WORLD TRADE
ORGANIZATIONWT/TPR/M/73
31 October 2000
(00-4545)
Trade Policy Review Body
TRADE POLICY REVIEW
REPUBLIC OF KOREA
Minutes of Meeting
Chairperson:  H.E. Dr. Iftekhar Ahmed Chowdhury (Bangladesh)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF
THE REPUBLIC OF KOREA 4
III. STATEMENT BY THE DISCUSSANT 6
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 8V. REPLIES FROM THE REPRESENTATI VE OF THE REPUBLIC OF KOREA
AND ADDITIONAL COMMENTS 14
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 22ANNEX I: ADVANCE WRITTEN QUESTIONS 25
ANNEX II: WRITTEN RESPONSES BY THE DELEGATION OF THE REPUBLIC
OF KOREA TO QUESTIONS RA ISED BY WTO MEMBERS 65WT/TPR/M/73
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The third Trade Policy Review of Korea was held on 26 and 28 September 2000.  The
Chairperson welcomed the delegation from Korea, led by Mr. Eui-yong Chung, Deputy Minister for
Trade, Ministry of Foreign Affairs and Trade, as well as H.E. Mr. Man-soon Chang, Ambassador and
Permanent Representative to the WTO.  The discussant, H.E. Ms Anne Anderson (Ireland), would as
usual speak in her own capacity and not as a government representative, and had circulated in advance
an outline of the main issues she intended to raise (document WT/TPR/D/52).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The report by the Korean Government was contained in document
WT/TPR/G/73 and that of the WTO Secretariat in document WT/TPR/S/73 and
WT/TPR/S/73/Corr.1.  Copies of advanced questions were submitted by Switzerland;  Canada; Hong
Kong, China;  New Zealand;  Malaysia;  Australia;   the European Union;  Japan;  Uruguay;  the
Czech Republic;  the United States;  Norway;  Thailand;  India;  and the Philippines (Annex I).  These
had been transmitted to the delegation of Korea.  Annex II contains written responses provided by
Korea.
3. The Chairperson noted that the Korean economy, having shrunk in the wake of the Asian
crisis, had quickly rebounded as a result of the successful implementation of prudent macroeconomicpolicies and particularly wide-ranging market-based reforms designed to address long-standing
structural weaknesses.  WTO Members had also played their role in keeping their markets open to
Korea's exports, thereby paving the way for a remarkable recovery.  In undertaking its ambitious
reforms, Korea had maintained an outward-oriented trade and investment strategy.  However, he
indicated that the drive for reform probably needed to be accelerated in order to ensure sustainable
growth in the future.WT/TPR/M/73
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE REPUBLIC OF
KOREA
4. The representative of Korea stated that his country's accession to the OECD, and the 1997
economic crisis were the two most important events since the previous Trade Policy Review.  The
latter was an opportunity to address long-standing structural weaknesses through reforms, coupled
with accelerated liberalization measures to open the domestic market to global competition.  Despite
the serious economic downturn, Korea's commitment to the multilateral trading system had grownstronger throughout the crisis.  The economic recovery had been made possible by the openness
maintained in the world economy, for which the WTO had played a central role.
5. Developments in the main macroeconomic indicators reflected Korea's recovery from the
crisis:  real GDP was again growing fast;  the current account balance had changed for the better;
foreign exchange reserves had risen considerably, and the value of the domestic currency hadrecovered quickly;  and the unemployment rate had also been improving steadily.  The overall
recovery was also reflected in foreign trade and investment figures.
6. Fundamental reform in the financial, corporate, labour, and public sectors was indicative of
efforts to build a more transparent, more efficient, and more competitive economic system.
7. In the financial sector reform, Korea had closed, merged, sold, and consolidated 488 financial
institutions (including 11 commercial banks).  About US$100 billion had been used to clean up
non-performing loans and to re-capitalize banks.  The management of financial institutions had been
restructured, thus actively encouraging foreign participation.  Prudential regulation had been
strengthened, and new monitoring, disclosure and accounting rules had been set up.
8. In the corporate sector, action had been taken to:  deal with insolvent firms through revisions
of bankruptcy-related laws and the full liberalization of merger and acquisition activities;  improve
corporate finance through workout programmes directed at small and medium-sizedenterprises (SMEs);  improve corporate governance and management by appointing outside directors
and external auditing committees;  strengthen minority shareholders' rights;  and adopt international
accounting standards, rules and disclosure requirements.
9. The essential goal of labour market reform was to increase flexibility through the revision of
the Labor Standards Act, and the expansion of the social safety net.  Efforts had been focused on morejob creation and training, better human resource development programmes, and more effective
unemployment benefit packages.
10. Regarding deregulation in the public sector, action was focusing on downsizing the public
sector (three public corporations privatized, eight to be fully privatized before the end of 2002),
cutting 45,000 government jobs (end-1999), and abolishing or relaxing over 70% of the more than11,000 government regulations that existed two years ago.
11. Along with these broad reforms, almost all industries had been opened to foreign investment,
and foreign investment support schemes  were introduced (e.g. one-stop service, Ombudsman
System).  The real estate market was completely opened to foreign participation so that they could
freely conduct business.  In the capital market, a negative list had replaced the traditional positive list,thus widening foreign participation in the capital market.  Priority had been given to liberalizing
foreign exchange transactions for corporations.
12. Reforms were still ongoing.  To cope with lingering financial weaknesses in both the banking
and corporate sectors, which could mutually reinforce each other and could result in credit crunch,WT/TPR/M/73
Page 5
additional public funds of about US$35 billion were to be used to complete the clean-up by the end of
the year 2000.  To deal with problems of moral hazard and complacency in some financial institutionswhere corporations had delayed restructuring, the Government recently introduced a second round of
financial restructuring.  This plan was aimed at setting up an autonomous market-driven restructuring
system within strict market discipline and improved corporate governance.  Furthermore, the
representative of Korea acknowledged the need for improving the productivity and profitability of
Korean businesses, as well as to reduce public debt and re-privatize banks.
13. Despite recent uncertainties due to the rising oil prices, falling semiconductor prices, and the
sale prospects of Daewoo Motor Company, the current situation differed from that of three years ago
because of the ongoing reforms and strong macroeconomic performance based on healthy external
sector balances and robust growth.
14. On trade policy orientation, liberalization in the world economy was being achieved by
strengthening the rules-based multilateral trade system, thus allowing for more trade and increased
prosperity for Korea.  Korea rejected resort to unilateralism in resolving trade disputes, preferring
instead to work through the WTO Dispute Settle ment Mechanism.  Korea's framework for trade
policy formulation and implementation had been strengthened by placing trade negotiating authority
solely under the Ministry of Foreign Affairs and Trade, and by increasing interaction with the publicon trade liberalization matters.  President Kim Dae-jung had emphasized repeatedly that, regardless of
origin considerations, consumers should choose best quality goods at best available prices.  Korea
strongly supported the launching – at the earlie st possible date – of a new round of WTO trade
negotiations with a comprehensive agenda.
15. Regional cooperation would supplement the multilateral opening.  Korea sought
WTO-consistent regionalism and confirmed the primacy of the multilateral trading system.  Free
Trade Agreement (FTA) negotiations with Chile had been ongoing since December 1998, andfeasibility studies had been conducted concerning bilateral FTAs with Japan, New Zealand, and
Thailand.  Bilateral trade relations with major trading partners had been useful in identifying the
direction for further liberalization and reform.  Korea had also made efforts to diversify its trading
relationships with China, the ASEAN, Lati n America, the Middle East, and Oceania.
16. Korea had taken a more active role in helping least developed countries (LDCs) by removing
tariffs on 80 commodities of major export interest to them and increasing the scale of overseas
development assistance for these countries, as well as by undertaking technical cooperation
programmes.  Korea planned to increase substantially its voluntary financial contributions to the
WTO's technical assistance programme.
17. Several measures had been taken to further open the domestic market for many items (e.g.
tariff reduction, dismantling of non-tariff barriers (e.g. Import Diversification System, sanitary and
phytosanitary measures (SPS) schemes, technical standards, contingency measures, customs clearance
procedures)).  He highlighted Korea's achievements in the implementation or improvement of
Uruguay Round and WTO commitments in numerous areas, including bindings, intellectual property
rights, services, government procurement.WT/TPR/M/73
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III. STATEMENT BY THE DISCUSSANT
18. The discussant (H.E. Ms. Anderson) considered this Trade Policy Review very important in
the light of the size of the Korean economy, the extraordinary developments since the previous
Review, and the extent of Korea's participation in WTO activities.  While recalling her
chairpersonship and the optimistic tone of the previous Review, she noted that at that time
WTO Members had not been alert to the long-standing weaknesses in the Korean economy and the
crisis waiting to happen.
19. Discussing the strength of the recovery, she mentioned the strong praise together with the
cautionary note contained in the Secretariat report, the recently published UNCTAD Trade and
Development Report, and in the press.  Commending the reform-based achievements under extremely
difficult circumstances, she highlighted the importance of the social protection policies that had
helped to mitigate the worst effects of the crisis for the most vulnerable segments of the population, amodel for governments in crisis situations.  Nevertheless, she sought confirmation that the
Government was fully committed to following through with reforms (mainly in the corporate and
financial sectors) with a view to eliminating any hidden problems.
20. As lack of competition was one of the weakness es exposed by the crisis, she highlighted the
pervasive presence of the chaebols, as well as the ongoing regulatory and enforcement efforts to curbmonopolies and cartel arrangements.  However, she noted the Government's failure to shake-up the
chaebols' management or to improve their accountability and corporate transparency.  In some areas
they seemed to be expanding their operations.  In addition, state involvement in the economy
remained strong and the abuse of market-dominant power by public enterprises was striking.  If Korea
was to benefit from truly vibrant competition, several areas such as regulation, monitoring, and
privatization, needed to be developed further.
21. In the light the complexity of the tariff structure and the use of adjustment duties, she sought
information on plans for simplification of the former, and for increasing the period of advance
notification of the latter.  While underlining the impor tance of indirect taxes in total fiscal revenue and
their disproportionate focus on imported luxury goods, she emphasized the importance of operating
indirect taxes in a non-discriminatory manner between domestic products and imports, particularly on
luxury goods.  Noting the size of the government procurement market, the implementation of theWTO Agreement on Government Procurement (since 1997), and the share of foreign suppliers, she
asked about the prospects for foreign suppliers, and progress in publishing all procurement
opportunities in English.  Where possible, advance consultation with foreign companies operating in
Korea, prior to the introduction of measures directly affecting the conduct of business, was desirable,
and, where not, advance information was still a big help.
22. Protection afforded to the agricultural sector was high and had led Korea to two dispute
settlement cases at the WTO.  This situation explained the number of advance questions on several
agricultural issues submitted to Korea by participants in its Trade Policy Review.  Noting the move
from direct market-price support to direct payments and environment-friendly policies, she asked
whether payments were to be increasingly decoupled from production, and how this new approachfitted in with food security objectives?
23. The remarkable opening up of services to foreign investment was a key development, and
their growing share in GDP was indicative of their cr itical contribution to the improved functioning of
the economy.  Despite painful and impressive reforms, the banking sector remained characterized by a
high degree of state ownership and huge corporate debts.  Referring to the possibility that recoveryhad had the effect of slowing down somewhat the ur gency of reforms, she asked what further steps
were envisaged to ensure that the momentum was ma intained in the reform of the banking sector. SheWT/TPR/M/73
Page 7
was also interested in the prognosis for further penetration of the non-life insurance market by foreign
firms.  Noting the phenomenal growth in Korea's telecom services and the concurrent expansion ofstate and chaebol involvement, she enquired about plans and a timetable for further privatization in
this sector.  In the light of the establishment of a Universal Service Fund to compensation of Korea
Telecom for provision of 7universal services, she wa s interested in knowing how this practice squared
with the approach of creating a level playing field in the telecommunications sector.
24. In concluding, she stated that factors such as a sustained rise in oil prices, interest in bilateral
and regional agreements, and the improving inter-Korean engagement could influence developments
in the short- or long-term.  Social partnership arrangements were vital in underpinning sustained
growth, and she expressed the hope that the reforms would be successfully completed.WT/TPR/M/73
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IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
25. Members commended Korea's successful crisis management and recovery based on a
combination of wide-ranging reforms, resistance to protectionist pressure and increased openness, as
well as for the decisive role that its social protection policies had had in this context.  They also
appreciated Korea's constructive participation in WTO activities.  Members noted the policy shift with
respect to regional and bilateral trade agreements.  Several Members indicated the strengthening of
bilateral trade and/or investment links with Korea in recent years.  Most Members referred to the
complexity of the customs tariff, the importance of border protection and support in agriculture and
the remarkable opening of the services sector.
26. The representative of Norway acknowledged the usefulness and complementarity to the
multilateral trading system of regional trade agreements.  He sought further information on Korea's
general policies on FTAs as well as on the current status of negotiations in this area.
27. Norway shared Korea's views on the multifunctional role of agriculture, and their bilateral
cooperation on agricultural matters at the WTO negotiations was to continue.  Non-trade concerns
(e.g. food security) justified government intervention in this sector.  While expressing serious concern
over the significant overcapacity in the world's sh ipbuilding industry, he sought more information
about the follow-up of Korea's agreement with the EU to refrain from competition-distortive supportto shipbuilding, and on any further initiatives to improve the situation in this industry.  On WTO work
in services, his country looked forward to coopera ting with Korea in the field of maritime transport
services.  He sought details on several aspects of the finance plan for Korean shipping companies as
well as on measures favouring domestic coastal tanker shipping companies.
28. The representative of Uruguay highlighted Korea's surplus in bilateral trade with his country.
While recognizing that the two countries had similar views on most WTO matter, he indicated their
opposite positions in agriculture-related issues.  He noted Korea's commitment to support thedevelopment of the multilateral trading system and explained that agriculture should not be singled
out from this effort.  Multifunctionality was equivalent to protectionism.  A disproportionately high
level of protection and support was afforded to agriculture.  This policy affected efficient producers,
like Uruguay, and distorted world markets.  He wondered what would have happened if his country
had maintained protectionist measures in manufacturing or services.
29. The representative of New Zealand hoped that Korea would consider concluding only
comprehensive and WTO-consistent regional agreements.  She expressed concern over the presence
of tariff escalation in Korea's customs tariff (especially on processed food, wood and paper activities).
She suggested that the extension of the six month period between altering adjustment tariffs and
quotas on certain items (e.g. seafood) would provide more certainty to foreign suppliers.  NotingKorea's expansion of intellectual property rights (IPRs) commitments, she hoped for a speedy
conclusion of the ordinance on plants under the Seed Industry Act.
30. High levels of border protection, domestic support and state intervention in agriculture, a
sector where her country was highly competitive, had impaired access to the Korean market.  While
understanding Korea's concerns in managing the transition from a protected agriculture sector to onethat was more competitive internationally, she urged Korea to continue reducing tariffs for
agricultural products and move towards less distortive methods of domestic support (i.e. direct
payments) so as to assist the efficient allocation of domestic resources and offer further opportunities
for trade.  She encouraged Korea to put in place all necessary steps to ensure a full and clean
liberalization of the beef market.WT/TPR/M/73
Page 9
31. While supporting efforts to align the domestic  regulatory framework with international
standards, she expressed concern over the import ban on sliced deer velvet on the grounds of absenceof domestic standards on this item, which is also produced in Korea.  New Zealand was ready to assist
Korea in developing an import standard for this item.
32. Although Korea had recast its import licensing requirement from a positive to a single
negative list of prohibited or restricted items, import items (particularly agricultural products) were
effectively prohibited through certification and other requirements.  In her country's experience, thebilateral negotiation of SPS issues could be a resource-intensive, non-transparent and lengthy process.
She also indicated that export approval procedures required of New Zealand had not been applied to
other trading partners.  In the case of live animal imports, Korea still required testing for particular
diseases, even when the exporting country had "country freedom" status.
33. She also suggested the opening of the transportation market sector in the interests of
consumers, and encouraged further assistance to regional tourism flows by considering more liberal
air service agreements.
34. The representative of Australia urged Korea to be more actively involved in efforts to build
momentum across several issues in the WTO agenda.  Referring to Koreas' ongoing commitment to
trade liberalization and increased interest in regional agreements, he noted its intention to observeArticle XXIV provisions and to ensure the coverage of all sectors by any future FTAs.  More
consistency and predictability was necessary in the implementation of adjustment duties.  He noted
the weak reforms in agriculture, where assistance rates exceeded average OECD levels.  Australia
strongly urged Korea to move away from trade distorting measures to deal with social and
environmental problems in the countryside, which harmed legitimate trade interests of trading
partners, particularly those of developing countries.
35. The representative of Switzerland encouraged Korea to complete fundamental reforms that
would lay the basis for sustainable growth.  His co untry shared Korea's belief on the multifunctional
nature of agriculture.
36. The representative of Canada noted that Korea was highly dependent on trade for economic
growth, and it was in its interest to implement trade-facilitating, WTO-consistent rules in goods and
services.  Korea had enhanced transparency on tariffs but those applied to agricultural items wereparticularly high.  Korea had also continued to amend its competition policies in order to foster and
maintain competitive markets.
37. The representative of Hong Kong, China comm ended the remarkable opening of the services
sector and improvement of the investment environment.  He looked forward to a deepening of reforms
in key services infrastructure.  He expressed the hope that future FTAs involving Korea would coverall sectors so as to supplement the multilateral trading system and facilitate further opening.  He noted
the continuing reliance on customs duties for government revenue purposes.
38. The representative of Malaysia highlighted that  a major factor aggravating the crisis has been
the systemic weakness in the international financ ial architecture and affected economies remained
vulnerable unless reforms to the international financial architecture are instituted.  Noting thepresence of considerable tariff peaks for agricultural products, she expressed concern over the
application of flexible or adjustment duties on products of export interest to her country, such as
frozen shrimps, prawns, frozen squid, bananas, plywood, and woven fabrics of cotton.  She urged
Korea to reduce uncertainty created by these duties and to revert to basic rates.  She expressed the
hope that restrictions on seafood imports and the stringent SPS requirements for tropical fruit wouldbe revised.WT/TPR/M/73
Page 10
39. The representative of the Czech Republic pointed out the persistent imbalance in the bilateral
trade with his country in favour of Korea, despite the signing of bilateral economic cooperation,
double taxation, and investment promotion agreements.  To improve this situation, he suggested
closer bilateral cooperation in areas such as heavy industry, energy, small and medium-sized
enterprises.  He drew attention to the restrictive effect of licensing conditions (i.e. capacity limits) on
exports to Korea by small breweries.
40. The representative of the United States praised the reforms and liberalization efforts that had
led to a quick return to growth and technological progress.  He highlighted, inter alia,  the strong
economic, cultural and personal ties between his country and Korea.  He also referred to the
improvement of Korea's WTO commitments during the period under Review in areas such as
information technology, basic telecommunications, and financial services.  He recognized Korea's
participation in the WTO Government Procurement Agreement and its WTO leadership ontransparency issues in this area.
41. Despite Korea's reforms and commitment to market openness, his delegation shared the
concerns of other Members in a number of areas including those relating to protection of agriculture
and intellectual property rights (e.g. lack of full retroactive protection to pre-existing copyright
works).  His delegation was interested in the timetable set for reforming the latter as well as the stateof progress in the development of unbiased standards and regulations.  He expected discussion on the
liberalization plans of important sectors, such as steel production and financial, insurance, and
telecommunication services.  In this regard he urged Korea's active participation in the ongoing
services negotiations.
42. The representative of Japan praised Korea's reform efforts and encouraged further
liberalization in trade and investment.  His dele gation shared Korea's view that a new round should
encompass not only further liberalization in existing areas, but also rule-making in numerous otherareas, thus addressing the interests of all WTO Members.  Views converged also on issues relating to
the multifunctional role of agriculture, which should be given full consideration, and on the
importance of maintaining a reasonable level of domestic production rather than relying excessively
on imports in order to ensure food security.
43. Japan appreciated improvements in tariff bindings on automobiles and hoped for similar
progress on items such as colour televisions, radios, and cameras, which had not yet been bound.
While commending the elimination of the Import Source Diversification Programme, he expressed the
strong hope that Korea would abide by WTO rules, and not take such discriminatory measure again.
He sought clarification on the implementation of different origin marking requirements between
domestic and imported products.  He also strongly requested Korea to ensure that the minimum60-day period for comment under the provisions of the TBT Agreement be observed.
44. The representative of the European Union acknowledged Korea's renewed economic
dynamism, but underlined that it was essential to maintain the reform momentum, especially with
regard to the corporate and the financial sector, and to ensure external trade liberalization.  He noted
the strong convergence of views between the EU a nd Korea regarding the further development of the
multilateral trading system.  Efforts to strength en the framework for bilateral relations were
continuing through a Framework Agreement on Trade and Cooperation (ratification process nearing
completion) and the Asia-Europe Meeting (ASEM) process.  He sought information on the short- and
long-term aspects of and prospects for the policy on the negotiation and conclusion of FTAs, as well
as the possibility for the development of the ASEAN plus 3 grouping into a regional free-tradepartnership.WT/TPR/M/73
Page 11
45. His delegation expected a positive result from the second round of bilateral consultations on
shipbuilding.  Regarding car imports, it was important for the authorities to avoid conveying any anti-import signals, and to take positive measures to correct distorted consumer perceptions.  Further
improvement of enforcement measures was still required as piracy and counterfeiting continued to
cause important losses for European right-holders.
46. The representative of Thailand, speaking on behalf of ASEAN countries, expressed the hope
that the ongoing reforms would continue to take into account regional trade and investment interests.
He welcomed efforts to improve transparency in import certification procedures and bring them into
line with CODEX provisions, although ASEAN food items were still subject to stringent import
measures (including SPS).  He sought more information on Korea's intention to further liberalize trade
in products of export interest to ASEAN partners (particularly agricultural items), and on any plans to
phase out out-of-quota tariffs.
47. The representative of Thailand complemented Korea upon its tangible progress and
achievements.  He expressed a sense of hope, optimism and admiration for Korea's unrelenting spirit
and drive to better itself against all the odds.
48. The representative of India noted that the Korean economy had recovered admirably from the
recent financial crisis, which erupted in 1997 and this showed the resilience of the Korean economy.
He also noted with satisfaction that despite the pressure this event imposed on the economy, Korea
stayed on course to undertaking far-reaching market reforms resisting protectionist pressures and this
reform process had established a strong foundation for sustainable growth.  He requested an
assessment of the current economic situation and information on plans to ensure that the recovery was
sustained especially keeping in view the prospects of national re-unification and the problem of an
aging population.  He enquired about the reasons for the decline of Korean exports to the Asia-Pacific
region and plans for boosting trade with its partners in that region.  Noting that Korea was animportant trade and economic partner for India, he pointed out that in the Joint Trade Committee
meeting held in May 2000, both countries emphasized the desirability of forgoing a strategic alliance
in the field of information technology.  The industries of the two countries had also set up a joint
business council and an economic cooperation committee.  However, he noted that several types of
trade barriers (including multiplicity of rates, high tariffs, autonomous tariff quotas mainly for rawmaterials existing in Korea along with exclusive importation rights of producers' cooperatives and
state trading entities, adjustment duties and subsidies) impinged upon exports to Korea of agricultural
and manufactured items from developing countries.  He also wanted to know from Korea what steps it
proposed to take to improve market access for agricultural products, particularly rice and fisheries
produce.  Further, he referred to the various written questions submitted to Korea and hoped to havethe responses.  Finally, he also noted the shift in Korea's stand on forging regional trade arrangements
and wanted Korea to pursue a vigorous multilateralization of the preferences under these regional
arrangements which would benefit not only Korea's long-term economic interests but also the
multilateral trading system as a whole.
49. The representative of the Philippines stated that developments in Korea's trade and investment
policies as well as the move toward FTAs aroused sharp interest.  She asked whether Korea intended
to further liberalize trade in agricultural products, specifically tropical fruit.
50. The representative of Chile noted Korea's extraordinary move towards an efficient and
competitive economy compared with the 1950s.  He singled out the lack of transparency in the
economy and the financial sector as a cause for the 1997 crisis.  He underlined that reforms had takenplace under a democratic regime, and referred to the important prospect of closer relations with
North Korea, which would contribute to greater peace and security in the region.WT/TPR/M/73
Page 12
51. In the context of APEC, both Korea and Chile had accepted and had been guided by the
principle of open regionalism.  His country had vi ews in common with Korea in several fora, except
for agriculture where their positions were opposite.  Negotiations of a bilateral FTA with Korea were
to be finalized by the end of 2000, once difficulties in sensitive sectors like agriculture had been
overcome.  This would be the first Trans-Pacific agreement of this type and it would be WTO-
consistent in all areas (i.e. goods, services, investment, dispute settlement).  During the negotiation
process, Chile had received abundant information in response to its numerous questions, and thereforehad no need to submit any questions in the context of this TPR of Korea.  He hoped for continued
economic opening as well as greater predictability on the measures affecting agriculture, forestry, and
fishery.
52. The representative of Turkey commended Korea's recovery through liberal policies.  His
country had similar orientations both in economic and agricultural issues.  He asked whether Korea's
involvement in regional and bilateral arrangements would erode its long-standing attachment to
multilateralism.  He sought more information on the Ombudsman system.
53. The representative of Mauritius praised Korea's economic miracle and crisis-related reforms,
which had set an example for African countries.  Well-balanced social policies were important in
order to mitigate the impact of reforms.  His c ountry shared Korea's view that regional cooperation
should promote global openness.  He commended Korea's granting of duty-free treatment for certain
commodities originating in LDCs and hoped that other countries would follow this example.  In the
name of multifunctionality, he advocated flexibility for devising agricultural policies in line with
domestic priorities such as food security, poverty alleviation, social exclusion, rural development, and
environmental concerns.
54. The representative of Argentina was pleased to note that reforms had dealt with long-standing
weaknesses and that no new protectionist measures had been adopted.  Despite a shift toward policies
aimed at increasing productivity, she noted the persistence of wide-ranging border measures and
increasing domestic support to agriculture.  These worrisome practices were reflected in high
PSE indicators, compared with the average OECD  level.  Korea insisted on limiting trade
liberalization in agriculture and had not yet tabled a negotiation proposal at the Special Session on
Agriculture.  In certain cases, financial support to the manufacturing sector was granted to meetimport substitution objectives.
55. The representative of Hungary commended Korea for having weathered its worst post-war
recession in a WTO-compatible manner.  He recognized Korea's liberalization efforts and its
implementation of WTO and OECD commitments, and hoped for more transparency in and further
simplification of the import procedures.  Acknowle dging the efforts undertaken in the review period
to deregulate Korean agriculture and to shift support policies from farm assistance to more
market-oriented policies he noted that agriculture was definitely an area where ample room existed for
further liberalization.  He expressed concern over the role of producer cooperatives federations,
state-owned enterprises and organizations in operating agricultural policies in areas like quota and
TRQ administration, price support, input distribut ion, soft loans and marketing services.  He
welcomed the marked change in Korea's approach to  RTAs and shared their view that multilateral and
WTO compatible regional initiatives could be mutually supportive.  Stressing the importance of
bilateral economic relations he expressed hope, that the investment ties were going to grow stronger
while trade flows became somewhat more balanced.  He commended Korea for its support for a
broad-based new round multilateral negotiations.
