy. Thegovernment believes thatsuchdiscussions contribute
toafreermultilateral trading system, pursuant toefforts made under theGATT system.
85. Inregards toregional cooperation, Korea hasplayed animportant rolewithin APEC andis
making efforts toreduce intra-regional tradeandinvestment barriers. Korea strongly supports APEC 's
basic trade philosophy of“open regionalism, ”which canserve tostrengthen andcomplement the
multilateral trading system.
5.2 Sectoral Policy Direction
5.2.1 Quantitative Restriction
86. Ofthe81BOPitems currently under quantitative restriction (43agricultural, 30fishery and
8industrial), 73arescheduled tobeliberalized by1997. Theremaining eightitems willbeliberalized
by2001.
5.2.2 Export andImport Procedures
87. TheKorean government willremarkably improve itsTrade Management System, sothatexport
andimport approval fromgovernmental authorities willberequired onlyinexceptional cases involving
national defense, public health andsafety, etc.
5.2.3 Tariffs
88. Korea willimplement theWTO agreement on"zero forzero" initiatives according toitstariff
concessionschedule.Forexample,thetariffratesfor28HS4-digititems,includingelectronicintegrated
circuits, micro-assemblies, cranes, etc.,arereduced tozeroby1999. Korea alsoharmonizes itstariff
levels forchemical products according toitstariff concession schedule.
5.2.4 Industrial Standards
89. TheKorean government istaking steps tomake Korea 'sstandards fully consistent with
international standards. Such efforts arefocused onareas where certification systems based on
international standards areapplied orareexpected tobeapplied, areas oftrade where international
standards areapplied, andsafety-, environment- andhealth-related areas.
5.2.5 Agricultural, Forestry andFisheries Products
90. Inagricultural trade policy, Korea willfaithfully implement itsURcountry schedule. Also,
further market liberalization willbepursued consistent withfoodsecurity considerations.Republic ofKorea WT/TPR/G/19
Page 21
91. Intechnical areas suchassanitary andquarantine, animal andplant inspection, Korea will
continue towork onharmonizing domestic systems withinternational principles andstandards.
Furthermore, Korea willstrengthen cooperation withother WTO member countries inthese areas.
92. Regarding imports offoodproducts, Korea willmove torecognize other country 'simported
foodmanagementsystemsashavingthesameauthorityasdomesticsystems,establishnationaltreatment,
andharmonize foodstandards.
5.2.6 Government Procurement
93. Korea willcontinue topursue internationalization ofitsgovernment procurement system,
including theestablishment ofinternational bidding andchallenge procedures. Toenhance the
transparencyofitsprocurementsystem,Koreawillalsoestablishadatabaseongovernmentprocurement
informationandbiddingopportunities,thusensuringthatforeignsuppliershavethenecessaryinformation
toparticipate inthebidding process.
5.2.7 Competition Policy
94. TheKorea FairTrade Commission plans toconcentrate itsefforts onrevising andrepealing
anticompetitive laws, regulations, andpractices inareas thathaveadirect impact ontheentire Korean
economy, suchasthetelecommunications andenergy sectors. Atthesame time, inorder toprevent
introduction ofanticompetitive elements, theCommission plans toeffectively enforce thestipulation
oftheMonopoly Regulation andFairTrade Actconcerning prior consultation withtheCommission
onrevision ornewenactment ofregulations which mayrestrict competition. Bydoing so,the
Commissionwillestablishacompetitivestructurethroughouttheindustries.Moreover,theCommission
willcarry outpolicies designed toalleviate economic concentration bystrictly enforcing limitations
ondebtguarantees among affiliates oflarge enterprises, continue toregulate unfair in-house trading,
strengthen investigations intocompetition-restraining corporate mergers, etc. Furthermore, the
Commission aimstoenhance economic efficiency andconsumer welfare through restricting abuses
ofmarket-dominating position.
95. Korea willconduct investigations intosubcontract transactions intheconstruction and
manufacturingsectorstoprotectsmallandmedium-sizedenterprisesfromunfairsubcontracttransactions
initiated mainly bylargeconglomerates. Moreover, thegovernment willlaunch acrackdown onunfair
transactions which result ininconvenience forthepublic, andtakesteps toredress these problems.
