PRESS/TPRB/42
3October 1996
TRADE POLICY REVIEW BODY
Review ofKorea
TPRB 'sEvaluation
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) conducted itssecond
review ofKorea 'strade policies on30September and1October 1996. ThetextoftheChairman 's
concluding remarks isattached asasummary ofthesalient points which emerged during thetwo-day
discussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachWTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairman 'ssumming-up, together withthese tworeports,
willbepublished induecourse asthecomplete trade policy review ofKorea andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992 &1994), theCzech Republic (1996), Chile (1991), Colombia (1990 &1996),
Costa Rica(1995), Côted'Ivoire (1995), theDominican Republic (1996), Egypt (1992), theEuropean
Communities(1991,1993&1995),Finland(1992),Ghana(1992),HongKong(1990&1994),Hungary
(1991), Iceland (1994), India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992
&1995), Kenya (1993), Korea, Rep.of(1992 &1996), Macau (1994), Malaysia (1993), Mauritius
(1995), Mexico (1993), Morocco (1989 &1996), NewZealand (1990), Nigeria (1991), Norway (1991
&1996), Pakistan (1995), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal
(1994), Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), SriLanka (1995),
Sweden (1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994), Turkey
(1994), theUnited States (1989, 1992 &1994), Uganda (1995), Uruguay (1992), Venezuela (1996),
Zambia (1996) andZimbabwe (1994).
96-4021 MOREPRESS/TPRB/42
Page2/3
TRADE POLICY REVIEW BODY
Review ofKorea, 30September -1October 1996
CONCLUDING REMARKS BYTHE CHAIRPERSON
Over thepasttwodays, theTrade Policy Review Body hasconducted thesecond review of
Korea 'stradepolicies andpractices under theWTO framework. These remarks, intended tosummarize
thesalient points, aremade onmyownresponsibility anddonotsubstitute fortheBody'scollective
evaluation andappreciation. Details ofthediscussion willbereflected intheminutes ofthemeeting.
Thediscussion developed under fourmainthemes: (i)macro-economic developments andthe
implications ofrapid economic expansion; (ii)policies related totariff andnon-tariff measures;
(iii)TRIPS, TRIMs, industrial andcompetition policy issues; and(iv)sectoral issues.
Macro-economic developments andtheimplications ofrapid economic expansion
Korea 'srapid economic growth andcontinued tradeliberalization sinceitsinitial Trade Policy
Review in1992 were strongly commended. Thepositive lessons fordeveloping countries were
highlighted. Members noted, however, theexport promotion efforts adopted inresponse totherecent
riseinthecurrent account deficit, andsought confirmation thatnopublic orprivate "anti-import"
campaigns orother restrictive policies would beundertaken. Korea wasasked theconsequences of
itsrapiddevelopment anditsexpected OECD membership foritsclaims of"developing country" status,
itsimplementation ofWTO agreements, andtheeffects onitsownGSTP anddevelopment co-operation
schemes. Interest wasalsoexpressed incommitments undertaken under APEC, andtheirexpected
effects ontrade withWTO members.
Therepresentative ofKorea responded thattradeexpansion through consistent market opening,
tradeliberalization andderegulation wasattherootofKorea 'srecent economic growth. Theexpansion
ofsocial overhead capital, manpower development, R&D assistance andincreased domestic and
international competition inthefinancial sector were fundamental tostrengthening competitiveness.
Inward andoutward foreign direct investment werepromoted; andnewfinancial instruments hadbeen
createdtoincreasenationalsavings,stabilizepricelevelsandimprovethecurrentaccount.Heconfirmed
thattheKorean Government would notresort toorencourage "anti-import" campaigns orimport
discriminating policies.
Therepresentative emphasized thatactive participation inthemultilateral trading system was
crucial forKorea 'sfuture growth. Although Korea hadparticipated intheUruguay Round asa
developingcountryinconsiderationofitseconomicandpoliticalenvironment,Koreawasmakingutmost
efforts toexpedite theimplementation process. OECD membership wasseenasaspringboard for
further liberalization, rather thananaffirmation offullydeveloped country status. Within APEC, Korea
wasstrongly committed tofurthering openregionalism.