56. The representative of Romania welcomed the important steps taken by Korea since its
previous TPR in numerous areas including customs clearance, anti-dumping, anti-import campaigns,
technical barriers to trade, competition policy, and intellectual property rights protection.  Korea'sWT/TPR/M/73
Page 13
proposals for the preparation of the Seattle Ministerial Conference reflected its commitment to
liberalization.  As a major foreign investor in Romania, Korea contributed to privatization efforts inthe country.
57. The representative of Brazil regretted that reforms had left the agricultural sector virtually
untouched and urged further liberalization in this area with a view to promoting greater efficiency
gains.  In the light of Korea's change of policy on bilateral and regional agreements, his delegation
was interested in learning more about Korea's position on this matter in the WTO Committee onRegional Trade Agreements and other relevant fora.WT/TPR/M/73
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V. REPLIES FROM THE REPRESENTATIVE OF THE REPUBLIC OF KOREA AND
ADDITIONAL COMMENTS
58. The representative of Korea recognized that inputs from trading partners had provided
catalysts in pursuing trade liberalization in the past.  Concerning complacency, the "reform fatigue"
and determination to complete reforms and restructuring, his Government would continue to do its
best to sustain efforts in this area, despite the high economic, social, and political costs they entailed.
Referring to the critical need to maintain social cohesion and the formidable challenges of reforms, he
expressed confidence in the continuity of the process because of the dedication of the top political
leadership, the strong public consensus, and thei r powerful synergy behind the fundamental changes.
59. However, he reiterated that there were challenges from outside as well as difficulties on the
inside (e.g. oil prices, price volatility of semi-conductors, uncertainties in the clean-up of the
corporate sector (Ford pull-out from Daewoo buy deal)).   In the light of solid achievements in external
sector positions and increased transparency, external challenges could not cause a repetition of the
1997 economic crisis.  Recent external challenges had accelerated the reform process.  Under a
Second Round of Financial Restructuring Plan (announced on 25 September 2000), US$35 billion of
additional public funds was to be used to clean up bad credit once and for all;  an October 2000
deadline for the closure or sell-off of non-viable institutions had been set, and all immediatelyachievable institutional reforms were to be finished by the end of the year.  The Plan had been well
received by capital markets.
60. He emphasized the discussant's statement that Korea had, by and large, honoured its
Uruguay Round commitments on agriculture.  His country was determined to participate faithfully
and actively in the on-going WTO agricultural negotiations while taking into account non-trade
concerns and multifunctionality.
61. In the aftermath of the June 2000 Summit, inter-Korean relations had progressed rapidly and
expanded in various areas, and talks on the setting-up of the legal framework for economic
cooperation had begun.  The essential goal of this policy had been, and would continue to be helping
North Korea to accelerate its reforms and gradually join the world community by opening its
economy to global trade and investment.  The costs of the transition to peace would be lower than
costs arising from a hostile confrontation on the Korean Peninsula.  Korea expected continued supportfrom the world community for its engagement policy toward North Korea.
62. The discussant acknowledged the risk of reform fatigue under these very difficult
circumstances.  It was encouraging to hear ab out the existence of synergy between the absolute
determination of the Government, the political leadership, and the public readiness to understand the
costs for reaching a medium and longer-term economic solution.  The external threats had served toensure that complacency did not set in.  For example, Ford's decision not to go ahead with the buy out
of debt-ridden Daewoo was indicative of the existing problems in the chaebols.
63. She sought further details on the Second Round of Financial Restructuring Plan;  one the most
appreciated aspects of the Plan (by the capital markets) had been the October 2000 deadline.
Referring to the work-out programmes, the length of the lifeline given to many firms under theseprogrammes was worrisome.  She hoped that the huge and costly injections of additional public funds
would solve problems definitively.  In addition, she enquired about plans to raise taxes by around
20% in 2001, and the need for ordinary people of Korea to pay for unnecessary injections of
government money into bail-outs.WT/TPR/M/73
Page 15
64. It was her understanding that future changes and corrections in the economy were to be driven
by market forces.  Statements in favour or against multifunctionality by various participants were amicrocosm of the broader WTO debate about the future direction of the agricultural sector.
65. The representative of Korea responded to questions raised on three main themes:
(i) economic environment;  (ii) trade policies by measure;  and (iii) sectoral policies.  Written replies
had been provided on advance questions submitted prior to the meeting (Annex II).
(1) Economic Environment
66. The representative of Korea announced a plan to sell off government-owned shares in
commercial banks after the second half of 2002, provided that no major negative impact on the market
was anticipated.  Additional public funds had been provided to further financial sector restructuring.
Efforts to reduce existing non-performing loans (NPLs) and prevent further accruing of NPLs would
continue.  For non-banking institutions, all ailing me rchant banking, insurance, securities, investment,
mutual savings, and other institutions would be fully identified and their future  settled prior to the end
of 2000.
67. Regarding corporate sector reform, the viability  of 46 companies remaining in the corporate
work-out programmes was to be reviewed by the end of October 2000.  By the end of 2000, the
corporate work-out programme would be transformed into a pre-packaged bankruptcy system thatwould allow creditor banks to either quic kly shut down or shore up ailing companies.
68. Over the past two years, an extensive regulatory reform programme had reviewed more than
11,000 laws and regulations, of which 5,500 had been eliminated.  Deregulation and regulatory
reform were expected to improve productivity, raise foreign investor confidence, and translate into an
8.6% increase in GDP over five years.  In response to criticism over the lack of sufficient
improvement of the economic environment, efforts would concentrate on raising the quality of the
regulatory reform process.
69. Privatization and restructuring of state-owne d enterprises had slowed down because of poor
market conditions or delays in the passage of relevant legislation but efforts were being made in this
respect.  Details of the privatization plan for major enterprises was contained in the written responses
to advance questions.
70. On competition policy, he agreed that the lack of competition in an oligopolistic economic
environment dominated by chaebols and public corporations was one of the main causes of the
economic crisis.  The Korean Fair Trade Commission had been very active in several areas and would
focus on monitoring cross-equity holdings among loosely and directly affiliated companies.
Consumer rights were being promoted in order to foster competition in the domestic market.
71. Following considerable liberalization of foreign direct investment, currently only four sectors
(inshore fishing, coastal fishing, radio, and television broadcasting) remained completely closed to
foreign investors (24 partially closed), compared with 54 industries in January 1997.  To improve the
investment environment, efforts were being made to open monopolistic structures (e.g. tobacco and
telecommunications) to foreign participation, as well as to expand and appraise the effectiveness of
several investment incentives (e.g. tax reductions for foreign high-tech firms and services industriessupporting the manufacturing sector, foreign investment zones).  Increased foreign direct investment
inflows had contributed to improving the financia l and managerial aspects of Korean companies as
well as to the transfer of technology and the creation of employment.WT/TPR/M/73
Page 16
72. Concerning the decision to pursue FTAs, Korea still believed that these agreements should
remain WTO consistent and should not act as barriers to trade with third countries.  A properlynegotiated and managed FTA could function as a building block to strengthen the multilateral trading
system.  Chile had been chosen on the basis of, inter alia , complementarity of the two economies,
which would maximize the trade creating effect of the FTA.  The agreement would encompass
substantially all trade in goods, including agricultural goods, and trade in services with the highest
possible degree of liberalization, as well as rules on investment and the protection of intellectualproperty rights.  So far three rounds of negotiations had been held and initial binding schedules had
been exchanged.  Upon conclusion of the negotiat ions with Chile, Korea would consider initiating
FTA negotiations with other countries.  Joint studies with Japan, New Zealand, and Thailand on the
economic feasibility of concluding an FTA had been or were being conducted and their results would
be made available in 2001.
73. Economic cooperation with developing countries was a priority.  Furthering the recently
introduced duty-free access for certain commodities from LDCs was under consideration.  Public
spending in development assistance programmes had steadily increased at an annual average of
27.7% (0.079% of GDP) with emphasis placed on capacity-building in developing countries.  As from
2001, Korea planned to at least double the number of participants in its training programme on theWTO and allocate more fellowships to the countries undergoing the WTO accession process.
74. The discussant expressed satisfaction at the strength of Korea's commitment to
multilateralism.  The opening towards LDCs was very important because Korea had graduated
recently and could recall its past level of development.
75. Government intervention in cleaning-up the banking sector was a particularly significant issue
because of the scale of the bail-out (some US$100 billion), which had given the State a major equity
share in large banks.  In addition, the situation was dangerously complicated by banks' ownership of asignificant equity share in companies in difficulty.  This situation was giving the impression that the
entire structure was either going to stand or fall all together.  Taking note of the corporate
restructuring deadlines, she sought further clarification on these issues, more information on the plans
for selling government shares in commercial banks after the second half of 2002, and plans for the
privatization of state-owned enterprises.
76. She queried the role of chaebols within Korea's extraordinary modern economy where
e-commerce and the internet were expanding rapidly, as well as their impact on the start-up activity
and new entrepreneurs.  She questioned whether chaebols represented the ideal shaping of the
economy in the medium-term?
77. The representative of Pakistan appreciated Kor ea's commitment to reforms, particularly in the
banking sector, as well as the steps it was taking to restore confidence and set the conditions for stable
sustainable growth.  He expressed concern about the prevalence of tariff peaks in agriculture and the
complex nature of the customs tariff.
78. The representative of the European Union was very grateful for the answers in relation to
FTAs and enquired about access to the feasibility studies on the establishment of FTAs with Japan,
New Zealand, and Thailand.  He requested Korea's views on the integration of sustainable
development and environmental concerns in a new comprehensive round of trade negotiations or in
relation to the WTO Agreements.
79. On sectors of the economy that were still fully or partially closed to foreign investment, he
was interested in the reasons, intentions, and time scale for different transition periods (depending onthe sector) prior to full liberalization.  While some sectors were of a more traditional nature, thereWT/TPR/M/73
Page 17
were other activities (e.g. mobile telephone services, other telecommunications) that seemed essential
in ensuring growth in a truly globalized economy.
80. The representative of Korea informed the TP RB that the Government had maintained and
would retain for a substantial period its status as a majority shareholder in certain financial institutions
in line with the IMF recommendations made in July 2000.  It was his understanding that the reason for
this recommendation was the need for a stable environment and enough time for the commercial
banks in question to concentrate on normalizing their financial operations.  Government shares wouldbe sold off whenever certain operational conditions were met, and this was expected to happen by the
second half of the year 2002.
81. Future activities of the chaebols would be guided by strengthened competition policies.  The
authorities planned to privatize Korea Telecom (full privatization by June 2002) and Pohang Iron and
Steel Corp. as soon as possible, but progress depended on the situation in the Korean stock market.
82. Korea intended to conduct FTA negotiations in a very transparent manner.  Studies on the
economic feasibility of possible FTAs were being conducted by private institutes in Korea and the
countries concerned.  Whenever published, these studies would be made public.
(2) Trade Policies by Measure
83. In addition to the publication of all laws, regulations and most administrative guidelines of
general application in the Official Gazette , the authorities provided adequate advance notification and
the opportunity for comment from the private sector (including foreign interested parties).  To ensure
transparency to foreigners, approximately 800 important laws had been translated into English.  These
translations were updated quarterly and were available on the Internet.
84. Customs procedures were being streamlined and modernized through, inter alia,  the
implementation of a paperless import clearance and an on-dock immediate delivery system.  The
authorities were willing to share specific experiences in this area with other Members in order tofacilitate international trade.
85. Under the current tariff system, a single 8% rate was applied on most industrial goods and
high tariff rates for agricultural products were the result of "tariffication" resulting from the
Uruguay Round negotiations.  The tariff structure was rather complicated because of the
implementation of the yearly tariff reduction schedules and "tariffication", but it would besignificantly simplified when the reduction plans were fully implemented.  Further simplification of
the tariff structure and additional bindings would be addressed in the context of a new round of
negotiations.
86. The adjustment duties were designed to respond effectively to import surges of certain
products and were WTO consistent.  Product coverage and rates had been continuously reduced.Improvements in the decision-making process for and management of these duties (including the
extension of the time period for advance notice) was to be studied.  There was no discriminatory
feature in the indirect tax system and the number of different taxes would be further reduced.
87. For items other than rice and beef, Korea had eliminated import-restrictive licensing since
March 1997.  It maintained non-discriminatory conditions and procedures for imports for the purposeof public health, sanitary standards, and safety.  Korea would ensure that these requirements did not
constitute unnecessary obstacles to trade, and product-specific issues in this area would be addressed
bilaterally with Members concerned.WT/TPR/M/73
Page 18
88. He highlighted several efforts to encourage the alignment of Korean standards and technical
regulations with international standards, including the National Standardization Act and a five-yearplan for harmonizing 80% of the domestic standards (except for those specific to Korea) by 2004.  A
non-discriminatory genetically modified organism s labeling scheme, aimed at securing consumers’
right to know, was to be gradually introduced for several items between March 2001 and 2002.
89. Despite faithful observance of obligations under the WTO Agreement on Government
Procurement, the share of foreign suppliers was low because of the presence of competitive domesticfirms (e.g. construction) as well as the crisis-related cut in procurement spending on items where
foreign suppliers had strong competitiveness (e.g. on high-tech items and services).  To improve
access for foreign suppliers, online facilities on procurement projects (i.e. information, application)
would be available in 2001.
90. Korea had reduced then number of its subsidy programmes from 26 (1996) to 19 (1999),
including the elimination ahead of schedule of four prohibited subsidies in 1997.
91. Recalling Korea's full compliance with (including on retroactive protection) or more
extensive protection than the TRIPS Agreement, he informed the TPRB that his country's IPR-related
legislation had been reviewed at the TRIPS Council in June 2000.  Korea was committed to
eradicating the infringement of IPRs and stopping trade in counterfeit goods through wide-rangingenforcement campaigns, efforts to promote public awareness and increased punishment.
92. The discussant noted that the apparent complexity of the customs tariff was transitional owing
to the implementation of Uruguay Round commitments  and looked forward to having less cause for
complaint by the end of the transition period.  While acknowledging that adjustment duties were
within the ceiling set by WTO bound rates, sh e noted Korea's commitment to improve the
decision-making process for setting these duties and to study the possibility of expanding the time-
period between the announcement and the application of such duties.
93. Despite the explicit lack of discrimination in the indirect tax system, it was very important to
realize the potential for an implicit discriminatory effect in the indirect taxation structure.  In this
context, she recalled the weight of indirect taxes in total tax revenue (compared with tariff revenue),
the WTO dispute on the taxation level of soju, and frugality campaigns.
94. Explanations provided on government procur ement were understandable.  Now that the
economy was picking up and there was to be electronic access to English written information, the
opportunities for foreign suppliers were expected to be enhanced.  This would be an area to watch
with a great interest at the next Trade Policy Review of Korea.
95. The representative of Japan did not intend to pursue his delegation's written question on
adjustment duties because the corrigendum issued by the Secretariat had clarified doubts on this
matter.
96. The representative of New Zealand indicated that sliced deer velvet could not be imported in
Korea.  Deer velvet had to be processed into and sold in sliced form in the domestic market.  Her
delegation would continue discussions with Korea on the development of a standard for the import of
this product after having received written responses to its advance questions (particularly question 3,Annex I).
97. The representative of the European Union indicated that full answers were expected on the
non-implementation of the harmonization principle under the WTO SPS Agreement concerning
imports of animal and plant products from the EU single market.  This had resulted in unnecessaryWT/TPR/M/73
Page 19
delays and complications in obtaining import authorization.  Concerning frugality campaigns, Korea
was on the right track but the EU would monitor the Government's active involvement in ensuring alevel playing field for other countries to trade in such an important market.  On IPR protection, he
highlighted aspects of interest to his delegation in areas of interpretation and enforcement of TRIPS
commitments that would soon be discussed bilaterally.
98. The representative of Korea reiterated several points from his initial statement with respect to
his President's involvement in efforts to improve people's understanding of the benefits of imports and
trade liberalization.  With regard to country-specific issues, he hoped to continue discussions with the
delegations concerned on a bilateral basis.  Some progress was being made in terms of developing
viable standards to allow sliced deer velv et into the Korean market in the future.
(3) Sectoral Policies
99. There were various positive functions of agriculture (e.g. food security, environmental
conservation, rural viability, maintenance of traditional culture) rather than its mere contribution to
GDP and trade.  Tariff rates for agricultural products were higher than those in the manufacturing
sector, but they were within the limit of bound rates.  Tariff rate quotas (TRQs) were allocated in
several ways, including auctions or directly to state-trading firms, and their administration was
notified the WTO.  Korea's TRQ fill rates were higher than those of other Members.  Therepresentative confirmed the role of several associations and public entities in quota allocation, import
approval and mark-up as well as the role of the private sector in resale price and distribution activities.
Their involvement was authorized by the WTO Agreement on Agriculture and Korea’s Schedule of
commitments.  SPS-related procedures were carried out in compliance with relevant international
standards and Korea was participating in discussions in several bodies.  Individual concerns on SPS
measures were to be fully addressed through consultations.
100. Most support for the sector was provided for structural adjustment purposes and to promote
sustainable agricultural and rural development in compliance with WTO commitments.  Korea had
been reducing market price support every year (including rice purchases) while increasing direct
payments and investments in structural adjustment projects.  The special treatment for rice would be
negotiated in the year 2004.
101. Bilateral efforts to reduce the imbalance and to ensure fair competition in the world
shipbuilding market had led to the Korea-EU Agreed Minutes (June 2000), which reconfirmed the
absence of any industry-specific support by the former, and the commitment for all financial
institutions to conduct their business with ship yards (including Daewoo’s shipbuilding unit) in a
commercially sound manner.  The same applied to export credit programmes, which were in
accordance with OECD Guidelines.
102. In response to the concerns of major trading partners on access to the automobile market,
Korea had taken a series of access-related measures in several areas (e.g. tariffs, taxes, standards,
certification), had corrected false perceptions on tax audits of owners of foreign cars, had decided to
use imported cars as official vehicles, and intended to join the UN/ECE 1958 and the Global
Agreements in 2000.  These measures led to a 100% increase in the sales of imported passengervehicles during the first seven months of 2000.
103. No discriminatory measures concerning the holding of equity in domestic banks were in
force, and foreign ownership in insurance companies was not limited.  Korea would maintain
limitations on the provision of non-banking services both by foreign and domestic banks, for
prudential reasons.  Although all new financial products or services were subject to approval, inWT/TPR/M/73
Page 20
practice, most new products or services were al lowed with simple reviews or notification, for
consumer protection purpose.
104. Under new legislation (effective in January 2000), telecommunications firms were required to
supply universal services;  Korea Telecom was the only firm that had qualified (and was designated)
for this service.  The losses incurred by the design ated universal services provider from the provision
of such services were shared with undesignated firms.  Preparations for raising the ceiling on foreign
equity ownership of Korea Telecom to 49% (as from January 2001) were under way and it would befully privatized by 2002.
105. He confirmed the elimination of the Shipping Industry Promotion Act and the absence of any
plans for subsidizing domestic shipping companies.  The speed and degree of Korea's progressive
liberalization of international air transportation would be determined on a case-by-case basis.
106. The discussant appreciated Korea's clarification on matters relating to multifunctionality, and
changes similar to those of other Members, in the focus/nature of domestic support programmes for
agriculture (i.e. towards direct payments and invest ment).  She would follow with interest the extent
to which foreign investors in the financial sect or would introduce more advanced international
management skills and practices.  She sought information on the reason for low presence (life) or
absence (non-life) of, and prospects for, foreign investors in the insurance market.  The timetable anddeadline for the privatization of Korea Telecom was noted.  Regarding services, she asked about
progress in and plans for eliminating the nationality requirement to practice as a domestic lawyer.  In
this context, she referred to the reportedly high  threshold (3% success rate) set for the language
examination.
107. The representative of the European Union was pleased to note the convergence between the
position of Korea and the ambitions of the EU in concepts such as those of multifunctionality and
non-trade concerns in agriculture.  Despite progress in opening the automobile market, Koreacontinued to export more cars in a single day than vehicles it imported during the entire year.
Regarding shipbuilding, Korea had to ensure that market economy conditions prevailed in the sector.
In the light of developments in domestic demand, th e Korean market for legal services needed to be
more open so that foreign expertise could, inter alia,  contribute to the economic and legislative
reforms as well as to a successful integration of Korea in the global economic system.  He suggestedthe operation of foreign legal consultancy without taking the internal bar examination.
108. The representative of Norway reiterated his request for clarification on measures taken to
protect domestic coastal tanker shipping.
109. The representative of the United States sought clarification on the dates set for the
privatization of Korean Telecom.
110. The representative of Uruguay expressed concern about the high level of the nominal tariff
protection and welcomed Korea's intentions to reduce tariffs further in the near future.  She recalled
that her delegation expected definitive replies concerning the competent body authorizing meat
imports.
111. The representative of the Czech Republic stated that his delegation would read very carefully
the answers to its questions and intended to explore ways to improve bilateral contacts with Korea.
112. The representative of Japan expressed his appreciation of the recent binding of tariffs on
automobiles, and reiterated his delegation's suggestion for a similar commitment on other majorWT/TPR/M/73
Page 21
manufactured items (colour televisions, radios, and cameras), which were subject to an applied rate of
around 8%.
113. The representative of Korea took note of concerns expressed with respect to agriculture and
foreign investment in the non-banking financial and legal services.  Multifunctionality and non-trade
concerns had to be taken into consideration in future WTO negotiations in agriculture with the close
cooperation of the EU.  Korea was exporting roug hly 1.5 million car units a year and was convinced
that the share of imported automobiles would increase substantially in the future (10,000-12,000 unitsby end 2000).  On shipbuilding, he fully agreed wi th the EU delegate's suggestions and hoped for a
more concrete result from the second round of bilateral negotiations with the EU.  Korea would
consider the possibility of binding the tariffs on the products suggested by Japan in the context of the
next round of trade negotiations.
114. Concerning the points raised by the representa tives of Norway and Uruguay, proper responses
in written form would be provided in due course.  He clarified the dates of the privatization of Korea
Telecom.
115. With regard to legal services, the relevant agencies in cooperation with relevant associations
in Korea were conducting studies to elaborate a policy recommendation on the possible liberalization
of these services in the near future.  Foreign lawyers were hired in legal consultancy business andtheir activities were increasing, although they were not allowed to participate in domestic litigation
procedures.  It was his understanding that a prior requirement for a lawyer to be able to successfully
participate in any litigation process, was to be familiar not only with the legal structure of the country
but also with the national language.
116. In concluding, he indicated that this Trade Policy Review on Korea had been a valuable
experience.  The constructive criticism and advice from Members was well received and the input
from this exercise would serve as an important input into future work on economic reform and tradeliberalization.WT/TPR/M/73
Page 22
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
117. We have had an open and informative discussion of Korea's trade policies.  Members were
impressed by Korea's strong and swift recovery from  the 1997 crisis and recognized that this recovery
was largely the result of prudent macroeconomic policies and far-reaching structural reforms.  In
addressing the crisis, Korea had, by and large, eschewed protectionist measures and had instead taken
steps to further improve the competitive environment both through domestic reform, particularly in
the corporate, financial and labour spheres, and through trade and investment liberalization.  Membersalso recognized that the multilateral trading system  had contributed to Korea's recovery, by ensuring
that export markets remained open.  Members pointed to the role played by Korea's social protection
policies in mitigating the effects of the crisis and in facilitating reforms.  Members took note of the
extent of the involvement of the State and the chaebols in the economy as well as their impact on
domestic competition.  Members urged Korea to reduce state involvement and facilitate foreignparticipation in several sectors.
118. Members expressed their appreciation for Korea's active participation in the work of the
WTO.  Many Members underlined that their bilateral trade and investment ties with Korea had been
strengthened over the recent period.  They noted Korea's increased willingness to explore bilateral
trade agreements and its involvement in regional gr oups such as APEC and ASEAN+3.  In the light of
Korea's interest in such arrangements, Members sought and were given reassurance about Korea's
commitment to multilateralism.  Certain Members applauded Korea's initiative in providing for
duty-free treatment of certain items originating in least developed countries.
119. Members commended Korea's efforts to enhance the transparency of its trade regulations,
including their publication in English.  However, concern was expressed on persistent administrative
delays in customs clearance and certification procedures.  Members noted Korea's complex tariff
structure and its use of adjustment duties, both of which reduced the predictability of the applied rates.Members acknowledged the decline in average tariff levels in line with improving Korea's binding
commitments.  Members noted that indirect taxes were borne disproportionately by imports of luxury
items.  In the light of the size of the Korean government procurement and the implementation of the
WTO Agreement on Government Procurement, certain  Members considered that the share of foreign
suppliers could have been expected to be higher.
120. On sectoral policies, Members noted the wide range of measures used to protect and assist
agriculture as well as the increasing level of spending on domestic support.  Some sympathized with
Korea's high and increasing level of agricultural support on the grounds of multifunctionality and food
security.  However, other Members expressed concern over the adverse impact of these policies on
domestic efficiency and consumers as well as on developing countries; they encouraged Korea toreduce market distortions in agriculture.  Members recognized that weaknesses in the financial system
had contributed to the 1997 crisis and unanimously welcomed the remarkable opening of this and
other service sectors.  Nevertheless, they believed that further action to open up the markets in
non-life insurance, telecommunications, and transportation was needed.
121. Members also sought additional details in a number of areas, including:
- plans to restructure and privatize state-owned firms (e.g. steel, energy);
- competition policy issues (notably mergers and acquisitions, illegal intra-group
transactions);
- plans to change investment incentives and liberalize foreign direct investment across
sectors;WT/TPR/M/73
Page 23
- FTA negotiations and prospects for the coverage of substantially all trade in goods,
and trade in services;
- matters concerning the different types of rates and plans for simplifying the customs
tariff;
- commitments under the Agreement on Government Procurement;
- alignment of national standards with international standards;
- the phase-out of export and production assistance programmes;
- the protection and enforcement of intellectual property rights;
- impediments to market access, and domestic support for items, such as beef, rice,
fruit;
- standards, taxes, and consumer-related impediments to imported automobiles;
- support provided to the shipbuilding industry and to shipping companies;  and
- plans for, and costs and difficulties in undertaking further financial and corporate
reforms.
122. Members expressed their appreciation of the written and oral responses provided by the
Korean delegation and its undertaking to provide additional written responses as soon as possible.