5.2.8 Foreign Direct Investment
96. Under thenewForeign Direct Investment Liberalization Plan(1997-2000), theKorean
government willliberalize foreign direct investment inaconsistent andongoing manner, leading to
aneventual liberalization ofallbut18business sectors by2000.
97. TheKorean government willestablish theone-stop service system tomake itmore convenient
forforeign investors throughout theentire investment process from thebeginning stage tothestart
ofproduction. Thegovernment willalsomake iteasier forthem topurchase factory sites, improve
living conditions ofthestaffofforeign-invested companies, andassist inthedevelopment ofgood
management-labor relations.WT/TPR/G/19 Trade Policy Review
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5.2.9 Telecommunications
98. Theobjective ofKorea 'stelecommunications policy istoenhance domestic telecommunications
services through establishment ofafullycompetitive market. Thelevel offoreign participation in
thedomestic market willbeexpanded instages from1998inaccordance withtheresults oftheWTO
negotiations. While faithfully implementing itsobligations asaWTO member, thegovernment will
closely examine theconsistency ofdomestic policy withinternational norms andtrends. Insodoing,
Korea willcontribute toforming anewglobal trade order inthetelecommunications field.
5.2.10 Intellectual Property Rights
99. Inaccordance withtheTrademark LawTreaty, Korea willconsider introducing, by1997,
single application forgoods and/or services inseveral classes, general power ofattorney, andelimination
oftherequirement ofcertification ofanysignature orother means ofself-indication. In1997, the
government willalsorevise theMajor Agricultural Crop SeedActtobetter protect seedbreeders.
100. Over thelonger term, Korea willreflect international trends andthedevelopment ofnew
technology initsIPR-related laws, andencourage private-sector organizations toassist inmonitoring
against IPRviolations.
6. NON-TARIFF BARRIERS OFMAJOR TRADING PARTNERS
101. Korea ’sexports aresubject tomany regulations andrestrictions byitsmajor trading partners,
including anti-dumping duties, countervailing duties, andrules oforigin.
6.1 Anti-dumping andCountervailing Duties
102. Asaninvestigation concerning anti-dumping taxation orcountervailing duties canitselfhave
theeffect ofrestraining imports, thedecision toconduct suchinvestigations should bemade very
carefully. Also, theinvestigation procedures should betransparent andopen.
103. Following thedeveloped countries suchasU.S., E.U.andAustralia, many developing countries
haverecently begun toimpose anti-dumping duties. Among those countries, some countries havenot
yetprepared national legislation consistent withtheWTO Anti-dumping Agreement.
6.2 Rules ofOrigin
104. According totheU.S. rules oforigin, theorigin ofimported goods isdetermined bythe
substantial transformation rules, which is,however, generally depended uponcase-by-case rulings of
theU.S.Customs Office based onitsprecedents orjudgments onthesubstantial transformation rather
thanbythespecific andclearregulations. Inparticular, theU.S.hasunilaterally changed itsrulesof
origin fortextile products, although theharmonizing work ofrules oforigin isbeing undertaken in
theWTO andWCO. Forthisreason, some concerns havebeenraised thattheU.S. rules oforigin
considerably lackpredictability andcancreate distorting effect oninternational trade andinvestment.
6.3 Trade-related Investment Restrictions
105. Several developing countries inAsiastillmaintain various restrictions onforeign investment,
suchasobligations touseproducts ofdomestic origin ortoexport aportion oftheirlocalproduction.Republic ofKorea WT/TPR/G/19
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6.4 Countries under negotiations forjoining theWTO
106. Currently, suchmajor economies asChina, Taiwan andRussia arenegotiating foraccession
toGATT 1947 andtheWTO. China andRussia, which areintheprocess ofconverting tomarket
economies, stillmaintain veryrestrictive tariff andnon-tariff barriers.
107. Taiwan practices discriminatory import restriction measures against Korea incertain areas,
including government procurement.
6.5 Impacts onEUExpansion onNon-EU Countries
108. Intheprocess ofexpanding EUmembership tosome countries inEastern andCentral Europe,
thereareinstances ofnon-member countries experiencing more disadvantageous treatment thanbefore
theexpansion ofEUmembership.