MOREPRESS/TPRB/42
Page4
Policies related totariff andnon-tariff measures
Members commented favourably upon Korea 's"Five-Year PlanforaNewEconomy", with
itsemphasis ontheelimination ofunnecessary regulations, promotion ofindustrial co-operation with
foreign countries andincreased assistance toless-developed countries. Concern wasexpressed over
theImport Diversification Programme, including localcontent provisions, aswellasapparent import
substitution aspects ofthecapital goods "localization" programme. Korea wasrequested toclarify
variousaspectsofsubsidyprogrammesandtoexplainthecriteriausedforsector-specificsupportgranted
under policy-based lending, including government guarantees forshipbuilding andsupport forsmall
andmedium-sized enterprises.
Members welcomed thetariff reductions implemented bothautonomously andinconnection
withWTO commitments, aswellasthegreatly increased levelofbindings foragricultural andindustrial
products. However, questions wereraised overthelackofbinding coverage forfishery andvarious
strategic industrial products. Thepossibility ofadditional reductions inbound levels wasraised,
especially inregard tohighratesresulting from tariffication andthesubstantial gapbetween bound
andapplied rates. Members observed thatrecourse toadjustment tariffs introduced instability into
thetariff system, andenquired about theirjustification.
MemberscommendedKorea'seffortstoreformcustomsclearanceprocedures,importlicensing,
standards andinspection procedures, andgovernment procurement, butexpressed significant concern
overthepaceofimplementation andtheadequacy ofthemeasures adopted. Questions werealsoraised
concerningtechnicalrequirementsforimports,changestosafeguardsprocedures,discriminatorytaxation
ofliquor, andjustification forexpanded label-of-origin requirements affecting imported agricultural
andother goods.
Therepresentative ofKorea indicated thatKorea wasfaithfully implementing theUruguay
Round Agreements andseeking toexpedite thisprocess where possible. TheImport Diversification
Programme, introduced in1978torelieve thechronic tradeimbalance withJapan, wastobeabolished
bytheendof1999. Rules oforigin would beapplied following WTO recommendations; there was
nointention thatthese rules should reinforce theImport Diversification System. Therepresentative
stated thatKorea hadalready abandoned itspolicy oftargeting special industries in1985. Most import
recommendation procedures would bephased outby1997 andallby2001. Quantity undertakings
hadbeenexcluded fromanti-dumping procedures from1July1996. Safeguard mechanisms werebeing
brought intoWTO consistency andwould bestrictly enforced. TheLocalization Scheme fortheCapital
Goods Industry, introduced inMay1995, sought topromote industrial demand andattract foreign
investment, improve theR&D environment, andfurther quality improvements. Thesystem forimports
ofusedgoods hadbeenrevised, andfurther modifications wereintrain. There werenorestrictions
onautoparts.Theshareofpolicy-basedlending,presentedintheSecretariatReport,wasover-estimated,
asitincluded alarge proportion ofgeneral loans extended byspecial banks; nopolicy based lending
wasextendedtoshipbuilding.Assistanceforsmallandmedium-sizedenterprisesfocusedoninformation
andtechnology dissemination.
Ontariffs, therepresentative emphasized thatKorea hadmade substantial tariff concessions
intheUruguay Round, withanaverage reduction of54percentonatrade-weighted basisandexpansion
ofbindings to91.2percentoftariff lines; further reductions would takeplace under "zero forzero"
andharmonization initiatives. Thefactthatmostbound rateswerehigher thanthecurrently applied
ratesreflected theimpact ofautonomous tariffreductions between 1989and1994; therewereatpresent
noplans forfurther revision ofgeneral tariffrates. While Korea 'sCustoms Actprovided fortentypes
offlexibletariffrates,countervailingduties,retaliatorydutiesandseasonaldutieshadneverbeenapplied;
MOREPRESS/TPRB/42
Page5
theuseofanti-dumping andemergency duties wasbased ontherelevant WTO Agreements; andprice
stabilization duties would beeliminated from1997. Adjustment duties could beimposed within the
limits ofWTO bound ratestoprevent import surges fromdisturbing thedomestic market; thesix-month
application period wasintended toavoid suchduties remaining beyond thetimenecessary. Lower
ratetariff quotas wereapplied more frequently thanadjustment duties. Theliquor taxandeducation
taxwereapplied differentially tohigher-alcohol products forfiscal, distributional andhealth reasons,
nottodiscriminate against imports.