123. In conclusion, it is my view that this Review has provided Members with a much better
understanding of Korea's trade and related policies, particularly the far-reaching reforms undertaken
to address long-standing structural weaknesses exposed by the crisis.  Members have been impressed
by the speed and strength of Korea's economic recovery from the crisis.  Notwithstanding this
recovery,  in our Review we have not seen comp lacency on the part of Korea regarding structural
reform. Members urged Korea to maintain the moment um of these reforms so as to ensure that the
recovery is sustained.  It is my sense that Members were reassured by Korea's reiteration of its strong
attachment to the multilateral trading system, but they did urge Korea to make sure that plansconcerning bilateral and regional arrangements were WTO-consistent.  This would not only be in
Korea's long-term economic interests but also to the benefit of the multilateral trading system.WT/TPR/M/73
Page 25
ANNEX I
ADVANCE WRITTEN QUESTIONS
SWITZERLAND
Secretariat Report (WT/TPR/S/73)
(2) Measures directly affecting imports(ii) Tariffs:  Adjustment duties
(para. 37)
Adjustment tariffs have been qualified by the Korean authorities as temporary tariffs.  In
para. 37 (page 52) the Secretariat mentions that they are applied, inter alia , to temporarily protect
less-competitive domestic goods, or counteract the impact of increased imports of items competingwith vulnerable domestic items.  However, a number of these adjustment tariffs are being applied
since 1992 and 1994, i.e. for 9 or 7 years, which would hint at a rather permanent protection.  Since
1992 Switzerland has pointed out several textile items to which such adjustment tariffs are applied,
thus doubling the ordinary applicable tariff rate  on these items (see Table III.3).  According to the
Secretariat's paper (page 143, paras 75/76), Korea is the world's fourth largest producer of textiles andclothing and the third largest exporter of textiles.  Given Korea's very strong position in this sector
and benefiting from access to liberal markets like Switzerland, we have difficulty to understand how
the Korean Government can justify to maintain such  a long lasting additional protection in the form of
adjustment tariffs.  Switzerland therefore submits the following questions:
- What are the criteria to maintain a so called "temporary" adjustment tariff?
- Is there a time limit for the repeated extension of these tariffs (like a sunset clause)?  If
not, should not one be introduced?
- Who can apply for the introduction or maintenance of an adjustment tariff?  (an
industry association?  an agency?)
- Which Ministry, agency or body decides on the introduction or maintenance of these
tariffs?  Are there any consultations in the decision process?
- Are there hearings or consultations with importer and consumer organizations?
(5) Services
(iii) Financial services
Since the recovery in 1998 after the severe cr isis of 1997, the growth rates of the Korean
economy have risen sharply again.  The rise of GDP was 10.7% in 1999 and is expected to be about
8% this year (OECD estimation).  Under the fina ncial restructuring plan mentioned in para. 89
(page 149) W 64 trillion have been used.  Some rescue aspects of this plan considerably increased the
already high degree of state-ownership in this sector.WT/TPR/M/73
Page 26
- Does the Government of the Republic of Korea consider that there is a danger of
inflation?  If this is the case, what are the measures envisaged to fight againstinflation?
- The non performing loans can be a threat to the recovery of the financial sector.  What
are the measures the Government is taking into consideration to reduce the amount of
such loans?
- Is there any time table in which the Government of the Republic of Korea considers to
introduce measures aiming at the reduction of the State’s position in the Korean
banking system?
CANADA
Secretariat Report (WT/TPR/S/73)
III. Trade Policies and Practices by Measure(2) Measures directly affecting imports
(ii) Tariffs
(paras 17, 18, 29, 37)
According to para. 17, the International Cooperation Tariff is the rate resulting from bilateral
negotiations or "in the context of an international organization".  What is meant by an "internationalorganization"?  Also, please clarify the type of negotiations with a foreign country that would result in
an International Cooperation Tariff?
We have noted that Korea would apply the higher WTO concession rate rather than the lower
basic/general rate with respect to agricultural, forest and livestock products.  We understand, however,
that it is the general practice to apply the lower rate as for other products.  Could Korea elaborate on
the rationale for this difference?
According to para. 18, the public is notified well in advance of changes in the tariff system,
including for changes in tariff rates.  Noting that  an increase in a tariff could potentially restrict
imports, does Korea have a process whereby interested parties (e.g. traders or processors which use
imported inputs) have the opportunity to provide comments to the Government on the potential
impact of a proposed increase in the tariff rate?
According to para. 29, "the list of items subject to tariff quotas is updated every six months,
upon the request of government agencies and industri es concerned.  Quota levels are set and operated
by the Ministry of Finance and Economy (MOFE), based on the needs and requests of relevant
government agencies and recommendations from the relevant industry associations designated by the
competent government agencies".  What are the criteria and/or the factors that would be taken into
consideration when setting quota levels?  Would the review also include the setting of tariff rates?
Would an interested party not affiliated with a designated industry association be able to participate in
the consultation process?  Does MOFE solicit comments from government agencies and relevant
industry associations?
According to para. 37, the short notice on the adjustment duties or variable levies provided to
importers and foreign suppliers seems to cause uncertainty for importers and foreign suppliers.  Havethe authorities increased the period between publication and the effective date?WT/TPR/M/73
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(vi) State trading, Table III.5:  State in volvement in enterprises in Korea, 2000
According to the table, the Agricultural and Fishery Marketing Corporation also "administers
imports".  What products are covered and how does the AFMC administer these imports?
With respect to this table and para. 62, we note that the formal merger between the National
Agricultural Cooperative Federa tion (NACF), National Livestock Cooperative Federation (NLCF),
and the National Ginseng Cooperative Federation (NGCF) is not reflected in Table III.5.  Given that
the report is dated 28 August 2000, the table could be modified to reflect the state of affairs thatexisted on 1 July 2000.
(4) Measures affecting production and trade
(iii) Competition and consumer policy
(paras 141 and 142)
According to para. 141, as of February 1999 "hard core cartels" have been illegal per se  and a
number of them have either been outlawed or "improved" under the 1999 Package Clearing Act of
Cartels.  What criteria were used to outlaw a cartel rather than improve it?  Please elaborate/clarify the
term "improved".  What improvements were sought?  What has been the impact on competition (i.e.
on prices and quantities), as a result of these changes?  What are the competitive conditions in respect
to the entry in the stock exchange and insurance sect ors?  Is there open competition in the fees and
commissions charged in these two sectors?  Are there cartel agreements in these two sectors in respect
to the establishment of fees and commissions?
With regard to para. 142, we note that both the telecommunications and financial services
sectors are outside the scope of the authority of the Korea Fair Trade Commission (KFTC) and that
sector regulators are responsible for regulating anti-competitive activities.  The two roles – regulator
and competition authority – are distinct in terms of perspective, analysis, and possible remedy.  While
the regulator has the technical knowledge of a sector, it is the competition authority that has theknowledge, experience, and expertise regarding markets and market structures.  What assurances can
competitors be provided that the regulation function is kept separate from the competition function?
What specific competition issues and challenges have the two regulators had to face in the recent
past?  How have these issues been resolved?
IV. Trade Policies by Sector
(2) Agriculture and livestock
(iii) Selected agricultural and livestock items
(para. 36)
The last sentence of the paragraph (also noted in para. 102 under Trade Policies by Measure)
states that "… further measures differentiating imported from domestic beef are to be appliedrequiring Korean-style restaurants to mark imported beef separately on their menus".  We understand
that this requirement is a proposal from the Korea MAF and that it has not become a regulation on
account of opposition from other Korean Ministries.  What is the current situation?WT/TPR/M/73
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(5) Services
(iii) Financial services;  Structural developments
(paras 89, 90)
Para. 89 details the restructuring that the financial services sector has undergone since the
financial crises of 1997.  Under the 1998 restructuring plan the Government of Korea acquired large
equity stakes in a number of banks.  The report indicates that other than steps to sell two of the banks,
no timetable for lessening the State's involvement in the banking system had been announced by theend of 1999.  Please indicate whether any further plans have been developed, in the interim,
pertaining to the State's involvement in the banking system, and, if so, whether a timetable has been
established for reducing such involvement?
Para. 90 indicates that in April 2000 the Korean authorities were to take regulatory action to
prevent chaebols from mis-using their non-banking units.  Has this action been taken?  If yes, whatform of action was taken?
(c) GATS commitments
(para. 107)
The report indicates that some new financial products are subject to approval (now to be more
widely granted).  Please specify which new products fall under the approval requirements?  Also,please specify how the criteria for approval have changed to allow for a wider granting of approval?
(iv) Communications
(a) Telecommunications
(para. 112)
The report indicates that Korean authorities plan to approve mergers and acquisitions between
facilities-based service suppliers, unless these undermine fair competition and user protection.  Please
indicate whether the plan to approve such mergers and acquisitions represents a shift from theprevious application of competition rules in the faci lities-based telecommunications sector.  If yes, has
there been an accompanying change in domestic legi slation or regulations that reflect this policy
change?
Also with reference to para. 114, the report indicates that all telecommunications services
providers (other than special or value-added services providers) must contribute to providinguniversal service despite the lack of implemen ting provisions.  However, only Korea Telecom
receives compensation from the Universal Service Fund.  Are other telecommunications services
providers eligible to receive compensation from the Fund on the same terms as those available to
Korea Telecom?
(v) Transport
(a) Shipping
(para. 124)WT/TPR/M/73
Page 29
The report states that the Shipping Industry Pr omotion Act, which promoted the development
of the national fleet for the purpose of securing stable transport capacity, was to be eliminated as ofJuly 1999, thus eliminating the legal basis for direct government support (including subsidies) to
national shipping companies.  Please confirm if the Act has been eliminated.
II. Trade Policy Regime:  Framework and Objectives
(8) Foreign Investment Regime;  Table II.1:  Foreign direct investment (FDI) limitations,
2000
Please provide the reason(s) why the FDI participation or liberalization ratio for cattle raising
and meat wholesale is less than 50%.
We note that Korea has undertaken a range of liberalization and privatization initiatives since
their last Trade Policy Review.  A number of these changes are highlighted under Section 8, including
Table II.1.  Please describe in greater detail Korea's experiences in investment liberalization followingthe Asian crises and the impact which these changes have had to date on both domestic and foreign
investment flows.
III. Trade Policies and Practices by Measure
(2) Measures directly affecting imports
(x) Standards and other technical requirements
With respect to the recent mandatory labeling initiative for products derived from genetically
modified organisms (GMOs), Korea has indicated that this is a means to provide information to
consumers.  What are Korea's plans to consider more "trade-friendly" measures to provide consumers
with labeling information, such as voluntary la beling schemes similar to those being proposed by
other countries?
IV. Trade Policies by Sector
Please relate Korea's experience in opening the energy, telecommunications, and
transportation sectors to foreign investment and privatization (in the case of the large, state-held firms
that fall under these sectors).  What are Korea's plans, if any, to increase or eliminate investment
ceilings?
Government Report (WT/TPR/G/73)
IV. Trade Policy Developments:  1996-2000(3) Regional engagements;  Free Trade Agreements (FTAs)
(paras 67-68)
The report explains that Korea has changed its policy towards regional FTAs and that Korea
plans to pursue an FTA with Chile and perhaps other trading partners.  Is it the intention of the
Korean Government to seek services liberalization part of the FTA negotiations with Chile and otherpotential FTA partners?WT/TPR/M/73
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HONG KONG, CHINA
Secretariat Report (WT/TPR/S/73)Bilateral trade agreements
(p. 16, para. 68;  pp. 29-30, paras 28-29)
It is noted that Korea is currently negotiating a bilateral free-trade Agreement (FTA) with
Chile and studying the feasibility of concluding FTAs with Japan, New Zealand and Thailand.  We
are grateful to know more details about the progress of the negotiations/feasibility studies.
Trade laws and regulations
(pp. 25-26, para. 18)
We note that Korea pledged to make efforts to publish all laws, regulations and administrative
guidelines pertaining to trade and investment in English, and make them publicly available in a
prompt and readily accessible manner, and to establish a web-based computer network serviceallowing access to all legal texts on trade and investment as of May 2000.  We commend Korea's
efforts to facilitate trade by means of enhancing transparency.  Would the Korean authorities share
with us the progress of the implementation of the above measures?
Foreign investment regime
(p. 31, para. 34;  p. 33, Table II.2)
It is noted that the Korean Government has offered a wide array of investment incentives to
attract foreign investment.  Notwithstanding this, it seems that Korea has also acknowledged in the
past discussions in the WTO Working Group on the Relationship between Trade and Investment that
such incentives had generally failed to achieve their desired effects and that their costs often
outweighed their benefits.  Noting that the availability of investment incentives is probably only one
of the considerations in multilateral enterprises' investment decisions, does the Korean Government
have any plans to review its existing incentive policy, and if so, what are the details?
Labeling of genetically modified (GM) soya beans
(p. 57, para. 55)
It is mentioned that in response to concerns about the presence of GM soya bean in 82% of
tofu sold in Korea, labeling on GM soya beans was proposed and may enter into force in 2001.
Would the Korean authorities share with us the details of GM soya beans labeling scheme?
Marking and labeling
(p. 78, para. 102)
It is mentioned that in order to meet labe ling/marking requirements, foreign manufacturers
have to make significant changes to their producti on process (estimated at 3% to 5% of the f.o.b.
price) for the Korean market.  It is also stated that an overall revision of food labeling standards wasplanned to start by December 1999.  We are interested to know the progress of the food labeling
standards review and whether the Korean authorities have any plans to reduce the labeling burden of
foreign suppliers.WT/TPR/M/73
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Subsidies and export assistance
(p. 88, para. 131)
It is stated that Korea has undertaken to rationalize its overall support programme by reducing
or phasing out prohibited measures under the Ag reement on Subsidies and Countervailing Measures
(ASCM).  We should be grateful to know more  about the status of Korea's existing support
programmes in the light of Korea's obligations under the ASCM, and its concrete plans to bring all
such programmes into full conformity with the ASCM.
Competition and consumer policy
(p. 96, para. 143)
It is stated that chaebols have constituted a significant concern for foreign competitors.  Since
1998, the KFTC has conducted probes on unfair/illegal intra-group transactions with a view to dealing
with cross-subsidization among chaebol affiliates and creating competition within the group.  We areinterested to know the result or effectiveness of these probes.  Has Korea taken any other measures to
address such problem?
Banking
(p. 149, para. 89)
It is noted that high degree of state-ownership in the banking sector has emerged as a result of
the State takeover of insolvent banks over the past few years.  We would like to know if Korea has
any plan to phase out State involvement in the sector.
(p. 152, para. 95)
It is stated that banks are required to allocate certain share of loan portfolios to Korean
companies, other than the top five conglomerates, and to SMEs.  We are interested in knowing the
details and rationale of the requirement and whether the same requirement is applied to both local and
foreign banks.
Telecommunications
(pp. 158-159, para. 112)
It is mentioned that there is a lack of implementing provisions concerning the obligation of
universal service.  Would Korea consider drawing up such provisions to enhance transparency and
predictability for existing and potential service providers?
Audio-visual
(p. 162, para. 118)
While Korea has scheduled no limitation in motion picture distribution services (except for
Mode 4) under GATS, the screen quota system on foreign motion pictures may, in effect, have a
bearing on the quality of output by foreign supplier s.  We wonder if Korea would consider reviewing
or phasing out the quota system.WT/TPR/M/73
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Maritime transportation
(p. 163, para. 124)
We are glad to note that the Shipping Industry Promotion Act, which provides the legal basis
for direct government support to national shipping companies, was eliminated in 1999.  However, we
note that plans to subsidize national shipping co mpanies have been introduced recently.  We would
like to know more about the details of the subsidy programme, e.g. its nature, application criteria, and
any target deadline for enrolment.
Air transportation
(p. 164, para. 128)
We are glad to note that there have been plans to sell some 51% of the new Inchon
International Airport to investors, including foreign airlines.  We would like to know the scope of this
investment opportunity and whether there will be any specific limitations for foreign investors'participation.
Rail transportation
(pp. 164-165, para. 130)
Would Korea share with us more details of the privatization plan of railroad operations, such
as share of ownership to be privatized, limitation, if any, on foreign participation?
Distribution
(p. 166, para. 134)
It is noted that both domestic and foreign firms are subject to lengthy registration and
approval procedures in the operation of large-size retail shops in Korea.  Would Korea consider
streamlining the process?
NEW ZEALAND
SPS/TBT
New Zealand welcomes Korea's commitment to "the continuous promotion of liberalization
and the proactive incorporation of global standards" and to building an economy that "… adheres to
the principles of transparency and accountability and is fully open to the world market and global
competition" (G/V, p. 17, para. 73).  In light of this, we would appreciate a response to the following
questions:
- What procedures has Korea instituted for ensuring that Government agencies
understand and apply, with consistency, the practical requirements of the WTO SPS
Agreement?
- The Secretariat's report notes that there have been concerns expressed regarding
considerable import clearance delays by several institutions responsible foradministering laws and regulations (S/X, p. 78, para. 100).  What measures is Korea
taking to address these concerns?WT/TPR/M/73
Page 33
- How does Korea intend to address its backlog of SPS access requests?
- What is Korea's justification for requiring pre-export testing for diseases of live
animals in cases where there is international recognition of a country's disease
freedom in accordance with the OIE (Office International des Epizooties) Code
requirements?  (As in the case of Brucella melitenis for goats.)
- How does Korea justify requirements for pre-export testing or area freedom
requirements for diseases of live animals which are already endemic and widespreadin Korea?  (For example listeriosis and toxoplasmosis.)
Import prohibition on sliced deer velvet
- Can Korea explain why measures applied against imported deer velvet, such as import
prohibition on sliced velvet, are more rigorous than those applied to locally produced
product?
- Could Korea clarify why procedures guaranteeing the authenticity, quality and safety
for consumption of sliced deer velvet cannot be conducted in exporting countries prior
to export in line with the principle of national treatment?
- What steps is Korea taking to remove the import prohibition on sliced velvet and
implement a standard for its importation?
Market access and domestic support
The Secretariat report refers to Korea's quantitative restrictions on agricultural products and
the potential scope for conflict of interest in issuing import licences (S /III, p. 60, paras 58 and 59).
New Zealand is concerned that the import licensing authorities for products that continue to be
underfilled are domestic producer board organizations.  For example, the Korean Dairy Industry
Association, the National Agriculture Co-operative Federation and the National Ginseng Co-operative
Federation.
- How can Korea assure exporters that import licences are issued fairly when the
licensing authority has a vested interest in favour of domestic producers?
- Has Korea considered applying tariff-only treatment to those products that are
consistently underfilled?  If not, why not?
- In view of Korea's general move towards a more open market system, what steps is
Korea taking to reduce its AMS support towards more decoupled, non-trade-distorting
policies?
Air transport services
New Zealand notes Korea's efforts to increase tourism flows within the Asia Pacific region
and its decision in this regard to conclude an Open Skies Agreement with the US in 1998.
- Is Korea considering pursuing other Open Skies Agreements in the near future?WT/TPR/M/73
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MALAYSIA
Para. 100 of the Secretariat report noted that Members have raised concerns relating to
scientific risk assessment in regard to sanitary and phytosanitary measures.  Malaysia share similar
concerns regarding stringent SPS measures which has prohibited the export to Korea of tropical fruit
such as guavas, mangoes, Carambola and papaya.  Appreciate clarification if there are measures by
the Korean Government to review these measures to  enable these fruits to be exported to Korea.
Food products exported to Korea are subject to complicated pre-approval procedures
involving submission of detailed documents (formulas, recipes etc.).  We seek explanation if the
revision of food-related codes to bring them in conformity with Codex standards (para. 95) will
reduce complicated pre-approval procedures.
Para. 101 refers to the practice of engraving or etching of country of origin markings on
products.  Can Korea comment why markings and labeling on stickers are not acceptable?
Korea has applied adjustment duties to temporarily protect less competitive goods or
counteract the impact of increased imports.  Among the products subjected to these duties in 2000
which are of export interest to Malaysia are plywood, veneered panels and similar laminated wood,
woven fabrics of cotton, bicycles and frozen shrimps and prawns.  We are concerned that some of the
duty increases will affect our exports of these products to Korea.  When does Korea envisage bringingthese levels down to pre-adjustment levels?
Would Korea also consider longer notification periods before the next round of adjustment
rates?
Can Korea comment on any plans to simplify its complex tariff instrument (para. 16) in line
with its intention to enhance transparency?
AUSTRALIA
Recent economic developments
The Korean economy has benefitted from strong economic growth in the aftermath of the
crisis.  As noted in the Secretariat report, market-based reforms contributed to this growth.  Further
reform, supported by the current momentum, is essen tial for sustainable and equitable growth in the
future.
- The debt levels of the corporate sector still remain high – on a consolidated accounts
basis well above the 200% debt to equity ratio targeted by the Government for the top
4 chaebol.  How does the Government propose to keep pressure on the corporates to
continue to restructure and reduce their level of debt?
- The high debt levels of the corporate sector places a heavy burden on the financial
sector which is carrying a high level of non-performing loans (NPLs).  TheGovernment has committed around W 85 trillion to deal with NPLs but private sector
analysts suggest further injection of public funds will be required.  What are the
Government's intentions regarding the injection of further public funds into this
sector?
- Inter-Korean engagement has recently developed considerable momentum with a
range of announcements and initiatives including economic cooperation.  Further
development of this process will require increased focus from economic policyWT/TPR/M/73
Page 35
planners putting pressure on resources already committed to the economic reform
programme.  Does the Government have any plans to allocate more resources to inter-Korean economic cooperation?  Will the Ministry of Unification continue to
coordinate inter-Korean economic cooperation or will the Ministry of Finance and
Economy assume a greater role?
Tariffs
The Secretariat notes that Korea's actual average tariff rate, taking account of out-of-quota
rates, is 13.8% and around 50% in the agricultural sector.
- How does Korea justify such high tariff rates, including tariff peaks of well over 100%
for some agricultural items?
Korea's practice of making temporary adjustments to certain tariffs and quotas on a
six-monthly basis can create uncertainty for exporters and importers.
- Does Korea intend to continue to make these six-monthly changes to tariffs, and if so,
will it consider taking greater account of exporters views prior to its six-monthly
reviews?  Will Korea consider binding more of the tariffs at the lower temporary rate?
Agriculture
The Secretariat Report notes that achieving self-sufficiency in rice has been a major objective
of the Korean Government.  However, Korea's Uruguay Round commitments require liberalization of
rice imports in 2004.
- With reference to Paragraph 3 of Annex 5 of the Agreement on Agriculture, can Korea
provide any indication of its intentions on future rice import policy?
Trade policy issues
Australia is interested in Korea's recent work on free-trade agreements with other countries
and notes that agricultural issues appear to have slowed the progress of current negotiations withChile.
- What are the prospects for conclusion of an FTA with Chile and can Korea confirm
that substantially all trade, including agricultural products, would be covered?
Services
Korea has undertaken substantial liberalization in the services sector, including in
telecommunications and financial services.  Further re form would create greater incentives for foreign
firms to enter the Korean market.
- Is Korea considering lifting restrictions in the banking sector, including:
- restrictions concerning the provision of non-commercial banking services and
lending by foreign banks?
- the requirement that foreign bank branches need to be separately capitalized to
operate in Korea?WT/TPR/M/73
Page 36
- Will the Government lift the ceiling on fore ign equity ownership of Korea Telecom to
49% in January 2001?
State-owned enterprises
- How does the Government propose to pursue the restructuring and privatization of
state-owned enterprises, including KEPCO and KOGAS?  Will the reported timetable
be maintained for this year and next be maintained?
EUROPEAN UNION
(1) General trade policy issues
In para. 69 of the Government report WT/TPR/G/73, Korea underlines its commitment to the
early launch of a comprehensive round of trade negotiations.  The EU shares this general commitment
but would be grateful for a more detailed explanation of which issues Korea would like to see
addressed in a new round.  In particular what are the more specific priorities of Korea in relation totrade and competition, trade and investment, trade and environment.  How does Korea feel that the
WTO should deal with issues related to social affairs.  In particular, are there specific reasons why a
new round and a strengthening of the multilateral trading system would be of high importance to
fast-growing and emerging economies like the Korean?
Equally in the context of the launch of a new round.  What means does Korea use to make its
trade policy supportive of sustainable development?  To what extent does Korea use, or is planning to
use, instruments such as sustainability impact assessments, as a tool in this sphere?  In particular, what
other mechanisms is Korea using to promote synerg ies between its trade policy and its environmental
policy?
In relation to the question of free trade areas, the EU notes the information provided by the
Government on the evolution of Korean policy towards regional trade agreements.  As is well known,
Korea has not previously concluded regional trade agreements in the sense of GATT Article XXIV orGATS Article V with any other WTO Member.  The EU welcomes the indication by Korea that any
such agreements it may conclude in the future wi ll be compatible with the relevant WTO rules and
that it will continue to place the greatest stress on the objective of continued liberalization and rule-
making at the multilateral level.  However, as a "user" of regional trade agreements itself, the EU has
always recognized the synergies and complementarities between the multilateral and regionalapproaches to trade policy.
Can Korea however please elaborate further on the development of its policy in this area?  In
particular, can the GoK confirm that any regional trade agreement it concludes will be compatible
with the relevant WTO rules?  What is the an ticipated timing for conclusion of the negotiations
already underway with Chile?  When is it expected that the GoK will take a decision on whether topursue the objective of negotiating FTAs with the three countries (Japan, New Zealand and Thailand)
already identified as potential partners?  Does the GoK anticipate that the existing ASEAN plus 3
(China, Japan, Korea) grouping will develop into a regional free trade partnership?  Has the GoK
identified any other potential FTA partners?  Will any of the proposed FTAs cover trade in Services?WT/TPR/M/73
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(2) Crisis Management/Restructuring
(i) Corporate reform
In July 2000 the chaebol for the first time presented consolidated balance sheets in line with
newly introduced legislation aiming at increased corporate transparency.  The consolidated figures
revealed debt equity ratios far beyond the 200% threshold which the chaebol had committed
themselves to earlier (deterioration of debt-equity ratios mainly due to unveiling of cross unit equity
investments which did not create any real value).  These new figures show that chaebol reform has notadvanced as far as had been previously assumed.  It seems that debt work outs of second tier chaebol
are progressing slower that expected.  How will Korea overcome this lack of commitment to market
oriented restructuring and ensure increased momentum in this area?
Korea's introduction of new accounting rules will improve transparency and help to remove
distortive business practices.  As a precondition, the largely improved accounting and auditingstandards will have to be applied consistently and bankruptcy must be perceived as a real threat.
What steps is Korea taking to ensure this?
Improved corporate governance has been an important goal of Korea’s corporate reform.  The
fact that Hyundai’s recent liquidity crisis has been aggravated by continued "old-style" management
practises shows that more progress needs to be made.  How does Korea intend to ensure suchprogress?
(ii) Financial reform/financial services
It is essential that Korean financial institutions operate on a strictly commercial basis and in
line with the upgraded regulations and standards.  Much will depend on further operational
restructuring towards a risk controlled environment.  What are Korea's plans in this regard what is the
timeframe?
In which way will recent drastic increases of chaebol debt-equity ratios be reflected in the
financial sector’s policy vis-à-vis the conglomerates?
In the regulatory field, newly established prudential provisions need to be fully applied.  The
recent extension of enhanced standards to the non-bank sector marks an important step forward.
Successful implementation will not least depend on the regulators' readiness to apply strong corrective
action in appropriate circumstances.  Which future steps is Korea going to take in this context?
(3) Automobiles
Border protection has indeed decreased (lowering of bound import tariffs).  However,
negative public perception remains in place as a primary market access obstacle (in our view, foreign
cars' large engine capacity was not the main reason for the import slump during the crisis.).  The EU is
concerned that the Korean media and consumer groups present ownership of foreign cars asunpatriotic, extravagant consumption and almost proof of tax evasion.  The Korean Government’s
recent plan to use car ownership systematically as an income indicator certainly added to this
perception, even though the measure did not materialize in the end.  The Korean government’s
attempt to challenge such distortive messages must go further as agreed in the 1998 MoU on cars with
the US.  In this regard, which measures does Korea intend to take in the future?
Since 1995 Korea has indeed taken steps to simplify standard and certification procedures for
automobiles.  However, problems with standards still exists and in this respect the EU has presented aWT/TPR/M/73
Page 38
list of items for which we propose simplifications, or acceptance of EU standards as equivalent.  We
are still waiting for an official response on several of the items.  Regulatory problems could also bereduced with Koreas full participation within the UN-ECE 1958 and 1998 agreements.  What actions
will Korea undertake to remedy this situation?  Do es Korea intend to fully participate in the UN-ECE
1958 and 1998 agreements?
(4) Shipbuilding
(i) Corporate restructuring
Does the restructuring process of private companies led by the Korean Government, through
public entities (state-owned banks like Korean Development Bank, Bank of Korea…) or agencies
(KAMCO, KDIC) involve public funds? If so, does Korea think that these practices are compatible
with WTO provisions and specifically with the ASCM?
How Korea can justify the workout plan for Daewoo in respect of the ASCM?Under a draft current law Daewoo Heavy industr ies would benefit from tax breaks for firms
under workout programmes when they merge with other companies or split themselves.  Can Korea
explain the objective of this tax exemption law currently examined by the Korean Assembly?
(ii) Export financing
Does Korea provide direct public export credit financing to the shipbuilding companies?  If so
does Korea follow the rules of the OECD Understanding on export credit for ships?  Or of the
Arrangement on officially supported export credits for that sector?
Do the terms and conditions provided (by Kexim Bank or public entity) to the exporting
companies cover the Government's cost of funds? In terms of interest rates and in terms of export
guarantees (guarantees at premium rates adequate to cover long-term operating costs and losses)?
(5) Market access/Deregulation/Customs and import clearance procedures
(i) Pharmaceuticals
The EU notes the recent changes in Korea’s pharmaceutical  regime with the aim of leading
to a transparent and non-discriminatory pricing a nd reimbursement system.  The EU will closely
monitor the implementation of the changes introduced or still to be introduced so as to ensure that
there is a full and rapid application of the new rules, in particular of the Actual Transaction Price
reimbursement system (ATP) and of the regulatory reform which will allow Korean patients to haveimmediate access to innovative products.  The separation of prescribing and dispensing, an important
element of the overall reform effort, should be implemented fully and quickly.  What are the latest
developments in this context?  We are also concerned about the lack of coordination between the
Korean Food and Drug Administration (KFDA) and IPR bodies, which may facilitate patent
infringement.  What does Korea intend to do to avoid such infringements?
Toll Manufacturing
In order for a pharmaceutical company to sub-contract manufacture of a product to another
company, is it still necessary to relinquish th e product licence to the manufacturing company?
If so, do the Korean authorities foresee any change to the system?WT/TPR/M/73
Page 39
Actual Transaction Price (ATP) System
Is the installation of the electronic reporting system for all the purchasers of pharmaceutical
products foreseen for March 2001 on schedule?
Has an enforcement/control system been put in place to verify prices?  If so, how does this
operate?
Has any assessment of transaction prices/will any assessment of prices be made before
March 2001?
Has there been an assessment of the ceiling prices of the reimbursement schedule been made
since November 1999?  If not, is any assessment foreseen?
Separation of prescribing and dispensing
Can the Korean authorities confirm that this was introduced on 1 August 2000 (postponed
from 1 July 2000)?  If not, when will it be introduced?
Data protection
Have there been any instances when data submitted to obtain marketing approval of a
patented pharmaceutical product has had to be revealed?  If so, could you please specify under which
circumstances?
(ii) Cosmetics
A new law governing cosmetics, promulgated on 7 September 1999, entered into force in
July 2000.  Will the Korean authorities indicate whether enforcement legislation has been enacted and
when?
Do the Korean authorities foresee the introduction of any future legislation or enforcement
regulations concerning the cosmetics market in Korea?  If so, when will these be introduced?
What changes are introduced by the new cosmetics act for the marketing of a
cosmetic/cosmeceutical product for the first time on the Korean market?
What conditions and requirements are applicable to a product containing a new ingredient not
already contained in a product on the Korean market?
What documentation is required to be kept by importers of cosmetic/cosmeceutical products
imported into Korea as specified by the new legislation on cosmetics?
(iii) Distribution of alcoholic beverages
It appears that the importers of alcoholic beverages are only permitted one warehouse from
which to distribute their products.  What is the justification of this?  Does the Government of Korea
have plans to remove this stipulation and by when?WT/TPR/M/73
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(6) Agriculture
(p. 57, para. 55)
Korea's import prohibition on bovine animals and products applies not only to the UK, but to
all EU member states where there has been a low incidence of BSE.  This is in clear contradiction to
the guidelines of the International Office for Epizooties (OIE), which lays down conditions under
which such products may be imported from such countries.  What is Korea’s scientific justification
for refusing to apply the OIE guidelines to imports of bovine animals and products from EU memberstates with low incidence of BSE? When does Ko rea propose to bring its practice into conformity
with the internationally accepted OIE standards?
(p. 60, para. 59)
Could Korea explain the nature of the role played by the producers organizations in the
screening and approval of import licences? In which sectors does such screening and approval takeplace?  What is the justification for industry orga nizations taking on such a quasi-governmental role?
(p. 62, Table III.5)
Could Korea explain in more detail the role play ed by the Cheju Citrus Growers' Agricultural
Cooperative in the price stabilization of oranges and Korean citrus fruit and in promoting Korean
citrus farming? In carrying out these activities,  is the CCGAC using its own funds, government
money, or levies from members which are collected on the basis of a legislative instrument?
(p. 77, para. 98)
Frozen meat is among the 350 food items for which "mandatory shelf-life requirements" have
been eliminated between 1995 and 2000.  However, many import shipments of frozen meat are being
delayed or rejected by the Korean veterinary services on the grounds of the shelf-life, which must be
stated by the producer on the product.  The problems is that European exporters work on the basis of a
maximum two-year shelf-life, whereas Korean veterinarians prefer a one-year maximum.  Given thatKorean legislation leaves the designation of shelf life to the producer, on what legal basis are
consignments of frozen meat imports being delayed and rejected by Korean veterinarians because of
concerns over shelf-life?  What is the scientific basis for Korean veterinarians' insistence on a one-
year shelf life for frozen meat?
(p. 77, para. 99)
Although there has been some progress in the implementation of international SPS standards
in relation to imports into Korea, there are still a number of examples where this has not been
achieved.  Two particular ones will be cited:
- Korea refuses to exempt flower bulbs packed for retail sale from post-entry quarantine
and treats them in the same strict way as bulbs destined for propagation, thus failing tomake the distinction laid down by the International Plant Protection Commission.
This acts as a barrier to imports of bulbs for retail sale.  Will Korea change this
practice?WT/TPR/M/73
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- Korea refuses to apply the regionalization principles of the SPS Agreement to the
single market of the European Union with respect to imports of animal and plantproducts, thus resulting in unnecessary delays and complications in obtaining
authorization for such imports.  When will Korea apply these regionalization
principles?
(p. 93, Table III.11)
Does the zero entry against the Livestock Support Programme for 1999 mean that this
programme has been temporarily suspended?  If so, for what reason?
For what reason was there a 511% increase in expenditure under this programme between
1996 and 1997?
For what reason has there been a 63% increase in 1999 on expenditure for the Marketing
improvement programme for fruit and flowers, after three years of relatively stable expenditure?  Howmuch of this expenditure is geared towards impr oving export markets for Korean fruit and flowers?
Is such export-oriented expenditure aimed at developing new export markets for Korean produce or at
consolidating and strengthening Korea’s position in existing export markets?
(p. 114, para. 11)
On what basis can the statement be substantiated, that producer-cooperative federations "have
no role in policy formulation"?  Repeatedly, the Commission is told by Korean officials that such and
such an action or policy cannot be undertaken because of these federations.  As a concrete example, at
the WTO consultations on the safeguard measures on skimmed milk powder preparations (which
dispute is referred to in several places elsewhere in the report), a delegate from NLCF participated in
the Korean delegation on the same basis as the government representatives, and it was clear from the
discussions that NLCF had played a fundamental role in the decision of the Korean Government to
impose a safeguard quota.
(p. 126, para. 27)
Could Korea supply more details on the form which "credit mismanagement" has taken and
the sums of money which are involved? Does Korea consider that this is an isolated problem which
has occurred in a particular year, or is it indi cative of a more longstanding structural problem?
(p. 131, para. 41)
The safeguard measures were not taken against "imports of skimmed powder milk" (which is
subject to prohibitive import tariffs), but against skimmed milk powder preparations.
Although "border protection has been lowered", a number of non-tariff barriers remain, which
are not immediately evident.  For example, cheese is currently subject to a zero tolerance for all
coliform bacteria, which is not scientifically justifiable and has led to rejections of many importconsignments and has discouraged many EU traders from even attempting to export certain cheeses.
Korea has notified the WTO (SPS Notification G/SPS/N/KOR/70) of a change to a zero tolerance for
E coli bacteria.  This is a step in the right direction, but is still not in line with scientific requirements
to protect consumer health and will lead to unnecessary rejections of imports.  Does Korea intend to
change policy in this area and what is the timeframe for such action?WT/TPR/M/73
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(p. 131, para. 42)
Could Korea explain how the Dairy Promotion Association (DPA) is financed under the
Dairy Promotion Act.  What is the nature of the relationship between DPA and MAF?  Who is
responsible for appointing the Chairman and Directors of the DPA?  Since DPA's funding is raised on
the basis of the Dairy Promotion Act, how does the Korean Government oversee and audit the
administration of such funds?
(7) Services
Although market access has certainly improved, important obstacles remain in place,
including in areas where liberalization would facilitate the internationalization/strengthening of
Korea's macroeconomy.  The best example concerns legal services, where even for providing legal
advice on the law of their own home country or on international law, foreign lawyers currently have
to sit the Korean bar exam in full. This is effe ctively a complete barrier to foreign participation.
Companies with international activities require the support of international services companies which
can offer expertise on a range of international transactions. Improving availability of international
legal advice would help capitalize on Korea’s recent reforms. Are there plans for at least a gradual
liberalization and what is the time frame for possible first steps (e.g. allowing foreign legal
consultants to work in Korea) as well as longer term reform?
(i) Business information services and/or other services
As regards the liberalization of distribution services, could Korea explain the details of the
economic needs test used in the distribution sector?  Why is it written in the GATS commitments in
such a large and unspecified manner?  Furthermore, it seems to us that department stores and
shopping centres remain unbound.
As regards the liberalization of telecommunications services:  when will implementing
provisions of the universal service be publicly available?
(8) IPR
The EU attaches high importance to the implementation of the TRIPS Agreement.  We expect
Korea to live up to its commitments under the TRIPS Agreement, which it had to implement as of
1 January 2000.  The present shortcomings on the legislative side need to be corrected.
When will Korea, in the copyright sector, grant full "retroactive protection" and remove the
excessive exceptions to authors' rights?
When will Korea take the necessary steps in the patent sector, so that the rights conferred by a
patent are respected and grant retroactive patent protection?
When will Korea, in the trademark and geographical indications sectors, take the necessary
steps to ensure the respect of the registrations by European rightholders of trademarks andgeographical indications?
Although Korea stepped up enforcement action over the last years, enforcement measures
were very sporadic and piracy and counterfeiting rates continue to increase resulting in major losses
for European right-holders.  Stronger enforcement measures have to be improved considerably as a
matter of urgency.  Which steps does Korea intend to take for this purpose and within which delays?WT/TPR/M/73
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(9) Indirect Taxation
(p. 83, paras 122/125)
EU appreciates that Korean has brought its liquor taxation in line with its multilateral
obligations.  We understand that recent ( ad valorem ) tax adjustments could in the medium-term be
superseded by a structural liquor tax reform.  Could you envisage the introduction of a specific tax
based on alcohol content as applied by most OECD members?
(10) Trade laws and regulations
(pp. 24/25)
Further to laws and regulations, explanatory guidelines play an essential role in Korea's legal
framework.  Although these guidelines often have major trade implications, adequate advance
notification and consultation often lacks.  EU companies find it difficult to make comments prior to
the guidelines taking effect and have problems in adapting to new guidelines overnight.
(11) Standardization and certification issues
The Report by the Secretariat (WT/TPR/S/73) states (clause III(2)(x), p.73, para 84) that "As
from December 1998, Korea has been committed to reducing technical barriers to trade".  However,
para. 87 states that "between 1995 and 1999, the number of KS [Korean Standards] has increased by
13% to 10,595", while paragraph 88 states that "Although Korea has been an ISO member since 1963,about 500 KS were identical to international standards (ISO, IEC) in 1999, the same number as in
1996 ".  A further 2000 KS are stated as being “equivalent, with minor deviations (alignment ratio
estimated at 70%)".  In view of the stated commitment, and the provisions of Annex III of the
TBT Agreement, does Korea have plans, or a timetable, for improving their alignment on
international standards?
Para. 89 mentions mandatory certification requirements for 20 products, including electrical
appliances, pressure vessels, gas appliances, motor vehicles and telecommunications equipment.
Are the technical requirements for these products based on international standards, or are
there other, purely national requirements?
If the latter, what is the reason for the deviation from international standards?
Para. 89 also refers to "voluntary certification, which is based on provisions of 14 Acts".
To what products do these schemes refer?Is this certification voluntary insofar as products that do not have it can nonetheless be freely
placed on the market in Korea?
Are the technical requirements based on international standards?WT/TPR/M/73
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Government Report WT/TPR/G/73
Direct foreign investment
The report mentions (p. 10, para 30) that Korea since 1998 has proceeded to an in-depth
reform of the rules for foreign land ownership and of cross-border mergers and acquisitions in the
direction of liberalization.  However, this liberalization has not been total.
Could Korea give more precise information on the next stages of the envisaged liberalization?
Para. 31 refers to sectors that remain fully or partially closed to foreign investment.Could Korea provide a detailed and exhaustive list of the sectors which still have not been
fully liberalized?
Could Korea provide the reasons and justifications for not fully liberalizing these sectors?
As regards financial markets (para. 32), it is mentioned that the regulatory system for
financial transactions has been modified from a positive list authorizing only certain types oftransactions to a negative list allowing all transactions, except other than those specified.
Could Korea specify the transactions which are still subject to restrictions.
Additional Questions
With a view to the gap existing between the bound tariff rates, on the one hand, and the
applied tariff rates, on the other hand, is Korea considering lowering its bound rates to bring themdown to applied levels?
Does the recent lowering of the tariff rate for automobiles from 80% to 8% concern the
applied rate or the bound rate?
The requirement under Korean tax law that br eweries keep a minimum stock of 1200 hl beer
hinders the creation of small breweries and prevents foreign suppliers from selling equipment.  What
is the reason for this legislation?
JAPAN
General questions for the Trade Policy of Korea
Economic situation in general
Can it be said that Koreas' incentive towards in ternal reform has become relented due to the
fact that Korea's economy has been improving after the economic crisis?
What king of measures is the Government taking in view of advocating the importance of the
multilateral trading system in Korea?
Please explain the following questions on Korea's four big reform plans:
- Reform of the financial sector
What is the reform schedule of the financial sector other than that concerning banking?WT/TPR/M/73
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- Reform of large conglomerates (chaebols)
It seems that the specification regarding the dealings of chaebols, except those having gone
bankrupt, which was aimed at improving their financial situation, has not actually been enhanced.
How does the Government intend to improve such specification?
- Labor reform
There can be witnessed a considerable amount of labour movements against the Government's
economic reform occurring in such fields as finance as well as medical treatment.  How will theGovernment deal with this situation in order to develop Korea's economic reform?  Furthermore, how
does the Government intend to tackle the reform of its labour conditions, which are currently not
consistent with international standards, for exampl e, paying wages to workers who only look after
labour union activities?
- Reform of public enterprises
What is the schedule for the privatization of public enterprises?
Government procurement
We understand that as of June 1999, the Korean Government has included new conditions in
the government ordinance of the National Contract Law.  As a result, it has introduced a measure
whereby products announced by the Minister of the Agency of SMEs as "preferentially-purchasedgoods", such as those bearing new technology, can be purchased through a single tendering
procurement, if the producing companies supply such products with "SMEs good product mark".  On
the other hand, according to Appendix I of the GPA concerning Korea, i.e. Note 3 of Annex I, Note 3
of Annex II and Note 2 of Annex III, the GPA does not apply to the single tendering procurement for
Korea's SMEs, according to the related national laws.
In this regard, please clarify the following:
Does this measure apply only in the case of procurement by the central government?  Or does
it also apply to the cases of procurement by all the entities covered by the GPA, including regional
governments and public enterprises?
How does the Korean Government ensure consistency between this measure and Article III
(national treatment and non-discrimination), together  with Article VI.3 (no requirement or reference
to a particular trademark, or trade name, patent, design or type, specific origin, producer orsupplier, … ), of the GPA?
Does this measure only apply to the procurement which is out of the scope of the GPA
according to the Notes to the GPA Annexes, as mentioned above?  If so, please indicate the provisions
to justify this.
Government Report (WT/TPR/G/73)
Foreign investment liberalization
(p. 10, para. 31)
Radio broadcasting and television broadcasting are described as business areas which are
"wholly closed to foreign investors".  On the other hand, according to p. 160, para. 115 of theWT/TPR/M/73
Page 46
Secretariat report, under the new Broadcasting Act, foreign investors are allowed up to 33%
participation in satellite broadcasting and 49% in cable transmission network business.  Does thismean that the negative list described in the Government report applies only to terrestrial broadcasting?
Secretariat Report (WT/TPR/S/73)
Textiles
(p. x, para. 19 of Summary)
Should not the term "silk waste" be replaced by "silk yarn"?
Investment
(p. 31, para. 33 of Chapter II)
Please explain in detail the meaning of "a one-stop service for foreign investors", as
mentioned in line 13.
Please also explain the function of the Commi ssion of Foreign Direct Investment Policy
established by the Foreign Investment Promotion Act.
(p. 35, para. 38 of Chapter II)
The report states that "chaebols" continue to cause some practical concerns for foreign
investors;  these concerns included influence by the chaebols on small and medium-sized enterprises
(SMEs) not to supply foreign enterprises, restra ined access to distribution channels, and the chaebols
dominated access to credit".  Please provide a detailed explanation of such situation.
Tariffs
(p. 41, para. 21 of Chapter III)
Japan appreciates that Korea has recently bound its tariff rates on motor vehicles to 8%
(WT/LET/302), the binding of which had not been done at the issue of the UR.  Please explain in
concrete terms the reason for allocating such a big reduction.
Tariffs on agriculture products
(pp. 52-53, para. 38 and Table III.3 of Chapter III)
The last sentence of para. 38 states that, "As indicated in Tables III.3 and AIII.3, the level of
adjustment duties appears to be in conformity  with WTO binding commitments".  According to
Table AIII.3 on p. 202, this does indeed seem to be the case from 1996 to 1999.  However, if
Table III.3 is correct, there appear to be a lot of adjustment rates in 2000 which exceed the WTObound rates.  Is this a violation of the concession?  Or, rather, is the Table inexact?
Government Procurement
(p. 66, para. 68 of Chapter III)
In Appendix II of the GPA, publications utilized by parties for notices of intended
procurements are specified.  Japan considers that a rectification to Article XIII.1 is necessary ifWT/TPR/M/73
Page 47
tendering procedures are to be conducted only by electronic means.  Prior to rectification of
Article XIII.1, electronic tendering, which each country is increasingly introducing, can only
supplement paper-based tendering, but cannot replace it.  Please explain how Korea view consistence
between the development of electronic tendering procedures and the current GPA?
Safeguards
(p. 71, para. 79 of Chapter III)
The safeguards measure applied by Korea against dairy products was concluded as being
inconsistent with the WTO rules (by both the Panel and the Appellate Body).  What measures does
Korea intend to take subsequent to this decision?
SPS
(p. 77, para. 98 of Chapter III)
Please indicate the current coverage of the Korean Food Additive List, as well as what has
been added to the list recently.  Does Korea have an y intention to add more ingredients to this list in
the future?
(p. 77, para. 98 of Chapter III)
Are "mandatory shelf-life requirements" applied equally to both domestic and imported
foods?
Marking and labeling
(p. 78, para. 101 of Chapter III)
The report states that "imported goods are inspected for country of origin markings engraved
on the packaging and the product itself";  however, "origin marking is voluntary for domestic goods".
What is the reason for such a different treatment between domestic and imported products?  Has this
obligation become an unnecessary obstacle to free trade?
(p. 78, para. 103 of Chapter III)
Please provide an adequate explanation on the "eco-labeling requirements".
Access-related export quotas
(p. 80, para. 110 of Chapter III)
Under the Agreement on Textile and Clothing, mention is made in line 7 of a bilateral
agreement with Turkey.  Which provisions of the ATC is this bilateral agreement based on?  Pleaseprovide, if any, the WTO documents giving mention of this bilateral agreement.
(p. 81, para. 113 of Chapter III)
Should not the term "silk waste" be replaced by "silk yarn"?WT/TPR/M/73
Page 48
Competition
(p. 96, para, 142 of Chapter III)
The report states that the "Korea Fair Trade Commission (KFTC) remains in charge of
matters subject to the general competition law, except for the telecommunications sector where the
Korea Communications Commission (KCC) regulates anti-competitive activities relating to
interconnection to networks, provisions of facilities, and misuse of information acquired from the
shared network".  Would the regulation by the KFTC be more strict than that by the KCC?  Pleaseexplain the measures that the KCC actually takes.  Is not the Korean consumer Protection Board
(KCPB) involved in the regulation of telecommunications sector?
(p. 96, para. 144 of Chapter III)
Please indicate in more detail the cases of anti-competitive activities that have arisen over the
past two years.
TRIPS
(p. 100, para. 151 of Chapter III)
The report states that "Korea has special enforcement periods (twice a month), when
significant resources carry out raids, prosecution, and other enforcement activities".  Please be more
precise in the details, i.e. when exactly are such enfo rcement periods;  and can it be said that there are
more prosecution, raids, etc., during the special enforcement periods compared with other days?
(p. 102, para. 156 of Chapter III)
What is the prospect of Korea acceding to the 1991 UPOV (International Union for the
Protection of New Variety of Plants) Convention?
(p. 105, para. 163 of Chapter III)
Please specifically explain the order issued by the Korean Industrial Property Office (KIPO)
to stop trade in counterfeit goods, with regard to the legal basis, as well to the effectiveness inimplementation.
Shipbuilding
(p. 142, para. 69 of Chapter IV)
The report states that "in December 1999, there were plans for setting up a W 500 billion fund
by mid 2000 to help cash-strapped shipping companies purchase vessels".  Japan is concerned thatthis fund could create unfair indirect-support to shipbuilders.  Please provide details of this fund (i.e.
the total amount, its resources, the amount contributed by the Government or by governmental
entities, the scheme of the fund, etc.)
Please provide precise details on the bilateral 1995 Framework Agreement.
"Agreed minutes between European Community  and the Government of the Republic of
Korea relating to the world shipbuilding market" signed jointly by Korea and EU in June 2000,
originated from the fact that direct-support provided by the Korean Government, including some
public entities, to the Korean shipbuilders, suffering financially from the economic crisis in Korea,WT/TPR/M/73
Page 49
was put into question.  Please explain the current situation of support measures by the Government
(i.e. preferential tax system, etc.) to the companies who do shipbuilding business in Korea sinceovercoming the economic crisis.  Please also indicate the current situation of support by public
financial entities, such as the Korean Industrial Bank?
Financial services
(p. 156, para. 106 of Chapter IV)
The report states that "Korea removed the requirement to rank among the world's top 500
banks in terms of asset size to be able to open a branch in Korea".  In this regard, are there any
screening conditions for their parent companies?  If so, please provide details on such conditions and
their purpose.
Broadcasting and audio-visual
(p. 160, para. 115)
Please provide an outline of the regulatory and institutional changes which have been
implemented since 1998.
Please explain the policy objectives for:
- splitting cable television (CATV) broadcasting into three different sectors in 1993;
and
- allowing more integration of these different operators into a single business.
(p. 160, para. 116)
How does the KOBACO (the Korean Broadcasting Advertising Corporation) allocate the
advertising time for television and radio?  Are there any criteria which have been made public?
(p. 161, para. 117)
Please explain the actual function of the Kor ea Broadcasting Commission (KBC) and provide
details on the outline of its programme regulation scheme.
Maritime transport
(p. 163, para. 124 of Chapter IV)
Please provide a detailed explanation on the plans to help cash-strapped shipping companies
purchase vessels in view of overcoming the financing difficulties of certain Korean shipping
companies.  Are not such plans inconsistent with th e phrase of the last line "thus eliminating the legal
basis for direct government support (including subsidies) to national shipping companies"?
(p. 163, para. 125 of Chapter IV)
Please provide details, if any, explaining about the international vessel system in Korea.
Please explain in detail the flexibility concerning the hiring of foreign seafarers and the providing of
tax benefits referred to in line 13 of para. 125.WT/TPR/M/73
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Additional questions from Japan
Import limitation
Although the Import Source Diversification Program was abolished at the end of June 1999,
announcement on the result of the imports concerning 16 items covered by this programme has been
continuing regularly through the Korean Bank, the Ministry of Commerce, Industry and Energy, and
the KOTRA.  Japan considers that these announcements impede consumption of these imported items
in Korea.  In particular, in the case of items for which imports are greatly increasing, theannouncements are sometimes made with exaggerated expressions, which become a cause of
harassment when importing such items.  Japan is of  the view that these announcement, which could
be considered as a kind of import inspection, may become a violation of national treatment, as
prescribed in Article III of the GATT.  Japan si ncerely hopes that these announcements be stopped at
once.  Please explain the reason for maintaining these announcements and, please also explain theconsistency between this kind of announcement and Article III of the GATT.
Safeguards
In relation to the safeguard measures taken by Korea on their imports of garlic, Korea has
established a special import quota for China on garlic.  Please explain the legal consistency between
this preferential treatment to China and the GATT.
TRIPS
In Korea there are many counterfeit goods of foreign-brand products, for example game's
software and music CDs.  It is suspected that Korea's regulation against counterfeit goods is not
sufficient.  Please explain the domestic laws in this regard, as well as their implementation system for
protecting IPRs, especially for the regulation of counterfeit goods.
Government Procurement
It is reported that "Ford Korea" has made a successful bid on the public cars of the Minister of
Commerce, Industry and Energy, and of the Minister of Trade, at only W 1 per vehicle.  It is assumed
that the procurement of foreign cars was designed to show the openness of its car market, as well as
the openness of its government procurements in these cases.  Why then has Korea permitted these
awards at such a low price?  Are such awards permitted under the Korean Accounting Law?
Standards and conformity assessment systems
Concerning the imports of cosmetics, tyres and chemical products, the standards and
conformity assessment systems of these products in Korea are more strict than those of other
developed countries.  Moreover, a seemingly unnecessary label has to be put on those products,
making all in all these measures obstacles against trade.  Please explain what kind of measures Korea
intends to take in order to avoid that its standards and conformity assessment systems becomeobstacles against trade (for example, by accepting the conformity assessment of export countries, and
by changing the standards in conformity with those of other developed countries)?WT/TPR/M/73
Page 51
URUGUAY
Secretariat Report (WT/TPR/S/73)Summary Observations
(pp. ix and xi, paras 13 and 24)
Could Korea comment on paras 13 and 24 of the Summary Observations of the Secretariat
report that states that government assistance of the agriculture and livestock sector remains strong and
wide-ranging, adding that since 1996 nominal applied MFN tariff protection has been reduced slightlyfrom 51.8% to 50.3%, and it is still more than six times the average for manufactured goods that is
7.5%?