TherepresentativeindicatedthatKorea'snon-tariffpolicies,primarilyaimedatensuringconsumer
safety, public health andsimilar objectives, were implemented inaccordance withWTO rules, and
werebased onrecognized international standards where possible. Recent changes incustoms clearance
procedures hadreduced storage andprocessing from anaverage of15tosome 2or3days. Import
licensing would bechanged from apositive toanegative system in1997, confining non-automatic
licensing toalimited number ofsensitive products. Origin marking, introduced todiscourage
counterfeiting, would bereviewed byend-1996; Korea waspursuing awiderange ofactions tofacilitate
foodinspection, including harmonization withinternational testing standards; random sampling would
beintroduced byend-1996. Industrial standardization andlabelling wasessentially inthehands ofprivate
sectororganizations;wherestandardswereconvertedintotechnicalregulations,thesewereinaccordance
withtheTBTAgreement. Provisions oneco-labelling were stillbeing developed; norequests had
beenreceived fromforeign companies todate. Forgovernment procurement, Korea published ashort
ormedium-term planatthebeginning ofeachyear; opencompetitive tendering waspromoted and
Korea 'slimited tendering procedure wasconsistent withthePlurilateral Agreement.
TRIPS, TRIMS, industrial andcompetition policy issues
While expressing theirappreciation forKorea 'simplementation ofnewlegislative measures
toexpand theprotection ofintellectual property, Members sought information onthetime-frames for
fullimplementation ofWTO obligations inthisarea. Questions were raised regarding thelackof
retroactive patent protection, therôleofthepatents court andcurrent border measures forIPR
enforcement. Clarification wasalsosought oninvestment performance measures, noting thelackof
aTRIMs notification; current limitations onshareholding levels; andremaining difficulties interms
ofinward foreign direct investment. Various competition policy issues were alsoraised, including
therôleofState trading organizations.
Therepresentative ofKorea stressed thathiscountry hadconsistently sought toimprove
intellectual property protection. Aseries oflegislative reforms wasaimed atimplementing theTRIPS
Agreement asearlyaspossible; onavoluntary basis, Korea didnotresort tothelonger implementation
period provided forunder theAgreement. ThenewPatent Lawprovided fora20yearprotection
period fromthedateofapplication. Apatents court, tobeestablished byMarch 1998, would review
IPR-related casesonappeal ofdecisions taken bytheKorean Industrial Property Office. Recent changes
tocustoms legislation hadaligned provisions forborder enforcement withthose contained intheTRIPS
Agreement. Therepresentative recalled themain provisions ofthe1996 Foreign Direct Investment
LiberalizationPlan,includinganincreaseinforeignshareholdinglimitationsto20percentfromOctober
1996; hespecified liberalization totakeplace in1997andstated thatthese limitations weretobefully
eliminated bytheyear2000. Limitations onforeign companies 'trading operations would beliberalized
from July1997. Herecalled recent improvements inthestatus andrôleoftheKorea FairTrade
Commission, made tostrengthen competition legislation andsupport theeconomic globalization process
inthepostUruguay Round era.
MOREPRESS/TPRB/42
Page6
Sectoral issues
Inregardtoagriculture,Membersagainnotedthehighdutylevelsresultingfromthetariffication
ofprevious quantitative measures, aswellaspotential conflicts ofinterest inconnection withKorea 's
practice ofoffering tariff-quota administration todomestic associations andotherdirectly related entities.