IV. Trade Policies by Sector
(1) Overview
(p. 109, para. 2 )
(2) Agriculture and Livestock
(p. 112, para. 6)
Taking into account the Secretariat report (Part IV. Trade Policies by Sector, Chapter 1.
Overview, paras 2 and 6, and Chapter 2. Agriculture  and Livestock, para. 6, respectively) which states
that the agriculture and livestock sector accounts for a relatively small and declining share of Korea'sGDP (5% in 1999) and that it plays a minor role in Korea's international trade (its share in total
exports was 3% in 1998), could you explain why the agriculture and livestock sector remains a major
beneficiary of government support in many forms and has a tariff protection higher than the industrial
sector including the presence of considerable tariff peaks?
(iii) Selected agricultural and livestock items
(a) Rice
(p. 128, para. 31)
Could you comment on the last sentence of para. 31 of the Secretariat report (related to rice,
p. 128) which notes that "… by late 1999, the Government indicated its intention to oppose or delay
the lifting of import restraints on rice (and other key farm products) at the next round of multilateral
trade negotiations"?
III. Trade Policies and Practices by Measure
(Table III.4, p. 58)
In relation to "Import licensing or prior authorization requirements since 1998", Table III.4,
(p. 58), could Korea confirm if in the case of rice such authorization is given exclusively by the
Minister of Agriculture?
With respect to Table III.4 (p. 58) we would very much appreciate if you can confirm if in the
case of live animals and its products, including meat and dairy products, the related administrativeWT/TPR/M/73
Page 52
organization is the National Veterinary Research and Quarantine Service – as indicated in the
Secretariat report – or is it the Ministry of Agriculture?
III. Trade Policies and Practices by Measure and IV. Trade Policies by Sector
(p. 60, para. 58 and Table III.5;  Table IV.3 (p. 121) and c) Milk products, pp. 131 and 132,
paras 40-42)
In relation to dairy products, citrus and other agricultural products, and taking into account
the Secretariat report (Part III. Trade Policies and Practices by Measure, para. 58 and Table III.5, andPart IV. Trade Policies by Sector, Table IV.3 and c) Milk products, paras 40-42), we would very
much appreciate if Korea could provide more information about the competent authorities with
respect to imports, distribution and pricing?
CZECH REPUBLIC
There seems to be some obstacles in the national legislation inhibiting supplies of small
breweries to the Korean Market.  As we understand them, the granting of licences to import breweries
is conditioned by requirements regarding the capacity limits which are set forth at levels the Czech
supplies can not comply with due to their size.
We would welcome clarification of this issue and appreciate justification for the capacity
limits.  Is it realistic to expect any changes to op en the way for imports of small breweries to the
Korean market?
Despite some positive changes, the system of internal taxation on automobiles continues to be
complex and burdensome.  Moreover, imported cars seem to bear a disproportionate burden of these
taxes due to higher rates depending on the engine capacity and tax incentives applied to mini-cars
with an 800 cc engine.
Could the Korea authorities comment on their intentions regarding further simplification of
the system of internal taxation on automobiles and on possible reduction of respective taxes?
UNITED STATES
Summary Observations
(para. 17)
While Korea continues to advocate a policy of privatization as a way to reduce government
involvement in the economy, many of the key privatization efforts have been delayed for reasons suchas poor market conditions or political/labour opposition.  What concrete plans does the Korean
Government have for proceeding with privatization generally and with each of these key privatization
efforts?
(para. 18)
In the past, the public perception was widespread that, if the frugality or anti-import
campaigns were not government led, they were at least government-inspired through various
statements, regulatory decisions, and other actions.  What steps has the Government taken to ensure
that the "Government" is not assumed to be endorsing or tacitly supporting such campaigns, and that,
in fact, it supports more open trade and investment?WT/TPR/M/73
Page 53
I. Economic Environment
(2) Recent Economic Developments(i) Growth, Incomes and Employment
(para. 6)
We were pleased to note in the Secretariat report that Korea undertook extensive
labour-related reform as part of its response to the financial crisis.  As noted in the report, these
reforms "... include the establishment of a new labour-management culture system, the expansion of amore productive and comprehensive welfare system, the improvement of living/working conditions of
middle-and low-income earners and the furthering of flexibility in the labour market."
We note in the Secretariat report that Korea agreed when it entered the OECD in 1997 to
implement changes in its law that permit multiple unions at the enterprise law by January 2002.  The
tripartite commission developed guidelines for impl ementing multiple unionism in the workplace, but,
to our knowledge, this implementing legislation has yet to be enacted.  We would appreciate an
update on the status of this important legislation.
It is our understanding that workers in many industries, including gas, electricity, water,
petroleum, hospital, banks, and some communications  and transport industries, may not have a right
to strike because they are considered to be employed in "essential services".  We note that the ILOinterprets the term essential services in the strict sense under conditions of an "imminent threat to the
life, personal safety or health of the whole or part of the population."  What steps is the Government
of Korea taking to more clearly identify which employees are entitled to a right to strike?
What steps is Korea taking to reform its labo ur regulations to allow unions themselves to
determine who can be members, without jeopardizing their status as collective bargaining units?
Box I.2., Public Sector Aid, Regulatory Reforms, and Privatization
Korea embarked on an ambitious programme of regulatory reform under the current
administration, and thousands of regulations have been reviewed for efficacy and need.  However, it
is not clear how many regulations have been eliminated, and what impact, if any, this deregulation has
had on the Korean economy.  Please comment generally on the effect of Korea's extensive efforts at
deregulation and regulatory reform and what sectors do you see the need for further reform?
II. Trade Policy Regime
(6) Trade Agreements and Arrangements
(ii) Preferential, Regional and Bilateral Arrangements
(para. 28)
What is the status of Korea's free trade negotiations with Chile?  What are the plans for
moving forward with negotiations on free trade ar rangements with other countries, including Japan,
New Zealand, and Thailand? What is the scope of these agreements ? Do they include services?WT/TPR/M/73
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(8) Foreign Investment Regime
(para. 32)
It seems in several instances that the liberalization of foreign direct investment has been a
stated goal of the Korean Government.  Does this include the liberalization of the steel sector?  Does
this mean that the limit of 3% ownership by any one entity has been abolished?
III. Trade Policies and Practices by Measure
(2) Measures Directly Affecting Imports(i) Registration and Documentation Requirements
(para. 9)
We note that the Secretariat report cited U.S. concerns regarding certification procedures.  We
believe issues still remain with respect to the fact that certification or approval of import
documentation by associations representing local competitors may be required ...  And that in additionto a processing fee levied by these associations, importers may be required to submit confidential
business information to them.  Domestic competitors or their associations should not have
certification or approval rights of the impor t documentation of competing imported goods.
Furthermore, any fee associated with such certifi cation constitutes an unwarranted charge to the
importer.  Exporters should never be required to submit confidential business information unlessabsolutely necessary, and then only to government  customs officials who safeguard such information.
This system is not consistent with modern customs procedures and several WTO/GATT provisions
(e.g. Articles 10 and 11).
What steps is the Korean Government taking to ensure that certification or approval by
associations representing local competitors is not permitted?
(para. 13)
Our experience has shown that the delay in clearing customs for most food and agriculture
products is far longer than for other countries with comparable economic conditions.  How does
Korea plan to facilitate and expedite trade for these products ?
(ii) Tariffs
(para. 20)
In 1999, the U.S.G. discovered a discrepancy between Korea's applied tariff rates on several
agriculture items – peanuts, popcorn, potato flour, potato flakes, and wheat and soybean meal and its
WTO bindings.  Korean officials have acknowledged these discrepancies and have given indications
they would search for ways to rectify them.  Wh at is Korea planning to do to eliminate these
discrepancies?
(para. 37)
Adjustment duties appear to be a wholly arbitrary means of protectionism that is particularly
unacceptable because of the short period of time (four to five days) between the announcement and
the implementation of the duty, designed to completely offset the price advantage of an imported
good.  What goods are subject to these duties?  Have Korean authorities decided on increasing theWT/TPR/M/73
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period between publication and effective date of adjustment duties?  If so, what will the new time
period be?  Will the number of products subject to adjustment duties be further reduced?  If so, whatitems and when?
The Secretariat's report suggests that Korea's adjustment rates are within its bindings under
the WTO;  however, the "adjustment rate" column in Table III.3 indicates charges in excess of
Korea's bindings (e.g. croaker and woven fabric of cotton).  Please explain these apparent breaks in
bindings.  Are the adjustment rates in addition to the general rate?
(vii) Government Procurement
(para. 71)
The Secretariat's report states that:  "most public enterprises benefit from monopoly status or
from exclusive rights stipulated in laws and regulations;  the authorities acknowledge that these
enterprises are an extreme form of government regulation with a longstanding incidence on theKorean economy.  Irrespective of whether their monopoly status or exclusive rights are stipulated in
laws or regulations, it is also understood that this type of firm may discriminate against and restrict
access to foreign supplies as well as cause competition-related problems (Section (4)(iii));  it seems
that this has been the case in operations of several enterprises including POHANG Iron and Steel
Company".  In a more detailed section immediately following that paragraph, it says that governmentownership of POSCO still stands at 9.84% with full pr ivatization plans by the end of 2000.  So far, the
full privatization plans as we have seen them have failed.  What steps are to be undertaken this time to
privatize POSCO?  How will the shares be divested?  Will the shares be offered internationally?  In
line with its policies on corporate restructuring has the Korean Government made any more moves
towards implementation of the Korean Fair Trad e Commission’s antitrust recommendations regarding
POSCO?  In line with continued corporate restru cturing, has the ROKG eliminated all government
representation on POSCO's board of directors?
(x) Standards and Other Technical Requirements
(para. 92)
Various concerns have been expressed over transparency issues, including the involvement of
private-sector associations in handling confidential business information of importers.  Is the Korean
Government planning regulatory changes to elim inate the involvement of private associations?
(xi) Frugality Campaigns
(para. 104)
Frugality campaigns in Korea have caused serious concerns among Korea's trading partners.
While the Korean Government has denied involvement in these campaigns, negative public
perceptions of many foreign products are common.  Please describe in detail the KoreanGovernment's plan, to promote a better understanding among its citizens of the benefits of trade
openness and competition?
(4) Measures Affecting Production and Trade
(i) Taxation
(para. 120-122)WT/TPR/M/73
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Korea's tax structure is extremely complex, particularly its indirect tax structure.  As the
Secretariat's report notes, many of these taxes are levied on products whose import shares arerelatively high, such as alcoholic beverages and cars with large engine capacities.  What is the Korean
Government's plan to simplify its tax structure, partic ularly as it relates to the disproportionate impact
on imported products?
(ii) Production Assistance
(para. 131)
Can you please provide more detailed information on the forms of tax incentives discussed in
WT/TPR/S/73 with expiry dates in December 2000 or 2003?  Are the incentives being offered to
specific industries, and if so, to what industries?  Who is monitoring compliance with the qualifying
criteria of the tax incentives?  Can you please explain how effective oversight of the corporate
restructuring will be maintained?  Which organizations will take part in a system of checks andbalances?
(para. 132)
In para. 40 of the Korean Government report it is noted that Korea has reduced the number of
its subsidy programmes from 26 in 1996 to 19 in 1999.  In particular, Korea eliminated four
prohibited subsidies in 1997 well ahead of schedule.  Would you please supply us with a list of theseven subsidy programmes that were terminated and the dates of their termination or whether they are
being phased out?  If they are being phased-out we would appreciate the time table.
(para. 143)
The Korean Government has been encouraging the restructuring of the Chaebol along core
areas of specialization, resulting in some Chaebols sw apping subsidiaries to allow them to specialize
in particular markets.  From an antitrust perspective, this looks very much like a horizontal market
allocation agreement among competitors in order to create specialized national champions.  How arethese agreements justified under Korean competition law?
(iv) Intellectual Property Rights
(para. 151)
Can you please provide us with details of the results of the most recent special enforcement
periods?  Specifically please provide details of your plans for instituting public education campaignsregarding illegal use of computer software, and y our plans for sustaining such campaigns over the
long term?
Concerns have also been raised by industry that foreign software has been largely excluded
from the enforcement efforts targeted at the public sector.  Concerns also remain with regard to a
significant problem of software piracy by Korean corporate endusers.  Please describe Koreangovernment actions in creating a deterrent effect to the piracy of computer software.
Can you please provide us with details regarding the number of investigations of copyright
piracy that have resulted in arrests, the number of arrests that have resulted in prosecutions, the
number of prosecutions that have resulted in convictions or acquittals, and the punishments actually
imposed on wrongdoers?  It would be helpful if you could provide a breakdown that indicates what
charges were brought in these cases, the amounts and types of infringing items seized by Korean
authorities, and the ultimate disposition of such items.WT/TPR/M/73
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Although the Korean Government has taken action to reduce illegal software usage in the
Government under the 1997 decree, concerns remain over sustain ability, transparency and the KoreanGovernment’s deterrent effect.  Please provide information on the Korean Government’s
implementation of the decree;  whether legal action has taken place;  the number of cases;  and the
types of penalties that have been imposed against violators of the software usage government decree.
(para. 165)
Please explain how Korean authorities consider the limitation of retroactive copyright
protection to works and phonograms whose authors died after 1957 is in compliance with Article 18
of the Berne Convention?
The Korea Consumer Programs Protection act is not in full compliance with Korea's TRIPS
obligations.  What are your plans to bring it into compliance?
(para. 167)
Korea has not met fully the retroactive copyright term of protection as specified in TRIPS,
and there continue to be a number of serious IPR protection problems in Korea, e.g. trademark and
well known mark infringement, theft of trade secrets, and infringement of textile designs.  Please
describe Korean government actions to address these trips compliance issues.
We welcome Korea's efforts to reduce piracy rates, which have declined in recent years.
However, piracy rates remain high and additional aggressive enforcement efforts are needed.  Of
those charged by the prosecutor's office between 1998-1999, how many people were actually
convicted of software piracy?  What types of sentences did they receive?
What standards are used by the prosecutor’s office to determine whether to accept or reject
requests to taken enforcement action?  Is there a minimum threshold of evidence necessary to prompt
government enforcement action, such as raids?
IV. Trade Policies by Sector
(2) Agriculture and Livestock
(iii) Main Policy Issues
(para. 18)
Misclassification by certain agricultural products has led to serious market access problems.
What steps is the Korean Government taking to ensu re that this problem is eliminated and that it does
not impede market access for such products as potato flakes and soda ash?
(iv) Selected Agricultural and Livestock Items
(para. 31)
The Secretariat's report cites statements made by government officials that the Korean
Government indicated its intention to oppose or delay the lifting of import restraints on rice and otherkey farm products until the next round of multilateral trade negotiations.  What is the Korean
Government's plan for liberalizing access to its rice market?WT/TPR/M/73
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(para. 34)
The Secretariat's report notes that quotas on beef are to be  replaced by a tariff-only regime as
of 1 January 2001.  What steps does the Korean Government need to take to carry out this
commitment?
(para. 35)
The Secretariat's report notes that involvement by the Government-linked livestock marketing
organization in beef importing will not be mandatory as of 1 January 2001.  What steps does theKorean Government need to take to carry this out?
(7) Mining and Energy
(iii) Energy
(para. 49)
The Korean Government developed extremely ambitious plans to privatize KEPCO and
increase competition and efficiency in the energy sector.  However, these plans have encountered
significant political resistance.  What steps is the Korean Government taking to move the privatization
process forward in this sector?
(paras 63 and 64)
The Korean Government has reduced taxes and reduced certain some regulatory barriers in
the automotive sector.  However, the relatively high tariffs and the high and cascading taxes on motor
vehicles continue to be significant barriers to mark et access for foreign automakers.  What steps is the
Korean Government planning to take to reduce the barriers to foreign auto imports and allow greater
competitive greater in the marketplace.
In particular, what steps will it take to further reduce the tax burden in this sector and to
overcome negative perceptions of Korean consumers about imported autos?
(iv) Iron and Steel
(para. 71)
POSCO maintains a monopoly position in th e Korean steel market, and the Korean
Government continues to hold a significant stake in  POSCO.  Moreover, the sale of Hanbo Steel has
yet to be finalized.  What are Korea's plans to divest its shares in POSCO and establish a more
competitive steel market?  When will the Hanbo sale be concluded?
(vi) Pharmaceuticals
(para. 81)
Please explain the role of the Korean Food and Drug Administration in the patent approval
process.  What steps is the Korean Government taking to limit patent infringement in this sector?
Data protection in Korea is a continuing concern in the pharmaceutical sector.  The
United States wishes to recall our concern over an amendment to the Pharmaceutical Affairs Act that
stipulates that the Korean Government is not requir ed to protect data when it would be contrary toWT/TPR/M/73
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"public interest."  Please indicate how the Korean Government defines "public interest," and the
circumstances in which the special exception will apply.
Concern has been raised by our industry over the lack of coordination between Korean health
regulatory agencies and intellectual property officials, allowing products that infringe existing patents
to be approved for marketing based on test data that was first submitted by the innovator.  Please
describe Korean Government efforts to resolve this issue in accordance with its WTO TRIPS
obligations, and whether steps will be taken to withdraw such approvals.
(9) Services
(iv) Financial Services
(para. 89)
In your 28 August 2000 submission, Section iii:   Structural Reform and Liberalization (2),
you explain the advances over the course of the pa st two years in corporate "workout" restructuring.
While we applaud the efforts that are under way, a recent report by the Korean Financial Supervisory
Commission (FSC), which was released 23 August 2000, claims that in the 44 companies under
workout programmes which the FCS examined, rampant problems still remain.  Problems created
when many owner-managers used the bailout money for private purposes.  Can you please clarify
when more stringent oversight will be implemented so these problems will be addressed?  What willthe next step be after the FSC turns in its list of  non-compliant companies to the national tax service?
The workout programme under the government's corporate restructuring policies have
encountered serious problems, as seen in the FSC August 2000 report.  What steps will be taken to
correct the workout programme?  What steps will be taken to reprimand firms that misused workout
programme funds?  Will the list of these companies be made public?
Can you please explain how effective oversight of the corporate restructuring in the financial
sector will be maintained?  Which organizations will take part in a system of checks and balances?
(para. 94)
The Korean Government has taken steps to liberalize and deregulate its financial sector.
When will foreign investors be permitted to buy a majority stake in another bank?
(para. 101)
Please provide an estimate of the total amount of non-performing loans in the Korean
financial system and explain the Korean Government's strategy in Phase ii of financial restructuring
for disposal of non-performing loans.
(para. 103)
The Korean Government has taken steps to improve foreign access to its insurance market.
When will foreign investors be permitted to buy a majority stake in a Korean insurance company?WT/TPR/M/73
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(v) Communications
(para. 109)
Korea has introduced competition in its telecommunications sector.  In addition, it has pushed
forward with deregulation and has introduced foreign investment in this sector.  Korea Telecom (KT),
however, remains a government-entity and maintains a market dominant position through its own
operation and its affiliates.  What is the time line for privatization of KT?  Will foreign investors be
allowed to assume majority ownership of telecom service providers?
(para. 117)
What further liberalization of broadcasted television programs is planned?
NORWAY
Secretariat Report (WT/TPR/S/73)
Shipbuilding
(pp. 141-142)
Since 1999 Korea has been the world's leading shipbuilder.  According to the Secretariat
report, the output of the shipyards grew steadily by more than 17% between 1995 and 1998 and Korea
virtually doubled its trade surplus in ships (para. 68).  The expansion of the Korean shipbuilding
industry has taken place in a period with significant overcapacity in the world shipbuilding industry.Would the Korean Government be aware of any plans for further capacity expansions in the Korean
shipbuilding industry?
Shipping
(pp. 162-164)
Given the substantive liberalization that Korea has undertaken in the maritime transport sector
in the recent years (para. 125), would it be possible to provide figures on the participation of foreign
shipping companies in the seven liberalized trade mentioned in footnote 196?
What are the requirements for foreign companies or persons to engage in the Korean shipping
industry, i.e. as for registering of vessels or establishing companies in Korea?
THAILAND
Secretariat Report (WT/TPR/S/73)
Import approval and restriction
(pp. 57-58)
The Secretariat report notes that, in the present under 53 separate domestic laws beside the
Foreign Trade Act, more than 5,000 ten-digit HS items or 50% of total tariff lines are subjected to
import approval or authorization.  The figure shows that, more or less, Korea still set rules for
distortion of trade liberalization.  Is Korea planning to reduce this existing restriction?WT/TPR/M/73
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Regarding to table III.4, could Korea explain more the relevant of the Weights and Measures
Act to the import restriction?
Standard and other technical requirements
(pp. 73-79)
The report shows that Korea has improved and adopted most of international standard, such
as ISO and CODEX standard, to be an essential method for protecting customers form imported
products.  However, regarding to topics of the Testing and Certification and the Sanitary andPhytosanitary Regulation, the report has fallen to show us the duration of testing process for all
imported products especially the perishable products.  Based on our own experience, the duration of
testing process on products, especially perishable  and instant foods, takes longer than two weeks.
Could Korea provide us more information regarding to this matter?  Is it possible for Korea to indicate
exactly the duration of testing process?
Agricultural tariff quotas
(pp. 43-44)
Could Korea provide us more details on quota allocation criteria?
The report notes that, in order to administration of tariff quotas, the state-trading agency may
impose a mark-up on sales in addition to the in-quota tariff.  Could Korea explain the reasons behindsuch the action?
Based on our source, in a certain imported product, cassava, Korea does not allow to sale for
the human consumption purpose.  Is it the government policy?  Could Korea explain the reasons
behind such a policy?
Additional Questions
According to our source, the Government of Korea does not allow imported cassava (manioc)
and rice to be sold directly for the human consump tion purpose.  These commodities are restricted to
be sold directly only to certain industries, namely the paper and textile industry for cassava and food
processing industry for rice.  Is this a government policy?  Could Korea kindly explain the reasons
behind such a policy?  Does Korea plan to abandon this policy?  If so, when would that be?
During the Uruguay Round, the Government of Korea bound tariffication of manioc in the
rate of 887.4%.  It seems to us that it is almost impossible, for agriculture exporting country likeThailand, to access into the Korean market for th is particular commodity.  We would like to seek
clarification whether the Government of Korea has intention to reduce such rate in the next round of
negotiation.
Adjustment duties
(pp. 52-53)
The Secretariat report notes that the adjustment duties have been applied just of temporary
period with several acceptable reasons.  However, according to Table III.3, the Government of Korea
has imposed the adjustment duty on several imported products in the greater value that its WTO
bound rate.  What are the reasons behind such rate exceeding WTO bound rate?  Moreover, we would
like to know that for how long the Government of  Korea intend to impose this adjustment duty;WT/TPR/M/73
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- in general cases;  and
- for particular products namely frozen shrimp/prawn and rice.
Tariffs
(pp. 39-40)
Does Korea have any indirect tax imposed on imported products, besides the custom tariffs
and the adjustment tariff?  If so, what kind of other tax would that be?  What are the criteria and
justification for using such measure in particular for certain specific products?  What kinds ofproducts are being imposed?
Are there any differences between the imposition of indirect taxes on agriculture products and
industrial products?
INDIA
From the Secretariat report, it appears that the Republic of Korea is taking increasing interest
in getting involved in regional trading arrangem ents and bilateral free trade arrangements, even
though it had eschewed such arrangements in the pa st.  The Secretariat further notes that "it remains
to be seen whether such regional and bilateral arrangements erode Korea's long-standing attachment
to the multilateral trading system".  Korea's presen t efforts are aimed at developing closer trading
links with the Members of the ASEAN/APEC, Japan and China.  India has always believed thatregional arrangements should supplement the multilateral trading system and not lead to any trade
diversion.  It may be pertinent to refer to a sugge stion made by the Secretariat while reviewing the
TPR of some other Member that the extension of regional trade preferences on a non-discriminatory
basis and securing them in the multilateral framework should maximize the benefits to that Member
from trade liberalization.  We would like to hear from Korea an update on these efforts and the names
of countries with which it is involved in concluding bilateral free trade agreements and how it
proposes to ensure that such arrangements do not become trade restrictions vis-à-vis  other trading
partners.
Multiplicity of rates, flexible tariffs, auto nomous tariff quotas mainly for raw materials
existing in Korea along with exclusive importation rights of producers cooperatives and state trading
entities, serve as trade barriers, specially to developing countries.  In the manufacturing sector,
adjustment duties ranging from 13% to 21% have been applied to protect a few industrial items, whileautonomous tariff quotas have been allowed concessional tariff treatment to imports of industrial
inputs like wood, yarn, leather, metal and machinery parts.  Number of incentives and subsidy
programmes including low interest short-term financing of trade and exports, tax measures tied to
local content or export performance requirements etc. are also extended to this sector.
These measures act as trade barriers, particularly to developing countries.  How does Korea
propose to simplify these measures and progressively reduce subsidies and incentives, so that these
measures do not result in restricting its trade with developing countries.
Another observation we would like to make is regarding the tariff peaks on agricultural
products, making the agricultural sector highly protected.  Further the application of flexible tariffs
and adjustment duties have been employed to regulate import of agricultural production.  Import andmarketing of rice is undertaken exclusively by the Ministry of Agriculture and Fisheries, which has
imposed mark ups of up to 98%.  As far as fish items are concerned, the adjustment duty system,
where a separate rate of tariff can be applied temporarily in case an increase in the import of aWT/TPR/M/73
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particular item adversely affects domestic market a nd industry, affects export of marine products from
India.  All this affects export of agricultural and fisheries products including rice, to Korea.  Wewould like to know from Korea what steps it proposes to take to improve market access for
agricultural products particularly rice and fisheries produce.
The Note 1, at the end of p. ix of the Secretariat report concerning Summary Observations,
points out that "in contrast to the WTO practice, the Korean authorities calculate tariff averages by
using "in-quota" and excluding "out-of-quota" tariff rates.  The result is a much lower average appliedMFN tariff rate (8.9%) than that computed by the Secretariat, which used "out-of-quota" tariff rates".
We would like clarification on this observation from Korea.
It is noted from the Secretariat report, efforts have been made to reduce the impact of
technical standards on trade and to bring them more in line with international rules.  We would like to
hear more from the Korean authorities on the development and implementation of these mandatorytechnical standards.  Para. 92 of the Secretariat report points out that Korea does not recognize testing
and certification of exporting countries, with very few exceptions.  It further refers to the concerns
expressed by certain trading partners with regard to homologation procedures for certain items,
including the involvement of private-sector associations in handling confidential business
information.  We would like to hear the comments of Korea on these issues.  An up-date on theirefforts at harmonization of its certification procedures with the WTO standards under an IMF
programme is also requested from the Korean delegation.
PHILIPPINES
Taking into account the statement made in the WTO Secretariat's report (WT/TPR/S/73) in
para. 28, Section II(6)(ii), concerning Korea's bilateral free trade arrangement with Chile, the
Philippines respectfully requests information from Korea on their proposed FTA with Chile,
specifically on the elements and features of the said FTA, as well as the exact scope and coveragethereof.
Will the product coverage of the FTA necessarily include all the major imports of Korea from
Chile mentioned in the WTO Secretariat report, i.e. non-ferrous metals and fruit?
With regard to the statement made in the Report in para. 16, Section IV(2)(ii) on the average
nominal tariff protection for agricultural products, the Philippines would like to confirm whether thestatement therein that "an out-of-quota tariff rate for bananas at least two times higher than the general
rate was eliminated in 1999" refers to the reduction of Korea's surcharge from 40% to 30%
implemented in 1999.
Does Korea intend to further liberalize its market for bananas given its relatively more
restrictive tariff structure compared to those of other Members, e.g. US, EU and Japan?  Does itintend, for instance, to phase out the out-quota tariff and retain the basic tariff rate a its remaining
trade measure?WT/TPR/M/73
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ANNEX II
WRITTEN RESPONSES1  BY THE DELEGATION OF THE REPUBLIC OF KOREA
TO THE QUESTIONS  RAISED BY WTO MEMBERS
I. ECONOMIC ENVIRONMENT
(1) Corporate and Financial Restructuring
(i) Financial Restructuring
1. Since the financial crisis in late 1997, the Korean Government has been conducting the first
round of restructuring programmes, focusing mainly on easing the capital crunch in the corporate
sector and restoring the financial intermediary function.  With the successful implementation of thereform programme, the Korean economy succeeded in recovering from the crisis in a notably short
period of time.  Nevertheless, there still remain vulnerabilities and uncertainties in the economy,
specifically in the financial and corporate sectors, which endanger Korea's sustainable economic
growth.
2. In order to remedy this problem and ensure sustainable growth, the Korean Government
announced "the second round restructuring plan" on 25 September of this year.  This plan aims to
complete the reform process by providing detail ed and comprehensive timetables for the tasks
remaining in the financial and corporate sector restructuring.  The gist of this plan is explained in
detail in the following paragraphs.
3. Japan made a comment that the momentum behind Korea's reform efforts might have been
eased due to improved economic conditions.  However, the Korean Government is well aware that the
next six to twelve months are a critical time for shaping the future of the Korean economy and
pursuing its goal of maintaining a market economy and achieving sustainable economic growth.
Therefore, strenuous reform efforts will continue in the future.  The policy will of the Korean
Government is well embedded in the second round restructuring plan.  In the corporate sector as well,
the Government will complete the restructuring plans for troubled companies and improve the
workout process by the end of this year.
4. Australia and Switzerland asked about the Korean Government’s intentions regarding the
injection of further public funds, and the concern about the possibility of inflation due to the injection
of public funds.  A total of W 64 trillion of public funds were injected into the financial system during
the first round of restructuring.  In its second round restructuring plan, the Government intends to
raise an additional W 40 trillion with the approval of the National Assembly, in order to complete theremaining tasks in the restructuring of financial institutions and to enhance market confidence.  The
main reasons for injecting additional public funds are as follows:
- Unexpected need for public funds during the process of restructuring because of
unfavourable changes in market conditions;  and
- Difficulties in retrieving the previously injected public funds through sales of the
Government's stake in commercial banks because of the bearish stock market.
                                                     
1 The structure of this paper is in accordance with that of the Secretariat Report.WT/TPR/M/73
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5. Regarding the concern about possible inflation, the injection of public funds is unlikely to
bring about inflationary pressure because the public funds are raised by issuing bonds, which will notcause an increase in the money supply.
6. Canada, Hong Kong, China and Switzerland i nquired about the Government's plans for a
reduction of the state's involvement in the banking sector.  In July 2000, the Government announced
its plan to sell off its shares in commercial banks after the second half of 2002, unless overall
economic and market circumstances are seriously aggravated.  For the time being, the Governmentplans to increase the value of banks' stocks to facilitate the retrieval of public funds when the
Government sells off its stake.  To achieve this goal, all commercial banks that have received injected
public funds must submit individual self-rescue plans by the end of September 2000.  At the same
time, a "Management Evaluation Committee (MEC)", consisting of experts who are independent from
the Government, will be established to evaluate the plans.  If the self-rescue plan is found to be viableby the Committee, the bank can continue to condu ct a normalization process according to its own
plans.  If a self-rescue plan is found non-viable, further public funds will be injected to fulfill the
minimum 10% BIS ratio, on the condition that further restructuring is to be performed and that the
banks will become the subsidiaries of financial holding companies that are expected to be established
in the future.
7. The United States and Switzerland asked about the total estimated amount of the
Non-Performing Loans (NPLs) of Korean financial institutions and the Korean Government's strategy
for reducing NPLs.  NPLs in banking and non-banking financial institutions amounted to
W 66.7 trillion as of the end of 1999, down from W 112 trillion at the end of March 1998.  The
Government will endeavour to clear up the remaining NPLs and prevent further NPLs from being
granted through the following efforts:
- Implementation of various restructuring programs as stipulated in the second round
plan;
- Strengthened standards for assets classification, sufficient provision of loan losses,
and transparent disclosure of management information;
- Accelerating corporate restructuring by promptly dealing with firms which are
undergoing workout programs, composition proceedings, or court management;  and
- Facilitating the clean up of NPLs through the launching of corporate restructuring
vehicle companies (CRVs) and possible introduction of a deferred amortization of
selling losses from NPLs.
8. Australia asked what the Government's intent ions were regarding the further injection of
public funds into the financial sector, which is carrying a high level of NPLs.  As explained in thepreceding paragraph, public funds will be used according to strict standards and principles to prevent
the moral hazard of financial institutions and mi nimize the burden on the public.  To minimize the
side effects of restructuring, public funds will also be promptly injected into the financial institutions
that can justify the need for them.  However, to establish strict market disciplines and enhance the
competitiveness of financial institutions, "softwar e reform", which involves advanced financial
supervision and improved corporate governance, will be continuously enforced.
(ii) Non-Banking Restructuring
9. In regard to non-banking restructuring:  (1) Japan raised questions on the reform schedule of
the non-banking sector;  (2) Canada inquired about the Government's policy on the chaebols' misuseWT/TPR/M/73
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of non-banking units;  and (3) and the European Communities wanted more information about the
Korean Government's future steps for enhancing prudential regulation in the non-banking sector.
10. The Government is exerting strenuous efforts to deal with the insolvency problem in the
non-banking sector because it is ultimately connected to the banking sector.  According to the second
round restructuring plan, all ailing non-banking companies, including merchant banks, insurance
companies, securities and investment companies, and mutual savings companies, will be identified
and settled by the end of the year.  For example, merchant banks which fail to record a BIS ratio ofabove 8% will receive public funds and be transformed into a KDIC (Korea Deposit Insurance
Corporation)-affiliated company in October 2000.
11. In order to prevent chaebols from misusing their non-banking units, the Government is
implementing strengthened corporate governance re gulations, such as by making it mandatory  to
have outside directors, auditing committees and compliance officers.  All the non-banking companieswhose business performance was poor because of excessive lending to chaebols who are their major
shareholders, will be heavily reprimanded and made subject to a restructuring process so that they
meet the capital adequacy ratio.
12. As for prudential regulations in the non-banking sector, the Government is imposing strict
Prompt Corrective Actions (PCAs) on non-banking companies that fail to meet the required capitaladequacy ratio.  PCAs consist of management improvement orders or recommendations, which are
issued according to the extent of the company's capital shortage.
13. The details of PCAs are as follows.  When  the Financial Supervisory Commission (FSC)
deems that the financial soundness of a financial institution has fallen below the standards provided,
for example, when the equity ratio is below the specified standards, or when the FSC judges that the
financial soundness is certain to fall below the standards provided, due to the occurrence of
financially burdensome incidents or the large sum of bad loans, it will issue an order the financialinstitutions concerned to submit an implementation plan for the improvement of financial soundness,
or it shall recommend, require, or order them to take actions that fall under any of the following
categories, in order to prevent insolvency and to ensure a sound management:
- A warning, reprimand, or salary reduction of officers or staff;
- An increase or reduction of capital, disposal of holding assets, or downsizing of
business networks and organization;
- Prohibition of the acquisition of the assets which are exposed to a high risk of
insolvency or price fluctuation, or restrictions on accepting deposits with unusually
high interest rates;
- Suspension of officers from the exercising of their duties, or appointment of
administrators who act for the officers;
- Retirement or consolidation of stock;
- Suspension of all or part of the business;
- Merger or acquisition of the troubled financial institution concerned by a third party;
- Assignment of business or transfer of contracts relating to financial transactions such
as deposits or loans;  orWT/TPR/M/73
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- Other actions which are deemed necessary for enhancing the soundness of financial
institutions and which correspond to the categories above.
(iii) Other Issues in the Financial Area
14. The European Communities inquired about the future steps for ensuring a consistent
application of newly introduced accounting standards and the future plans for enhancing the risk
management abilities of financial institutions.  In order to guarantee a consistent application of the
newly introduced accounting standards, the Government has been imposing penalties on firms andauditors who violate the accounting standard codes.  In addition, the penal provisions state that if a
person who is specified in Article 635(1) of the Commercial Code or who is in charge of the
accounting of a company, an auditor or CPA attached thereto, or any person related to an audit
commits any of the following acts, he shall be puni shed with an imprisonment of up to three years or
a fine of up to W 30 million:
- Failure to appoint an auditor within the period referred to in the relevant articles
without justifiable reasons;
- Failure to state the matters that should be contained in an audit re port, or the making
of a false statement in an audit report;
- Divulgence of confidential matters;
- Failure to report the malpractice, etc. of directors;
- Acts of making a false statement or concealing facts during stockholders' meetings;
- Failure to prepare financial statements, or consolidated or combined financial
statements;  and
- Acts of preparing and publicly disclosing false financial statements, or consolidated or
combined financial statements which is in violation of the accounting standards as
mentioned in the appropriate articles.
15. The Government also strengthened the review processes to detect accounting manipulations
and inappropriate auditing.  In addition, a non-governmental standards-setting organization, the Korea
Accounting Institute, was established to further develop accounting standards.
16. In order to enhance the risk management skills of financial institutions, the Korean
Government issued guidelines for the overall risk management system.  This effort aims to encouragefinancial institutions to build their own plans fo r establishing risk management systems.  The
implementation of these plans is reviewed by supervisory authorities on a semi-annual basis.  The
Government will also introduce the new advanced BIS system by the end of 2001, which will reflect
market risks, such as stock price fluctuations, in the calculation of commercial banks' capital
adequacy ratio.
17. In regards to the European Communities' question on further financial restructuring toward
establishing a risk-controlled environment, the Government will enhance the FSC's supervisory
functions regarding the credit risks of financial institutions, by setting up a monitoring system.  It will
also supervise and evaluate the financial institutions and their management on a regular basis.WT/TPR/M/73
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(iv) Corporate Restructuring
18. In regard to corporate restructuring:  (1) the European Communities inquired about the
Korean Government’s future policy for correcti ng the workout programmes and eliminating the "old
style" management practices of some chaebols;  (2) Japan sought further details on the Korean
Government’s efforts to help chaebols specialize in core business areas;  and (3) the European
Communities and Australia inquired about the Korean Government’s policy aimed at curbing the
chaebols' debts.
19. An early completion of the corporate restructuring is important because the ailing companies
are directly responsible for the precarious state of a number of financial institutions.  Accordingly, the
viability of the remaining 46 workout companies will be reviewed by creditor banks by October this
year, and non-viable ones will be liquidated or converted to court receivership according to the second
round restructuring plan.
20. Moreover, the present workout programme will be transformed into a pre-packaged
bankruptcy system by the end of 2000.  The new sy stem will facilitate the settlement process by
allowing creditor banks to either quickly shut dow n or shore up ailing companies.  To prevent any
abuse of the workout programme, illegal behaviour will be punished, and any company that violates
the law will be indicted by the law enforcement auth orities.  To remedy the "old style" behaviour of
chaebols, the Government will continue its efforts to enhance transparency in management, improve
corporate governance, and reduce overall debts.
21. Since the financial crisis, the Government has continued to encourage the conglomerates to
concentrate on their most competitive sectors, instead of expanding their business areas, in order to
enhance the overall competitiveness of Korean firms.
22. According to the second round restructuring plan, a comprehensive plan for the settlement of
12 Daewoo affiliates through sell-offs and other measures, will be finalized by the end ofOctober 2000.  For the other 34 companies undergoing the workout programme, they will undergo
either an early graduation from the workout programme or liquidation.  The outcome for each of these
companies will be determined by the end of November 2000, based on the review of their viability.
As for the companies undergoing court receivership  or court mediation, creditors will determine
whether the corporate reorganization process should be continued through consultations with thecourt, after a reassessment of the companies' viability.
23. To enhance the monitoring of potentially non-viable companies, the companies that are slow
in carrying out the corporate restructuring programm e (the so called "Big Deal") schedules, including
aviation manufacturing firms, will be requested to submit their final plan by the end of October 2000.
During the month of October 2000, creditors will check credit risks, including the liquidity problemsof major conglomerates that have achieved the target of a debt-to-equity ratio below 200% by the end
of 1999.  As soon as any signs of weaknesses in affiliates are detected, they will be required to make
self-rescue plans.  For the major conglomerates that failed to implement the Capital Structure
Improvement Plan (CSIP) or to achieve a debt-to-equity ratio below 200% by the end of 1999,
creditors will consider revising the CSIP after assessing the implementation of the plan inOctober 2000.  The viability of big companies, which suffer from severe liquidity problems, but have
not yet determined their future plans, will be assessed by creditors in October 2000.  After the
assessment, plans for their settlement will be determined for instance, plans for liquidation or a debt-
equity swap.  Restructuring measures such as M&As will be recommended for the companies that
belong to declining or non-profitable industries, so that the conglomerates can transfer their attentionto competitive and profitable industries.WT/TPR/M/73
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24. To establish a Day-to-Day Corporate Restructuring System, which will provide a more
efficient and legally stable workout system, Corporate Restructuring Vehicles (CRVs) andPrepackaged Bankruptcy will be introduced.  In December 2000, the current Corporate Restructuring
Agreement will be revised, so that it can be implemented autonomously by the creditor banks.  To
promote corporate restructuring through market mechanisms, credit financial institutions will enforce
risk management systems, such as loan interest discrimination, according to the credit risks of the
company.
25. To enhance the transparency of management and improve corporate governance, the hiring of
outside directors and auditing committees will be enforced for KOSDAQ-listed companies that meet
certain capital criteria.  Similar measures are in place for KSE (Korea Stock Exchange)-listed
companies.  To prevent moral hazard problems, such as inside trading by management staff, and to
reduce the possibility of false entries, the investigative functions of the FSC will be enhanced.
26. Some Members (Australia, the European Communities, and Japan) have raised questions
about what appeared to be an increase in chaebols' debt-equity ratios.  According to the consolidated
balance sheets, which are used according to international standard accounting methods, the average
debt-equity ratio of the four largest chaebols has drastically decreased from 352% in 1998 to 174% in
1999.  The average debt-equity ratio of the 6th to 64th largest business groups fell to 224% at the endof 1999, from 419% in the previous year.
27. Korea has introduced its own financial statement system and the combined financial
statement, in order to more accurately review the overall financial status of the conglomerates.  The
financial statements prepared according to this new system were disclosed in July 2000 for the first
time.  According to the new system, it appears that the four largest conglomerates' average debt-equity
ratio is 349%, if financial subsidiaries are included, and 225%, if financial subsidiaries are excluded.
However, it is incorrect to compare the consolidat ed balance sheets with the combined statements,
and conclude that the equity-debt ratios have increased because the standards for the two types of
financial statements are not entirely the same.
28. Nonetheless, the Korean Government will cont inue pushing forward to reduce the debt-equity
ratios, especially through tax incentives for restructuring efforts such as sales of business divisions or
assets, and through tax disincentives, such as non-deduction of expenses for the interest rates onexcessive debts.
29. To further induce the chaebols to improve their financial structure, the authorities will
strengthen the ongoing effort to improve the profit- oriented financial structure, by solidifying the
creditor banks' autonomous review and management system.  The authorities will also actively
respond to the chaebols' debt problem by establishing the credit risk management system in the latterhalf of this year, which will manage all of the financial institutions' total credit to chaebols.
30. In order to further reduce the chaebols' debts, the Government will continue to enhance the
transparency of management, improve corporate governance, and enforce the Capital Structure
Improvement Plan (CSIP), which is an agreemen t between creditor banks and conglomerates on
curbing reckless business expansions.  The CSIP specifies the methods, as well as the time schedule,for lowering the chaebols' debt-equity ratios.
31. The European Communities asked if the corporate restructuring process of private companies
is compatible with the WTO Agreement on Subsid ies and Countervailing Measures (ASCM), hinting
that it might involve public funds and financial contributions from the Government.  The Korean
Development Bank, a Government-established bank, is participating in the corporate restructuring
process, not as a public entity, but as one of the creditor banks.  Even though this bank wasWT/TPR/M/73
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established by the Government, it operates on the basis of commercial considerations, using
self-raised, non-Government funds.
32. The injection of public funds through some public entities, such as the Korea Deposit
Insurance Corporation and the KAMCO (Korea Asset Management Corporation), is not intended to
support any specific industries or companies.  These entities use the public funds to ensure the
soundness and stability of financial institutions that are experiencing serious problems with bad loans.
The WTO Agreement on SCM, which deals with trade in goods, would not apply to operations likethis.
33. The European Communities also requested a justification of the workout plan for Daewoo in
respect to the ASCM.  All financial institutions participating in the workout plan for Daewoo are
members of the Creditor Committee, which was established by voluntary agreement to maximize the
possibility of loan repayment.  The workout plan, which was initiated by a group of privateorganizations, is not subject to the Agreement on SCM.
34. The United States raised the need for more stringent monitoring of non-compliant companies
that have misused funds under the workout programme.  The FSC found that 44 companies under the
workout programme have moral hazard problems.  The FSC referred the matter to the National Tax
Office for its investigation, as financial transact ions cannot be tracked down under the current law.
The National Tax Office is investigating corporate owners for possible tax evasion, including
irregular insider trading and transfers of corporate capital to private uses.  Any violations of the law
will be charged, and evaded taxes will be collected.
(2) Labour Market Reform
35. The United States asked about the current status of Korea's legislation on multiple unions.
The Trade Union and Labor Relations Act, which was enacted in March 1997, newly allowed
multiple trade unions at the enterprise level to ex ist.  However, the implementation of the Act was
delayed until 31 December 2001, in order to avoid possible shocks and problems, as well as to give
enough time for the unions to establish a collective bargaining channel.  The Government then
submitted, in December 1999, a bill containing provisions on establishing a collective bargaining
channel at the enterprise level, but the bill wa s automatically voided when the National Assembly
ended its term.  The bill will be re-introduced in the near future, after discussions with the TripartiteCommittee.
36. The United States asked what steps the Government of Korea is taking to more clearly
identify which workers are classified as being employed in "essential services," and are thereby not
entitled to strike.  In the 1997 revision of the Labor Act, "essential services" was defined as those
industries where strikes would threaten the public's daily life, and where the possibility for asubstitution of services was slim.  Five service areas were covered:  railroad and urban transportation
services;  water, electricity, gas, petroleum refining and petroleum supply services;  hospital services;
banking services;  and telecommunications services.  The workers in these services do not
automatically lose their right to strike, but they must first undergo an arbitration process conducted by
the Labor Relations Commission (LRC).  Arbitrati on is undergone only when the Special Mediation
Committee of the LRC recommends it.  The banking industry (excluding the Bank of Korea) and
urban bus services will be dropped from the list of essential services in 2001.  The Tripartite
Commission has also agreed to have discussions on this issue.  The Commission will also actively
review measures to narrow the list of essential services in phases.
37. Japan asked how the Government intends to tackle the reform of its labour conditions, which,
it claims, are currently not consistent with international standards, for example, the one regardingWT/TPR/M/73
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payment to full-time union officials.  The March 1997 revision of the Labor Act prohibited the
payment of full-time union officials by employers, as of January 2002.  Since then, the FKTU(Federation of Korea Trade Unions) has demanded that the payment of full-time union officials
should continue.  The Government submitted a legislative bill to the National Assembly in December
1999, based on the proposals made by members of the Tripartite Commission.  However, the bill was
automatically dropped when the National Assembly ended its term.  A Sub-committee for Industrial
Relations was established within the Tripartite Commission, and a bill will be re-introduced in thenear future, based on the discussions of the Comm ission.  Other issues, such as simplification of
bargaining channels for multiple trade unions at an enterprise level, will also be addressed based on
the agreements made in the Tripartite Commission.
38. The United States asked what steps Korea is taking to allow unions themselves to determine
who can be members of the unions without jeopardizing their status as collective bargaining units.  Inprinciple, under Korean labour laws, a trade union that includes an unemployed worker cannot be
considered a trade union.  In 1998, the Tripartite Commission agreed to allow unemployed workers to
join trade unions, but the bill modifying the Labor Act did not pass the National Assembly, as
mentioned in the preceding paragraph.  There were attempts to allow currently unemployed, former
workers to join the trade unions, but the initiative was withheld because of legal clashes with theexisting Trade Union and Labor Relations Adjustment Act.  Discussions are under way in the
Tripartite Commission to work out a solution.
(3) Public Sector Reform
39. The privatization and restructuring of state-owned enterprises (SOEs) have been important
elements of Korea's public sector reform since 1998.  Even though some aspects of the privatization
process have slowed because of poor market conditions or delays in the passage of relevant
legislation, the Korean Government has been comm itted to following through with its privatization
plan.  The relevant legislation has been, or will be re-submitted, to the Korean National Assembly for
passage, and the sale of Government-held stocks will  take place as soon as market conditions allow.
Some details of the privatization of Korea's major SOEs are listed in the Annex.
40. Questions (Australia, the United States) were raised concerning the restructuring and
privatization plans for certain state-owned enterprises:
- The privatization of Korea Electric Power Corporation (KEPCO) will be launched in
three stages once a special law, which will divide the electricity generation sector into
six subsidiaries, which are to be immediat ely privatized, passes the National Assembly
in the fall of 2000.  Full privatization is expected to be realized by 2009.
- As for Korea Gas Corporation (KOGAS), the Government plans to reduce its
shareholding ratio by issuing new shares in 2000.  Then, the distribution component of
KOGAS will be divided into three subsidiaries in 2001, and then privatized in 2002.
- As for the privatization of Pohang Iron & Steel Company (POSCO), the privatization
process has been completed.  Of the shares previously held by Korea Development
Bank (6.84%), 4.6% was sold through an international DR offering on29 September 2000, and the remaining 2.24% was bought back by POSCO on
4 October 2000.  The 3% ceiling on individual investment has been eliminated.  To
foster a competitive domestic steel market, Korea maintains an open market for steel
and steel products, as evidenced by five billion dollars worth of steel imports.  While
there was an opinion that Pohang and Kwangyang Mills of POSCO should have beenseparated in order to raise the competitiveness of the market, the Korean GovernmentWT/TPR/M/73
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found that the positive synergy effect from POSCO retaining both mills was greater
than the benefits gained from separating them.  As a result, the Government did notpursue the breakup.  In line with the objectives of the corporate restructuring, there are
currently no Government representatives on POSCO's board of directors.
- As for Hanbo Steel, a contract for the sale of assets was signed with the Nabors
Consortium on 8 March 2000, but the final sale did not take place because Nabors
Consortium decided not to go through with the purchase.  The Korean Government is
still committed to selling Hanbo Steel as quickly as possible, and it is actively seeking
new buyers.
41. Regarding regulatory reform, the Korean Govern ment has engaged in an extensive regulatory
reform programme.  The Korean Government has reviewed 11,125 regulations, and eliminated over
5,400 of them in the last two years.  While some of the positive effects of the deregulation andregulatory reform can be seen quickly, others need more time to surface.  However, Korea expects the
deregulation and regulatory reform to improve the productivity of the economy.  Also, the increased
transparency of regulations and market liberalization have raised foreign investor confidence in
Korea, and resulted in the increase of Korea's inward foreign investment.  According to one study,
regulatory reform in Korea is estimated to bring an 8.6% increase in GNP over five years.  However,because the first stage of Korea's regulatory reform concentrated on reducing the number of
regulations, there is some validity to the criticism that the economic environment has not improved as
much as the numbers may indicate.  Thus, Korea will concentrate on raising the quality of its
regulatory reform process, by concentrating on improving the actual economic environment, rather
than focusing merely on the number of regulations eliminated.
(4) Other Matters
42. The Korean Government will continue to push for the second round of restructuring, based on
the successes of the first round of restructuring efforts.  The Government will put emphasis on
establishing a framework of market-oriented restructuring, and on restoring the soundness of the
financial industry through the prompt elimination of factors that may cause potential losses.  The
Government will encourage changes in managerial thinking and practices, in order to prevent
non-performing loans.  Such measures should enhance the competitiveness of the financial industry.
43. Japan asked how the Government of Korea w ould push the reform forward in the midst of
opposition movements in the financial sector.  The Government believes that there are always views
opposing reform in all societies and nations because reform brings changes to the pre-established
social order and values.  The Korean Government is making best efforts to proceed with the necessary
reform measures as smoothly as possible, by explaining fully the needs, principles, and basic directionof the reform to all the interest groups who are likely to be affected by the reform.  When necessary,
the Government tries to build a common ground with trade unions on the issue of reform, through
dialogue and consultations.  In the case of the tensions between the Government and the trade unions
during the financial sector reform in July of this year, the Government had engaged in sincere
consultations with trade unions to reach an agreement on the principles and direction of the reform.This was followed by talks at the Tripartite Commission to confirm the agreements made, after which
the reform proceeded smoothly.  The Government in the future will continue to move along the same
line, and other outstanding labour issues will be resolved based on the agreements made at the
Tripartite Commission.
44. Australia raised the issue of inter-Korea economic cooperation.  Australia asked if the
inter-Korea economic cooperation will be executed in a way so that the cooperative activities do not
impose too much of a burden on the Korean economy.  The Korean Government will continue toWT/TPR/M/73
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implement its engagement policy, in order to help North Korea accelerate its economic reform and
transform and open its economy to global trade and investment.  This, in turn, will contribute to thepromotion of peace and prosperity in East Asia and the world.  The expenses for the inter-Korea
economic cooperation, for which the Korean Government is to provide, have been and will continue
to be financed through the government-managed South-North Cooperation Fund, the volume of which
the Government intends to increase as long as the Government budget allows.  As to the division of
responsibilities between the Ministry of Unification and the Ministry of Finance and Economy, thecurrent arrangement will be mainta ined in the future.  Presently, the Ministry of Unification is in
charge of negotiating with North Korean authorities and coordinating the overall framework, while
the Ministry of Finance and Economy is handling more detailed issues, such as financing, preventing
double taxation, and establishing a financial clearance system.
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) Trade Policy Objectives
45. In response to the European Communities' question, Korea is fully committed to the early
launch of a comprehensive round of WTO trade negotiations.  Given that Korea has benefited
tremendously from the free trading system in its economic development, and that it is still heavily
dependent on external trade, it is vital for Kor ea to keep the multilateral trading system open and
rules-based.