Additional information wasrequested inregard tostatistics onminimum access commitments, safeguard
investigations forrecently liberalized "sensitive" products, inspection andquarantine procedures, and
shelf-life regulations. Forfisheries, Korea wasasked toexplain thereasons forhightariff rates, the
lowlevelofbindings andcontinued useofquantitative restrictions.
Inconnection withservices, members commented onKorea 'sextensive useofhorizontal access
limitations, including restrictions oncommercial presence, landpurchase, foreign equity participation
andthemovement ofnatural persons. Korea wasurged toconsider more rapid elimination ofbarriers
toforeignparticipationintransport,communicationsandfinancialservices;inthisconnection,problems
ofaccess fortelecommunications equipment were alsoraised. Problems were alsonoted inregard
tothecertification offoreign service professionals.
Therepresentative ofKorea recalled thathiscountry 'sagricultural sector, dominated byrice
production onsmall farms, suffered from lowproductivity andanunderdeveloped infrastructure.
However, widespread reforms were under wayinthecontext oftheWTO implementation process,
including mechanization andconsolidation offarms. Tariffication wasapplied inallareas other than
rice.Theoperation oftariffquotas hadgenerally beenasuccess; some minor problems, suchasunfilled
quotas, wereattributable toadverse market conditions rather thantoproblems inquota management.
Safeguard investigations forspecific products, suchasmilkpowder blends, were based onWTO
provisions. Thepossible introduction ofmeasures would bedecided bytheKorean Trade Commission.
InMay1995, Korea hadestablished anambitious plantoimprove itssanitary andphyto-sanitary system.
Recent reforms included expedited customs clearance forperishable products, theplanned introduction
ofrandom sampling, andthegradual conversion ofofficial shelf-life regulations intoamanufacturer-
determined system. Clarification wasgiven onbeeftariffication, limits ongame meat, andconditions
forimports ofwool. Inthefisheries sector, Korea didnotcurrently envisage anytariff reductions;
however, imports ofclose to50items were tobefullyderestricted bytheendof1997.
Onservices, therepresentative indicated thatKorea hadtaken important steps tofacilitate
commercial presence, including theincreasing ofceilings forforeign portfolio investment. Korea was
firmly committed toimplementing theconcessions offered inthenegotiations onfinancial services
in1995. Inmaritime transport, Korea 'senvisaged reforms wentbeyond thecommitments initially
tabledundertheGATS.Korea'sdraftscheduleofcommitmentsintelecommunicationswasverydifferent
fromthestatus quo,covering international services andsatellite telecommunication services. Foreign
equity ownership inbasic telephone services would beallowed upto33percent, andnoeconomic
needs testwould beimposed. Resale ofbasic telecommunications services would bepermitted, with
theexception ofvoice resale services which weretobeliberalized from2001. Thisdelay wasintended
toallow fortheestablishment anation-wide telecommunications infrastructure.
********************
MOREPRESS/TPRB/42
Page7
Overall
Members acknowledged andappreciated thesteps taken bytheRepublic ofKorea overthe
pastfewyears towards economic reform andmarket opening, including intheareas oftariffreduction,
internal deregulation andliberalization oftheinvestment régime. They emphasized theimportance
offurther steps toimprove market access, toincrease predictability, transparency andcertainty in
Korea 'stradepractices, andtoensure thatKorea 'sregulatory andadministrative régimes areconsistent
withthestated aimsofincreased liberalization andopenness. Theneedforimproved access inthe
agricultural sector andcontinued liberalization invarious fields ofservices wasparticularly emphasized.
Overall, Members offered strong encouragement totheRepublic ofKorea tocontinue andaccelerate
thereform process inalleconomic areas andtobeready toundertake responsibilities within theWTO
fullycommensurate withthestrength anddynamism ofitseconomy.
Weunderstand thatKorea willprovide further written replies todetailed questions, andlook
forward toreceiving these induetime.
END