46. Also in response to the European Communities' question, Korea believes that the agenda of
the new round should be comprehensive.  It should encompass, in addition to agriculture and services,
further market opening for non-agricultural goods, the strengthening of anti-dumping rules, new rules
on investment, competition policy, transparency in  government procurement, e-commerce and issues
of sustainable development.  Korea does not place any specific priority on these individual issues,
because it believes that the agenda should respond to the interests of all WTO Members in a balancedmanner.  Therefore, no issue should be excluded in an a priori manner.  However, Korea insists that,
at a minimum, non-agricultural goods, anti-dumping rules, new rules on investment, and competition
should be included as additions to the built-in agenda.
47. On the European Communities' question about sustainable development, after a long period of
the implementation of development-oriented economic policies, since the early 1990s, there has beenan emerging consensus on the need for an economic policy that is conducive to sustainable
development.  In this context, some new elements have been accommodated for in the
decision-making process in the economic field, including sustainability impact assessments, as
mentioned in the European Communities' questions.  Civil society has recently played a greater role
than ever, and diverse social interests, including environmental protection, are therefore beingreflected more and more in economic policies.
(2) Trade Laws and Regulations
48. Hong Kong, China asked about the Korean Government's efforts to publish legislation in
English.  Since 1996, the Korean Government (Ministry of Legislation) has translated into English
800 important pieces of legislation (Acts and Presidential Decrees), particularly those pertaining totrade and investment.  As a result, a twenty-volume series on the "Statutes of the Republic of Korea"
was published.  Currently, the Korea Legislation Research Institute updates the series on a quarterly
basis.  The English text is also available on the website of the Institute (http://www.kiri.re.kr).  In
addition to this extensive translation project, various translation works in specific areas have been
done.  For example, a three-volume translation of the financial statutes was published in 1999, andWT/TPR/M/73
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labour-related laws were translated in 1999 as well.  These translations are made available for the
convenience of foreign investors.
(3) Trade Agreements and Arrangements
49. A number of Members expressed interest in one of Korea's new trade policy agenda items
since the last review:  the Free Trade Agreement (FTA).  Questions by Members centered on Korea's
general position towards FTAs vis-à-vis the WTO multilateral trading system, the scope and progress
of Korea's current FTA negotiations with Chile, and the prospect of Korea negotiating FTAs with
other countries.
50. In an effort to adjust to the global trend of the increasing use of FTAs, Korea has come to
believe that FTAs can complement the multilateral trading system in the acceleration of the
liberalization of trade, and has decided to pursue an FTA.  However, there has been no change in the
Korean Government's position that FTAs must be consistent with the multilateral trading system, asembodied by the WTO, and should not act as a new barrier to trade between non-member countries.
This guiding principle will direct the Korean Govern ment to negotiate FTAs with other countries in a
manner consistent with the relevant WTO rules.
51. In choosing an FTA partner, the Korean Government uses the following criteria:
- Whether the FTA with that country will ma ximize trade creation but minimize trade
diversion;
- Whether the economic systems of both countries could be harmonized and whether
each country has a strong commitment to having an open economy;
- Whether the competitiveness of each party's industries will be improved through the
restructuring of the industries resulting from the FTA;  and
- Similarities in non-economic areas.
52. Taking into account the above factors, Korea chose Chile as an ideal partner for its first FTA.
The Presidents of Korea and Chile agreed to launch official negotiations on an FTA at a bilateral
summit in September 1999.  Korea and Chile have held three rounds of negotiations so far.  The
bilateral FTA will be comprehensive in its coverage with the highest possible degree of liberalization,
so that the FTA may bring optimal benefits to both  countries in conformity with the WTO Agreement.
In this respect, all products, including agricultural goods, will be covered, and the liberalization oftrade in services is currently a subject of negotiations.  No specific date is set for the conclusion of
negotiations, but both countries have agreed to exert best efforts to conclude negotiations as soon as
possible.
53. So far, the Korean Government has not selected Korea's next FTA negotiation partner.  Upon
finalizing FTA negotiations with Chile, Korea will consider initiating an FTA with another country,based on the criteria stated above.  Joint studies with Japan, New Zealand and Thailand have been
conducted on the economic feasibility of having FTAs with each country.  A joint study with Japan
was concluded early this year.  The results of the joint study are available upon request.  Joint studies
with New Zealand and Thailand have been conducted by private institutes of both countries and
Korea.  The results are expected to be available next year.WT/TPR/M/73
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54. The European Communities asked about the prospect of the current ASEAN+3 Group
developing into an FTA.  In the view of the Korean Government, it seems premature to discuss
whether the ASEAN+3 Group will develop a regional free-trade partnership.
(4) Trade Disputes and Consultations
55. Korea has completed the implementation of the recommendations and rulings contained in the
reports of the panel and the Appellate Body on "Korea - Definitive Safeguard Measure on Imports of
Certain Dairy Products" (WT/DS/98), by lifting the safeguard measure in question, as of20 May 2000.
(5) Foreign Investment Regime
56. Canada asked about the results of Korea's liberalization of FDI.  Before the financial crisis, in
January 1997, there were 54 industries completely closed to foreign investment.  By May 2000, there
were only 4 industries still completely closed to foreign investment.  Because of such liberalization,Korea has attracted around 33.8 billion dollars of in ward FDI since 1998.  The table shows the flow of
inward foreign investment between 1994 and August 2000, in millions of US dollars.
1994 1995 1996 1997 1998 1999 2000.1-8
Amount
(rate of increase)1,317
(26.1)1,947
(47.8)3,203
(64.5)6,971
(117.6)8,852
(27.0)15,541
(75.6)9,366
(20.5)
Cases
(rate of increase)646
(41.0)873
(35.1)967
(10.8)1,055
(9.1)1,399
(32.6)2,102
(50.3)2,810
(134.8)
57. Foreign investment has also provided opportunities for Korean companies to improve their
budget structure, enhance their managerial transparency, facilitate technology transfers, and increase
employment.
58. The European Community commented that Ko rea removed restrictions on foreigners'
ownership of land, and liberalized cross-border mergers and acquisitions.  Within one year since the
sale of land to foreigners was liberalized, 1.7 billion dollars worth of land was sold to foreigners.  The
land law on foreigners stipulates that foreigners can acquire land with little restriction, though there
are small exceptions, such as the military facilities protection area.  However, some foreigners
complain that a number of regulations on the use of land are too complicated, and it sometimesrequires much time and high administrative costs to change the zoned use of land.  However, these
regulations apply equally to both nationals and foreigners.  The Government will continue to
streamline and make transparent various land regulations.
59. There was a comment by the European Communities that the liberalization of M&As may not
be complete.  By removing the provisions that require approval from the board meeting for the
acquisition of existing shares, the  Government revised the law on foreign investment and foreign
capital inducement in May 1998, thereby completely allowing hostile M&As.  By the end of this year,legislation on facilitating M&As will be prepared.
60. Japan asked for clarification regarding the functions of the Foreign Investment Committee
and the "one-stop service for foreign investors."  The Foreign Investment Committee, whose chairman
is the Ministry of Finance and Economy, and whose members include officials from all ministries
responsible for foreign investment, is responsible for deciding the basic policies on foreigninvestment, and improving the investment climate.WT/TPR/M/73
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61. The KISC (Korea Investment Service Center) acts as a one-stop service center for foreign
investors.  The KISC provides consultations and support for various activities, such as the search foran ideal investment partner, selection of appropriate land for factories, obtaining of appropriate
licenses, and fulfilling of legal requirements.  It  even provides assistance in providing appropriate
housing, as well as improving the living environment, for foreigners.
62. The European Communities and Canada asked about the next stage of Korea's FDI plans, and
Hong Kong, China asked about Korea's plans to revi ew its existing investment policies.  The Korean
Government is seeking to improve its overall investment environment, to open more business areas,
and to transform monopolistic regimes into competitive ones.  For example, Korea Tobacco and
Ginseng Corporation, one of the remaining monopolistic industries, will be privatized in the near
future, and foreigners will be allowed to participate in the tobacco industry through a licensing
system.  Furthermore, the Telecommunications Act will also be amended to further liberalize foreigninvestment in the telecommunications sector.  According to the amended Act, the special
telecommunications services sector will be fully opened as of January 2001.
63. Korea has also strengthened and expanded its investment incentives.  For example, Korea has
reduced corporate and local taxes for ten years on foreign businesses engaged in 436 high-tech
industries that have a high technology transfer effect, and 97 service industries which support themanufacturing sector.  Another example is the design ation of "Foreign Investment Zones (FIZs)" for
large-scale greenfield foreign investment.  Foreigners in FIZs benefit from reductions in corporate and
local taxes for ten years, and exemptions from rent payments on state-owned properties.  During the
economic crisis, the Government drastically expanded tax benefits and rent reductions in order to
actively induce foreign investment.  This measure contributed to inducing large increases in foreign
investments, helping the stabilization of the foreign exchange market.  In an effort to minimize market
distortion, the Government confines the incentive system to technology-intensive or job-creatinginvestments whose social benefits outweigh the social costs.  The Korean Government constantly
monitors the effectiveness of these incentives, and asks for the opinions of foreign investors on the
usefulness of these incentives.
64. The European Communities and Canada asked which industries are still closed to foreign
investment.  Four activities are wholly closed to foreign direct investment: inshore fishing, coastal
fishing, radio broadcasting, and television broadcasting.  These industries are currently closed to
foreign investment because of possible negative effects on the Korean culture and undesirable effects
on related sectors.  Foreign investment in inshore and coastal fishing is closed because of the poor
condition of the fishing industry and the possibility that fishing villages could be ruined by the
introduction of large-scale foreign investment.  Radio and television broadcasting are closed toforeign investment, as well as investments by large domestic conglomerates, because of the
significance of their social impact.
65. Currently, 24 businesses are partially closed, mostly because, given the economic and social
impact of those businesses, more transition time is required before the industries can be fully opened
to foreign investment.  These 24 areas are:  growing of cereal crops, farming of beef cattle, publishingof newspapers, publishing of magazines and period icals, processing of nuclear fuel, electric power
generation, wholesale of meat, coastal water passenger transport, coastal water freight transportation,
scheduled air transport, non-scheduled air transport, leased line services, wired telephone and other
wired telecommunications, mobile telephone serv ices, cellular phone services, telecommunications
resellers, other unclassified telecommunications activities, domestic commercial banking, investmenttrust companies, programme supplying, cable broadcasting, satellite broadcasting, news agency
activities, and radioactive waste disposal.WT/TPR/M/73
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66. The telecommunications sector (the basic telecommunications industry, wired and wireless
phone industry and other telecommunications-related industries) is partially restricted because of itssignificance as one of the nation's key industries.  However, value-added telecommunications
activities are completely opened to foreign investme nt.  The ratio of foreign investment in Korea
Telecom will be gradually raised, and the Korean Government will also consider the opening of the
telecommunications sector in the renegotiations on WTO services.  Foreign investment in the
broadcasting and periodical industry is partially restricted because of its significant social effects, aswell as the importance of its role in preserving traditional culture.  The air and vessel transport
industry is partially restricted because of its public function as one of the nation's  key industries  and
its important role as the means of transportation in national emergencies.  The grain or food-growing
industry, including farming, is partially restricted in order to protect marginal farmers and small
farming villages, as well as to secure a stabilized food supply.  The nuclear fuel and generationindustry is excluded to ensure a stable supply of strategic parts and equipment.  It also plays a
significant role in the defense industry.
67. Canada asked why the FDI participation or liberalization ratio for cattle raising and meat
wholesale is less than 50%.  As stated, more tran sition time is required before these industries can be
fully liberalized to foreign investment.
68. Japan asked for clarification on foreign investment in broadcasting.  While satellite
broadcasting and cable broadcasting are partially open to foreign investment, radio and television
broadcasting are closed.  In this case, radio and television broadcasting refer only to terrestrial radio
and television broadcasting.
69. Japan asked about the chaebols' market power in the distribution sector, the credit market, and
the intermediate goods market, and the effects of their market power on foreign investment.  Recently,
chaebols' market power has fallen significantly.  For example, in the distribution sector, because ofthe development of large-scale discount stores which stock products from all manufacturers, the
number of traditional exclusive franchise stores has receded.  The financial sector restructuring has
limited the amount of credit that can be allocated to large business conglomerates, and the continued
corporate restructuring has reduced the scope of the chaebols' market distorting activities by
prohibiting illegal inside trading and mutual debt guarantees.  A tougher enforcement of competitionlaws has also reduced the influence of the chaebols on their SME suppliers.  Through fair trading
policies, the government has built a regime to k eep conglomerates from abusing their market power.
In order to prevent the abuse of market power, the Government also takes administrative actions when
companies, which have a market share beyond a certain level, wield abusive power by limiting a new
entry, adjusting delivery rates, or interrupting other businesses.  To contain unfair trading practices,the Government may fine companies that conduct unfa ir trading, such as forced trading, abusive use
of trading power, exclusion of competitors, and disc riminatory treatment.  In this environment, the
market power of the chaebols has fallen, and foreign investors and firms can more easily access the
distribution market.
70. Turkey asked for an explanation of the Foreign Investment Ombudsman Office.  The Foreign
Investment Ombudsman Office is a nonprofit orga nization, which was established in October 1999,
and is exclusively in charge of after-care services for foreign investors.  It receives complaints and
helps solve the problems experienced by foreign comp anies that invest in Korea, thereby helping them
to maximize their operational results in a stable and predictable investment environment.  The Foreign
Investment Ombudsman Office also speaks on the behalf of foreign enterprises in Korea.  It identifiesproblems in management and the living conditions, as faced by foreign companies, and solves them in
consultation with central and local governments.  Wi th matters that require policy changes, the Office
recommends to the relevant agencies, such as the Foreign Investment Committee, ways to solve the
problems.  The Office is composed of 30 experts from the fields of construction, finance, taxation,WT/TPR/M/73
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labour, customs clearance and others.  They often visit foreign companies and give individual
consultations.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) Measures Directly Affecting Imports
(i) Tariffs
71. Korea's tariff system is designed to flexibly respond to changes in the domestic industries and
markets to the extent possible, fully complying with WTO rules and principles, as well as its bindingcommitments to the WTO.
72. The structure and level of Korea's tariffs reflect the past economic history.  With time, and
through the process of multilateral tariff negotiations in the WTO, the Korean tariff system will
become more similar to that of other countries.  For example, a part of the reason why Korea's
agricultural tariffs are complex is because the agricultural sector has only recently undergone thetariffication process.  Thus, the current rates reflect varying degrees of protection, which was enforced
before the tariffication process.
73. Canada asked a question on the decision-making process for tariff rates and tariff quota.  As
explained above, the discussion on tariff rates starts in Korea with recommendations by the ministries
concerned or relevant industries.  The views of c onsumer organizations and interest groups are taken
into account through public hearings, deliberations of relevant committees, and public notices.
74. Indicating that Korea imposes high tariff rates, including tariff peaks of over 100% for some
agricultural items, Australia asked if Korea will consider binding more of the tariffs at lower rates.
Korea imposes higher tariffs on agricultural items than on manufactured products.  However, as
mentioned earlier, this should be understood as an  inevitable result of the Uruguay Round tariffication
of traditional import restrictions.  The possibility of implementing an overall tariff reduction, for
agricultural products as well, will be discussed in the context of the ongoing WTO agriculturalnegotiations and the new round of trade negotiations.
75. In regards to adjustment duties, many Members, including Australia, Canada, India, Japan,
Malaysia, Philippines, Switzerland and the United States raised questions.  First, some countries
indicated that the adjustment duties cause uncertainty for importers and foreign suppliers, and that the
public notice period needs to be extended.  Switzerland raised some detailed questions on the criteria,time limits and decision-making process for adjustment duties.  The United States and Malaysia asked
about Korea’s plan to reduce the number of products subject to adjustment duties, and Japan and the
United States indicated that some adjustment duty rates exceed WTO bound rates.
76. The adjustment duties are a type of simplified emergency measure that operate s within the
WTO binding rates, responding in a simple, yet timely manner to the import surge of a specific item,which causes or may cause injury to the domestic industry.
77. Adjustment duties are imposed for a relatively short period of time, and it takes some time to
consult with the ministries concerned and the interested parties, after the recommendation is made by
the relevant ministries or domestic industries.  Ther efore, it is important that the public notice period,
which begins when the preliminary decision is made to when the final decision is made, is short, andthus, it is not easy to extend it.WT/TPR/M/73
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78. The final decision is made through discussions in the Customs Deliberation Committee,
which is comprised of representatives of consumer organizations, opinion leaders, and other experts.Australia indicated that the exporter's view needs to be taken into account.  In this context, it is to be
noted that the exporter's view can be represented by domestic importers.  The authorities in charge or
the Ministry of Finance and Economy change the tariff rates or the tariff system, to reflect the views
of the related industries and organizations.  Interested parties, including importers and exporters, are
given prior notification through press releases and publications.  Foreign businesses are allowed topresent their opinions to related authorities as well.
79. The period of time for the imposition of adjustment tariffs is normally six months.  This
period may be renewed in some cases, taking into account the circumstances in the domestic industry
and markets.  The adjustment duty rates do not exceed the WTO binding rates.  However, in response
to the concern of trading partners that it causes uncertainty for traders, the Korean Government has
reduced the number of items subject to this duty and has also lowered the adjustment duty rates
gradually.
80. The United States and Japan indicated that some adjustment duty rates exceeded the WTO
binding  rates.  The figures in Table III.3 have been corrected and are available in the corrigendum to
the Secretariat's Report (WT/TPR/S/73/Corr.1).  As  indicated in the new Table III.3, there are no
items with adjustment rates that are higher than the WTO binding rates.
81. Canada inquired about the international cooperation tariff.  The international cooperation
tariff is stipulated in the Customs Act to implement the results of multilateral tariff negotiations, such
as the WTO and UNCTAD negotiations, as well as the results of the bilateral negotiations with other
governments.  The tariff is not the result of any single type of negotiations.
82. Canada asked why Korea applies the higher WTO concession rate rather than the lower
basic/general rate with respect to agricultural, forest and livestock products.  The Korea's CustomsAct provides that only WTO concession rates apply to these products, whatever the rates may be.
83. Japan asked why Korea has bound its tariff rates on motor vehicles to 8%.  In October 1998,
Korea concluded an MOU (memorandum of understanding) on motor vehicles with the United States.
The binding of tariff rates reflects the commitments  undertaken in the MOU.  For reference, this is
explained in the Secretariat Report, on page 139, paragraph 63.  Additionally, the EuropeanCommunities asked if the tariff rate (8%) is the applied rate or the bound rate.  In this case, both of
those rates are the same.  Japan also inquired about the possibility of reducing tariffs and concession
schedules for some electronic goods.  Korea expects that reductions in tariffs and concession
schedules will be discussed in the new round of trade negotiations.  Malaysia asked when the
adjustment tariffs on some forestry, industrial and fishery goods will be withdrawn.  Korea will studycarefully the possibility of withdrawing these adjustment tariffs in the near future.
84. The United States raised a question on the misclassification of certain products, that is, potato
flakes and soda ash.  Because clear criteria are not provided in the HS Convention, the Korean
Government classifies certain potato flakes as prepared items, rather than as mixed ones, which is in
accordance with the HS Convention.  The Korean  Government believes that the WCO (World
Customs Organization) allows each member to implement and operate internal criteria when an
internationally harmonized guideline on the HS classification of a certain item is not provided.  No
classification problem exists in regard to soda ash.
85. In the additional questionnaire, the European Communities asked if Korea is considering
lowering the bound rates, to bring them down to applied levels.  This issue will be discussed duringthe new round of negotiations.WT/TPR/M/73
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86. The United States pointed out that Korea contravened WTO bindings on several agriculture
items, such as peanuts, popcorn, potato flour and wheat, and soybean meal.  Korea has faithfullyimplemented the multilaterally agreed Uruguay Round Country Schedule in its administration of the
tariff rates on agricultural products.  The issue mentioned by the United States seems to have resulted
from the very slight discrepancy in the applied in-quota tariff rates during the interim period, due to
the difference in calculation methods.  Korea’s calculation method for the rates was based on
nine instalments while the United States considered ten installments.  Therefore, this is not a matter ofviolating a commitment, but a matter of disagreeing on the method of calculating the in-quota tariff
rates for the interim period.  However, the Korean Government has made an effort to settle the issue
in a constructive way, and as a result, the in-quota tariff rates, except for the one for popcorn, were
adjusted by January 2000.  However, the adjustment of tariff rates for popcorn would require an
amendment to the Tariff Act.
87. New Zealand asked if Korea is considering applying tariff-only treatment to those products
whose TRQ are consistently underfilled.  Korea is of  the view that any such additional tariff cuts or
changes in TRQs should be discussed within the framework of the WTO new round of negotiations.
88. With regard to tariffs, India raised a number of issues, expressing a concern that those tariff
problems serve as trade barriers, especially for developing countries.  In response, it should bestressed that the Korean Government has sincere wishes to expand its cooperation with developing
countries in all areas, including trade, investment and other activities.  In fact, the Korean Government
plans to continue expanding its official developm ent assistance (ODA) prog rammes.  It will maintain
its focus on the capacity-building of the developing countries through human resources development,
while sharing its development experiences.  The concern expressed by the Indian delegation has been
conveyed to the relevant authorities, so that they keep this in mind when deciding on and
implementing tariff policies.
89. India requested clarification on the calculation of the average applied tariff rate.  Basically,
the average tariff rate should be calculated us ing the in-quota rates which are actually applied.
Out-of-quota tariff rates are just statutory rates, which, in most cases, do not have any record of actual
application.  By using the in-quota rate, it is easier to get the average tariff rate closer to the
trade-weighted average figure.  Whichever is used, Korea does not have any problem identifyingtrends in tariff level changes, as long as some consistency in calculation is maintained.
90. India asked what Korea was doing to improve the market access for fishery products.  The
Government does not maintain any regulatory trade measures for fishery goods other than tariffs, thus
providing easy access to the Korean market.  The tariff structure is composed of only three stages.
However, adjustment duties have been temporarily applied to some fishery products.
(ii) Import Prohibitions, Restrictions, and Licensing
91. Korea eliminated the licensing system for all imports in March 1997, with the exception of
rice and beef.  For the purpose of preserving public health, sanitary standards and safety, however,
Korea maintains certain conditions and procedures for imports, which are applied in a
non-discriminatory manner to both domestic and imported goods.  For the sake of transparency, theseconditions and procedures are published in the form of a consolidated list.  In this regard, Thailand
asked about the possibility of easing the existing requirements.  Korea will continue to make sure that,
while endeavouring to achieve public policy purposes, those requirements will not constitute
unnecessary obstacles to trade.
92. In response to New Zealand's question, Korea does not have any discriminatory measures on
imported deer velvet.  Domestic and imported whole stick velvet, which is distributed in the slicedWT/TPR/M/73
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form, are covered by the same non-discriminatory standards and regulations.  However, it is very hard
to apply the current measures that are applied to whole stick velvet to imported sliced velvet, becauseonce the deer velvet is sliced, quality control is nearly impossible with the current inspection system,
and an internationally recognized inspection procedure does not exist at the present time.  Though
New Zealand has submitted a revised proposal on the quality control of sliced velvet, it did not
contain objective and scientific procedures for identifying the quality of sliced deer velvet.  A variety
of matters concerning deer velvet were discussed in bilateral negotiations between New Zealand andKorea, which were held on 10 October 2000.  Further bilateral negotiations concerning deer velvet are
tentatively scheduled for February 2001.
93. The European Communities and Canada asked questions about Korea's GMO (Genetically
Modified Organism) labeling scheme.  In order to guarantee the consumer's right to know, the
labeling system for genetically modified agricultural products is to be implemented from March 2001on corn, soybeans and bean sprouts, and from March 2002 on potatoes.  The labeling of food products
made from these GMOs will also be implemented from July 2001.  If the share of these agricultural
GMO products in the total weight of a final product  is below 3%, the final product will be exempt
from the mandatory labeling system.  Both imported and domestic products shall be subject to the
labeling regulation.  A mandatory labeling system is being adopted by many countries.  The KoreanGovernment will make sure that the labeling system will not be used as an unnecessary trade barrier.
94. With regard to the sanitary and phytosanitary measures, Korea's procedures for permitting the
imports of plants and animals are carried out in co mpliance with relevant international standards, as
established by the WTO/SPS Agreement, the Intern ational Plant Protection Convention (IPPC), and
the International Office of Epizootics (OIE).  Korea is also actively participating in the discussions in
the WTO/SPS Committee, OIE, Codex and IPPC.  In conformity with relevant international standards
and guidelines, including the SPS Agreement, OIE and IPPC, the Korean Government will examinethe SPS access requests that have been made until now, and will review the ones made in the future.
95. Regarding Malaysia's question on the SPS measures for tropical products, such as guavas,
mangoes, carambola and papaya, the consideration of pest risk analysis is under way.  Regarding the
European Communities' question on the "regionalization" principle, it is difficult for Korea to regard
the 15 European Communities members as a single area in the context of disease prevention.  EachEuropean Communities member needs to consult Korea on a bilateral basis on the disease-free
recognition issue.
96. The European Communities asked whether Korea will exempt the Netherlands' flower bulbs
packaged for retail sale from isolated cultivation.  In 1991, quarantine pests, including ISMV (Iris
Severe Mosaic Virus), were found in the Netherlands’ flower bulbs.  In Korea's judgment, it is verydifficult to exempt the flower bulbs, since there is a possibility that viruses can be transmitted to
domestic farms even though the flower bulbs are packaged.
97. The European Communities asked, concerning the BSE-related safety issues, for Korea's
justification for maintaining an import prohibition on bovine animals and products that are from
countries with a low incidence of BSE.  However, since scientific discussions on BSE-related safetyissues are still currently under way in international organizations, and the dissemination routes for
BSE have not yet been identified, a large number of countries are still prohibiting imports of cattle
and beef from countries with a low incidence of BSE outbreaks.  Korea will observe the results of the
discussions that are held at the OIE and take into account relevant research findings on BSE
dissemination in deciding whether to permit imports of cattle and beef from the countries in question.WT/TPR/M/73
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98. Regarding New Zealand's concern over pre-export testing for diseases such as Brucella
melitenis, Listeriosis and toxoplasmosis, Korea will consider examining the case in accordance with
relevant international standards.
99. The European Communities expressed concerns about Korea's zero tolerance for E-coli in
cheese products.  Since E-coli is a bacteria generally used as an indicator of contamination in dairy
products, Korea is maintaining zero-tolerance.  Korea also applies this regulation to domestic cheese
products.
100. The pre-approval procedures cited by Malays ia are not very burdensome.  Almost 80% of
imported foods have been categorized as products that need only a document review and can be
cleared within 2 days.  Even if a product is required to undergo the laboratory tests, the shipment can
be cleared in one week if the importer submits test result s that have been issued by domestic food
sanitation inspection laboratories or an official laboratory of the exporting country, which isauthorized by the Korea Food and Drug Administration (KFDA).  Furthermore, in April 1998, the
KFDA developed an Automated Inspection System for Imported Food, which is connected to
Customs Services.  The inspection results for imported foods are notified to Customs Services by the
EDI system to improve the speed and transparency of the customs process.
101. The United States and Thailand asked about the length of time required in clearing customs
for food and agricultural goods.  Korea's plant and animal quarantine and sanitary inspection of
livestock products are usually completed within one to three days after the related documents are
received, except in cases were close and minute examination and testing are required.
102. The inspection period for imported foods has been continuously reduced.  The period for the
KFDA's document, organoleptic and laboratory tests was shortened to two, three, and ten days,
respectively, in December 1999.  In the case of citrus fruit and vegetables, whose value usually
declines during the clearance period, test procedures will be completed within five days, based on the"fast inspection system".  However, for some inst ant foods, which use the "retort" method, and for
canned foods, the testing for bacteria takes 18 days.  However, a new method that takes only 15 days
will soon be implemented.
103. Regarding Japan's question on Korea's food labeling standards, the draft of the Labeling
Standard for Food e t al was notified to the public in November 1999, notified to WTO Members in
December 1999 (G/TBT/Nofti.99.661), and adopted in July 2000.  In drafting the new standards, the
KFDA made efforts to reflect the requests of foreign suppliers by introducing a main labeling section,
exempting certain types of foods from labeling, and using the Codex guideline as the standard for the
labeling of nutritional information.
104. Malaysia asked why the markings and labeling on stickers are not acceptable for country of
origin markings on products.  There are no specific restrictions as to the country of origin marking
methods employed in Korea, except that the mark ing is required to be sufficiently permanent.
Generally, such methods as engraving, etching, molding, branding, stitching, printing, labeling,
tagging and affixing stickers are acceptable for the country of origin marking.  The actual method of
marking should be selected according to the conditions and characteristics of each product, and theyshould be pertinent to international trade practices.  In the specific case of stickers, when information
such as product name, size and model are included with other necessary information, and if the
attachment is sufficiently permanent, stickers can be a proper method for the country of origin
marking.
105. Japan asked why origin marking is voluntary for domestic goods.  Marking of origin on
imported products provides consumers with information on the country where the product was made.WT/TPR/M/73
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Domestic products are not required to mark the place of origin because in Korea, as in most countries,
if there is no specific marking, the product is regarded as domestic.
106. Japan asked for an explanation of Korea's eco-labeling requirement.  Under the eco-labeling
system, the Government or a neutral body certifies, as environmentally friendly, goods that either
cause less environmental pollution in their production, distribution, usage and disposal process when
compared to other goods, or contribute to the conservation of resources and energy.  The system is
intended to provide accurate information to consumers so that they can select products based on theirenvironmental friendliness, and also to provide incentives to producers to develop environmentally
friendly products and technology.  The system is designed to facilitate sustainable development and
consumption, and it is not a requirement for exportation or importation.  The eco-labeling system is
administered jointly by consumers, producers and the Government.  The Ministry of Environment is
responsible for its general policy, including the drafting of relevant laws and cooperating with otherrelevant ministries.  A non-governmental or ganization, the Korea Environmental Labeling
Association, is in charge of the general administration, including the selection of the products
qualified to receive eco-labeling, the certification and use of eco-labeling marks, and the monitoring
of the use of the mark.
107. New Zealand asked how Korea can assure exporters that import licences are issued fairly
when the domestic producer board organizations also act as the import licensing authorities, and may
thus have a vested interest in favoring domestic producers.  In cases where the imports of items that
are subject to tariff quotas are applied for, these producers' organizations automatically give approval
for such imports, as long as the amount of the imports does not exceed the limit of the tariff quota.
108. The United States and the European Communities also asked questions concerning the role of
producers' organizations in import certification and licensing.  In 1997, Korea abolished the import
licensing system on all items but rice and beef.  However, export and import qualifications andprocedures are still required for some items, in order to ensure public health care, safety and
biological diversity, as explained earlier.  These requirements and procedures, which are generalized
worldwide, are implemented based, for example, on Articles 20 (general exceptions) and 21
(exceptions for safety ensurance) of GATT, the Montreal Protocol, and the Convention on
International Trade in Endangered Species of Wild Fauna and Flora.
109. There are allegations that some producer groups seriously intervene in import procedures and
thus cause side effects.  However, most  of the confirmation of import and export qualifications is
conducted by the Government.  Private organizations, on occasion, are involved in the procedures for
some items, when the Government consigns such work to them, so that their special skills are utilized
and a smaller government is maintained.  The Gove rnment's consignment follows transparent and fair
procedures, and non-government persons must keep business secrets strictly to themselves, much like
civil servants.
110. With regard to Uruguay's questions on Table III.4 concerning the import licensing or prior
authorization agency for rice and beef, the import li censing authorization agency for the import of the
minimum market access amount of rice is the Ministry of Agriculture and Forestry.  The priorauthorization agency for the import of animals and animal products is the National Veterinary
Research and Quarantine Service (NVRQS), which is a subsidiary agency of the Ministry of
Agriculture and Forestry, responsible for the quarantine and inspection of animal and livestock
products.WT/TPR/M/73
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(iii) State-trading and TRQ Administration
111. The European Communities, Uruguay, New Zealand, Canada, and Thailand asked about the
TRQ administration methods and producers' organiza tions' role in TRQ administration.  TRQs are
allocated to end-users in various ways: on a first-come first-serve basis (used for corn, sweet potatoes,
and rye, etc.);  based on a consideration of past import performances (used for manioc (cassava), corn
for feed, and barley for feed, etc.);  through quota auctions (used for other milk and cream products,
etc.);  or by state trading (used for oranges, natural honey, potatoes, onions and garlic, etc.).
112. Several organizations are commissioned by the Government to administer their respective
tariff quotas, and Korea has notified the May 1995 Session of the WTO Committee on Agriculture of
its TRQ Administration.  The main organizations in charge of TRQ administration are:
- National Agricultural Cooperatives Federa tion (NACF), (for sweet potatoes, wheat
starch and manioc, etc.);
- National Livestock Cooperative Federation (NLC F), (for rye, corn, corn for feed and
barley for feed, other milk and cream products, and whole milk powder, etc.);
- Cheju Citrus Growers' Agricultural Coop erative (CCGAC), (for oranges and citrus
fruit);  and
- Agricultural and Fishery Marketing Cooperation (AFMC), (for potatoes, onions, and
garlic, etc.).
113. Please note that the National Agricultural Cooperatives Federation, National Livestock
Cooperatives Federation, and the National Ginseng Cooperatives Federation have merged to become
the National Agricultural Cooperatives Federation on 1 July 2000.
114. The role of these organizations is limited to determining quota allocations and giving import
approval.  The allocated tariff quotas are imported and distributed by private importing companies.
Also, the private importing companies autonomously determine the resale prices of the importedgoods.  In the case of state trading, the organizations import the quotas themselves and sell them in
domestic markets.  In order to ensure orderly domestic markets, the state trading enterprises may
impose a mark-up on some agricultural products, as stipulated in Korea's Schedule Note 4.
115. The CCGAC is carrying out a development prog ramme with the revenues collected from the
importation and domestic sales of TRQ orange s and citrus fruit.  The major contents of thisprogramme involve structural adjustments, research and extension projects to develop technologies
relating to citrus production, and marketing.
(iv) Government Procurement
116. Japan asked about the new conditions recently included in the amendment to the Presidential
Decree of the "Act Relating to Contracts to which the States is a Party" (ARCSP) for the singletendering procurement for small and medium-sized ente rprises.  This regulation applies to all agencies
subject to the Government Procurement Agreement, regardless of whether they are central
government agencies, sub-central government agencies or public corporations.  For Korea, the GPA
does not apply to the single tendering procurement, which includes set-asides for small and
medium-sized businesses, according to the Notes of Korea's Annexes to the GPA.  The "Local
Finance Act" and the "Framework Act on the Management of Government-invested Institutions,"WT/TPR/M/73
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which are referred to in the Notes of Annexes 2 and 3 of the GPA, follow the provisions of the
ARCSP that deal with single tenderings related to SMEs.
117. Japan asked about a certain vehicle the Korean Government had procured from Ford Korea at
the price of one won, specifically if such an award was permitted under the Korean Accounting Act.
In order to improve the public perception of imported motor vehicles, the Ministry of Commerce,
Industry and Energy (MOCIE) had decided to purchase an imported automobile to use as an official
ministry vehicle.  The procurement took place thr ough an open tendering process, according to the
conditions specified in the Act Relating to Contracts to which the State is a Party, and Ford Korea
won the contract.
118. Korea plans to gradually introduce electronic tendering, starting in 2001.  However, it is the
intention of the Korean Government to maintain the use of existing publication methods until the
GPA is modified to allow the sole use of electronic means.
(v) Standards and other Technical Requirements
119. The Korean Government enacted the National Standardization Act in February 1999, in an
effort to encourage the alignment of Korea's stan dards and technical regulations with international
standards, including the ISO/IEC.  Furthermore, the Korean Government has drawn a five-year plan
aimed at aligning Korean Standards (KS) with international standards.  By 2004, more than 80% ofthe KS will be aligned with international standards.   When this plan is fully implemented, all Korean
standards will be made in line with international st andards, with the exception of standards that are
relevant only domestically.
120. Japan asked whether Korea intends to implement the 60-day review period for new
technology standards.  Korea is a member of the WT O/TBT Agreement, and is doing its best to give a
60-day examination period for technology standards to the concerned parties, regardless of
nationality.  In cases where revisions in technology standards are urgent, the 60-day period might notbe fully provided, but in such cases, the Korean Government will answer relevant questions, even
though the period for questions may have passed.
121. The European Communities asked to what products the voluntary certification is applied.
The European Communities seem to be referring to the Temporary Certification System.  The
Temporary Certification System is operated for the purpose of expanding the product coverage ofindustrial standards, assisting in the development of new technologies, protecting the environment,
and encouraging the effective use of energy.  The products to which voluntary certification is applied
are determined according to the requests of applicants, and will not be chosen beforehand.  This
certification is entirely voluntary, in that products that do not have such certification can still be
placed in the market without restriction.
122. Mandatory certification is aimed at ensuring consumer safety, health and environmental
protection.  Certain deviations from international standards in this area are inevitable for the purpose
of fulfilling legitimate objectives, including national security requirements, the prevention of
deceptive practices, and the protection of human health or safety, animal or plant life or health, or the
environment, as provided in Article 2.2 of the TBT Agreement.
123. Thailand asked whether Korea is willing to accept the conformity assessments of exporting
countries.  The authorization of the exporting country's certification is currently possible when that
country has a Mutual Recognition Agreement with Korea.WT/TPR/M/73
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124. Concerning the European Communities and Japan's questions with respect to the shelf-life
requirement, Korea is currently applying the ma ndatory shelf-life requirement to pasteurized milk
only, and the requirement is applied equally to domestic and imported pasteurized milk.  Contrary to
what the European Communities has found, Korea's importers are autonomously setting the shelf-life
of imported frozen meat within the limit of the original shelf-life established by processors in
exporting countries.  Korea does not delay or reject imports of frozen meat on the grounds of the
shelf-life requirement.
125. Concerning Japan's question on the Korean Food Additive Code, the Code covers 571 items,
and many flavor ingredients are allowed but not included in the list.  Korea has continuously
expanded the Code's coverage:  38 items were added in 1995, 108 items in 1996, 2 items in 1997,
14 items in 1998, 10 items in 1999, and 4 items in 2000.  The added items have been notified to the
WTO through the SPS notification system.  Korea is further considering adding six more items to thelist, and will make constant efforts to expand the list through the examination of the necessity and
safety of additional additives.
(vi) Frugality Campaigns
126. Several Members, including the United States and the European Communities, have asked
what Korea was doing to counter the anti-import sentiments often fostered during frugalitycampaigns.  The Korean Government has actively increased its interactions with the public to improve
the people's understanding of the benefits of imports and trade liberalization.  President Kim Dae-jung
himself has been at the forefront of this effort, making television appearances and recommending
"rational consumption", which includes the consumption of imports.  He emphasized that consumers
should choose the best quality goods at best available prices, making it clear that open competition is
the best way to ensure the future success of Korean businesses.
(2) Measures Directly Affecting Exports
(i) Market Access and Export Restriction
127. Japan asked about the bilateral agreement on textiles, which Korea concluded with Turkey in
April 1996.  The Korea-Turkey Bilateral Textile Agreement was signed in the context of the
establishment of a customs union between the European Communities and Turkey.  A reference is
made in the corrigendum to the Secretariat's Report (WT/TPR/S/73/Corr.1).
(3) Measures Affecting Production and Trade
(i) Taxation
128. In the operation of its internal tax system, Korea fully complies with the principle of national
treatment, which is an important WTO rule.  In addition, the Korean Government has abolished all
prohibited subsidies well in advance of the time limit provided in the WTO Agreement on Subsidiesand Countervailing Measures.  Specific tax incentives are maintained at the lowest level possible.
129. The Czech Republic and the United States stated that Korea's internal taxation on automobiles
and alcoholic beverages is complex and burdensome, and they asked if there were any plans to
simplify the internal taxation system.  Malaysia also asked about simplification in the context of
enhancing transparency.  In modern countries, in order to achieve various policy objectives, the taxsystem is becoming more complex than ever.  In Korea, automobiles and alcoholic beverages, which
are very important sources of tax revenue, are taxed to achieve objectives such as consumption
control, environmental protection and energy conserva tion.  In particular, high taxes are imposed onWT/TPR/M/73
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automobiles that heavily consume energy, in order to encourage energy conservation.  It should be
stressed that these taxes are applied on both domestic and foreign vehicles, and that Korea, therefore,does not discriminate against imported automobiles in  the assessment of taxes.  Therefore, the Korean
Government cannot accept the notion that internal taxation imposes a disproportionate burden on
imported automobiles.  Tax simplification is one of the main policy goals of the Korean Government.
130. The European Communities asked about the possib ility of adopting a specific tax, rather than
an ad valorem  tax, on alcoholic beverages.  In Korea, almost all consumption taxes are levied by an
ad valorem  method, and the Korean Government has not considered any specific taxes on alcohol
beverages.
131. The Czech Republic and the European Communities raised a question about the national
legislation prohibiting supplies from small breweries in the Korean market.  The present Liquor Tax
Act strictly controls the distribution network for alcoholic products in order to levy appropriate taxes.Thus, small breweries selling directly to consum ers would cause serious problems in Korea's tax
administration.  In addition, it would be difficult for the Government to check and guarantee the
quality of alcoholic products for every small brew ery.  Concerning Switzerland's question on indirect
taxation, the excise tax for most products is streamlined with the ad valorem  tariff in Korea.
Therefore, the Government has no plan to introduce specific duties on alcoholic beverages in theforeseeable future.
132. The European Communities pointed out that the importers of alcoholic beverages are
permitted to have only one warehouse each, from which to distribute their products.  As referred to
above, the distribution of alcoholic beverages is strictly controlled by tax authorities in accordance
with the Liquor Tax Act.  As a method of control, all distributors of these products, including
importers, are allowed to have only one warehouse in a unit of area, that is, in each city or county.
However, an importer is allowed to have an additional warehouse in importing ports.  This can beregarded as a benefit, rather than a disadvantage for importers.
133. The United States asked for detailed information on tax incentives, whether any tax incentives
are offered to specific industries, and as to which organization monitors compliance with the
qualifying criteria for the tax incentives.  Tax incentives in Korea are explained in detail in the
Secretariat Report, especially in Table III.9 on pages 89-91.  In addition, every specific subsidy,including tax incentives, offered by the Korean Government is included in the subsidy notification,
the latest of which was submitted last June (G/SCM/N/60/KOR).  Compliance with the criteria for tax
incentives is checked and monitored by the National Tax Administration.
134. Referring to Daewoo Heavy Industries, the European Communities asked for an explanation
of the objective of the tax exemption law currently being examined by the National Assembly.  Underthe current Corporation Tax Act, all corporations benefit from special tax treatment, such as tax
deferrals and deferred payment of capital gains tax, when they are divided or merged, as long as some
requirements are met.  However, it would not be easy for some  companies which are undergoing the
workout process to fully meet such requirements.  Thus,  the revised bill would allow the companies
undergoing workouts to enjoy the same benefits, even if they cannot meet those requirements.  Thus,the revised bill should be regarded as securing the same tax treatment for those companies undergoing
workouts, rather than as offering any special benefits to them.
(ii) Production Assistance
135. The United States asked for a list of the seven subsidy programmes that were terminated and
the dates of their termination.  The seven subsidy programmes that were eliminated are listed below.The four prohibited subsidies that were eliminated in 1997 were the Reserves for Export LossesWT/TPR/M/73
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(10 April 1998), Reserves for Oversea Market Development (10 April 1998), Tax Credit for
Investment in Facilities (10 April 1998) a nd Assistance Program to Promote the Spread of
Domestically Produced Mini-Computers (1 January 1998).  The three actionable subsidies that were
eliminated were the Sericulture Development Program (31 December 1997), Government Purchase of
Rapeseed (31 December 1997), and Research and Development Activities for Low Emission Auto
Vehicles (31 December 1996).  Regarding the subsidies that are subject to notification according to
the WTO Agreement on Subsidies and Countervailing Measures, Korea has been notifying theSecretariat of its subsidy scheme on a yearly basis since 1996.  As of 1999, Korea maintains
19 subsidies, 15 of which are actionable subsidies.
136. The European Communities asked questions on the Livestock Support Program and Market
Improvement Program for Fruit and Flowers.  The Government's purchase of beef was carried out on
a temporary basis as the domestic cattle industry was affected by drastic falls in the prices of Koreancattle, while production costs had increased due to the economic crisis.  The Korean Government's
purchase of beef was carried out for one month beginning in May 1996, and then suspended.  The
purchase was resumed in January 1997 and implemented until 31 August 1998.  The difference in the
periods of implementation explains why the 1997 expenditures under the Livestock Support Program
are substantially higher than those of 1996.  As Korea recovered from the recession and cattle priceswere restored, the purchase under the support programme was discontinued in late August 1998.  No
Government purchase of beef was made in 1999.
137. On the other hand, the support programme for pork production provided financial support to
pig breeding farms and meat processing companies.  The project was also implemented in 1999, and
the total amount of support was W 8,334 million.  It is to be noted that the figures in Table III.11
stand to be corrected.
138. The Marketing Improvement Program for Fruit and Flowers is intended to provide support for
the selection, packing and transportation of fruit and flowers by domestic exporters.  This programme
falls within the support to marketing expenses and domestic transportation costs which is permitted
for developing countries under Article 9.4 of the UR Agreement.  The amounts of support in 1998 and
1999, under the Marketing Improvement Program for Fruit and Flowers, are 5.3 billion and
W 7.4 billion, respectively.  The marked increase in 1999 over 1998 is due to an increase in exports.
(iii) Competition and Consumer Policy
139. Canada asked for the details of Korea's policy on hardcore cartels.  The cartels that are
deemed illegal are those that fall under the category of hard-core cartels recommended by the OECD
for prohibition (for example, computation of the remuneration for CPAs by the Korea Institute of
Certified Public Accountants), as well as those that are not hard-core cartels but have largeanti-competitive effects (for example, the coordination of interests among wired broadcasting
companies by an association of wired broadcasters).
140. The improvement of cartels means introducing elements that can stimulate competition in
cartels, while allowing for their existence.  Defining or clarifying the laws that permit cartels, which
were too broad in their scope or unclear in their meaning, would be an example of such animprovement.  In some cases, "improvement" also means the monitoring of a cartel, such as requiring
prior consultations  or advance reporting/notification.
141. Concrete examples of cartel improvements include:  scaling back the band of jointly
calculating insurance premiums;  phasing out the number of products subject to group negotiations
with the association of SMEs;  and narrowing the scope of the coordination directive issued by theWT/TPR/M/73
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Minister of Commerce, Industry, and Energy for the purpose of maintaining a balance of exports and
imports.
142. One of the major impacts of such cartel-related improvements on competition is enhanced
price competition in the professional services markets.  For example, the measure of abolishing the
standards for setting service fees resulted in a wide remuneration gap between professionals.  In
October 1999, the KFTC conducted a survey on the level of service fees that lawyers would like to
receive concerning the same criminal lawsuit.  The desired level of remuneration ranged from 1 toW 10 million.
143. In order to enter the stock exchange market, firms have to meet the required capital and
facilities standards, subject to the approval of the Financial Supervisory Commission (FSC).  As of
September 2000, a total of 63 firms are in operation in the domestic stock market.  Since the 1990s,
fees and commissions related to stock trading have been open to competition.  There exist noagreements on fixing such fees.
144. Also, capital and facilities standard requiremen ts must be met for entry into the insurance
market.  As of September 2000, 28 life insurance companies and 16 non-life insurance firms are
operating in the domestic market.  The enactment of the Omnibus Cartel Repeal Act in 1999 allowed
the Insurance Development Institute to set only the net premium, effective from the year 2000.  Thereexist no other agreements on fees or commissions in the insurance market.
145. Canada also asked how Korea balances the regulation and competition functions of the
two separate authorities (MRFTA and KCC/FSC) in the telecommunications and financial services
sectors.  Unfair practices related to interconnection, the provision of facilities, and information
sharing in the telecommunications sector are handled by the Korea Communications Commission
(KCC), while prudential regulations and those concerning trade practices in the financial sector are
the responsibility of the Financial Supervisory Commission (FSC).  However, the telecommunicationsand financial sectors are not completely exempt from the application of the Monopoly Regulation and
Fair Trade Act (MRFTA).  In December 1996, the provision of the MRFTA that granted exemptions
to the financial market was repealed.  Thus, the KFTC has strictly enforced the law against
anti-competitive practices in the financial market, as it has in other sectors.
146. A noteworthy feature of Korea's competition policy is that institutional mechanisms have
been put into place to prevent clashes between the MRFTA and other statutes concerning
telecommunications and financial services.  For example, a telecom service supplier that received
corrective measures from the Minister of Information and Communication, after the deliberation of
the KCC, cannot receive additional corrective measures pursuant to the MRFTA for the same practice
(Article 37-3 of the Telecommunications Business Act).
147. In addition, the KFTC and KCC have continued consultations in order to clarify each other's
tasks, reviewing a variety of unfair practices that are taking place in the telecommunications sector.
Subjects of consultation include how to limit the scope of unfair practices governed by the KCC to
technical and expert matters, how to define the scope for both organizations more clearly, as well as
how to define ways to operate a working-leve l consultation channel between the two agencies.
148. With respect to financial services, there has been closer cooperation between the KFTC and
FSC since the abolition of the provision in the MRFTA, which had granted exemptions to the
financial sector.  The KFTC has been in charge of regulating against undue concerted acts, undue
labeling and advertising posted by financial institutions, and the review of unfair standard contracts.
Meanwhile, the FSC has been responsible for prudential regulation, based on finance-related statutes,and tackled violations of the law in the financial sector to protect the interests of investors.WT/TPR/M/73
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Consultations between the KFTC and KCC/FSC are ongoing, as there may still be some gray areas
concerning the mandate.
149. In the proposed business merger between SK Telecom, the largest wireless phone operator,
and Shinsegi Telecom, which has the third largest market share, the KFTC granted a conditional
approval after holding consultations with the Ministry of Information and Communication (MIC).
After inquiring of the MIC about the need for corporate restructuring in the relevant market-place and
the efficiency-enhancing effect of the proposed merger, the KFTC approved the merger with severalconditions attached, which reflect its concerns.
150. In this regard, Canada also asked about Korea's policy on M&As between facilities-based
telecom service suppliers.  The Korean Government has maintained a consistent policy of approving
M&As between facilities-based telecom service suppliers, unless they undermine fair competition and
jeopardize user protection.  Moreover, the M&As of facilities-based service suppliers by non-serviceproviders were allowed as of January 1999, following the revision of the Telecommunications
Business Act in September 1998.
151. With respect to the telecommunications sector, Japan was concerned that regulations against
the harmful effects of monopolies might have remained weak because the KCC has been regulating
the sector.  Contrary to Japan's concerns, the fact that the KCC, instead of the KFTC, regulates thetelecommunications sector does not necessarily weaken the regulations against the harmful effects of
monopolies.  As the KCC specializes in the telecommunications sector, it can more effectively
strengthen regulations against the harmful effects of monopolies in this sector.
152. One of the reasons why regulations against monopolies are not weak is because the "Essential
Facilities Doctrine" is strictly enforced in Korea.  The Telecommunications Business Act requires
telecom service suppliers equipped with essential facilities to offer network interconnections and
necessary information to other suppliers.  At th e same time, it is possible to apply the MRFTA
whenever it is deemed necessary.  These arrangements ensure that the harmful effects of monopolies
are fended off in the telecommunications industry.
153. Japan also asked whether the Korea Consumer Protection Board (KCPB) participates in the
regulation of the telecommunications industry.  The KCPB assumes the responsibility of consumer
protection in the telecommunications industry, such  as in the remedy of injury and provision of
information.  The KCPB receives complaints from consumers who have been injured by telecom
service suppliers.  Then, the KCPB opens fact-findi ng investigations and recommends that the parties
concerned reach a settlement.  If the recommendation is not accepted, the Consumer Dispute
Settlement Commission steps in to facilitate a settlement.  However, it cannot regulate the
telecommunications industry, which is handled directly by the Ministry of Information andCommunication and the KCC.
154. Hong Kong, China expressed interest in the result or effectiveness of the KFTC's
investigations into unfair intra-group transactions among chaebol affiliates, and other measures to
address competition.  From May 1998 to September 2000, a total of four rounds of probes into alleged
undue intra-group transactions among chaebol affiliates were carried out.  Three probes dealt with thetop 5 business groups, while the other probe dealt with five groups other than the top 5.  The
investigations uncovered subsidization transactions worth W 20 trillion, and resulted in the
assessment of W 184.5 billion in surcharges.  Such investigations and tough corrective measures
taken by the KFTC against undue intra-group trading have prevented the flow of healthy affiliates'
resources into marginal affiliates.WT/TPR/M/73
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155. In addition, such investigations have provided the public with detailed information on
chaebols' undue transactions within the group, which have helped create a favorable public opinion oncorporate restructuring.  The investigations have also had other positive ramifications, such as
supplementing institutional mechanisms related to taxation and finances and providing necessary
information to minority shareholders and civic groups for corporate monitoring.
156. Furthermore, the KFTC has implemented limits on cross-debt guarantees against the top 30
business groups to resolve chaebol-related competition problems.  The February 1998 revision of theMRFTA led to a complete ban of any new cross debt guarantees, effective April 1998.  The
outstanding guarantees were to be removed by March 2000.  All the existing guarantees were cleared
off by the target date.
157. In addition, since April 1987, the KFTC has prohibited mutual shareholdings among chaebol
affiliates, in order to prevent the monopolization of financial resources through the creation ofwatered-down capital, an increase in the chaebol chiefs' controlling power, and the reckless expansion
in the number of affiliates.
158. Japan requested information on the results of the investigation on the anti-competitive
practices of State-Owned Enterprises (SOEs) in the past 2 years.  The results of the investigation into
the unfair trade practices of SOEs from May 1998 to date are as follows:
159. Probes into Korea Telecom, KEPCO, Korea Housing Corp., and Korea Highway Corp. in
May 1998 led to several corrective orders, including cease and desist orders, the publication of law
violations, and assessment of surcharges totalling W 1.5 billion.  KEPCO abused its market power
when conducting transactions, by failing to pay extra charges to their transaction partners for delayed
payments and unduly passing onto others the responsibility of compensating for damages arising from
electric shock accidents.  Korea Telecom also abus ed its market power when conducting transactions,
by failing to reflect the price hike of telecommunicat ions cables and failing to make payments to their
transaction partners for indirect costs, which stemmed from the suspension of construction projects.
160. The second round of investigations on unfair trade practices committed by 10 public entities,
including Korea Land Corp., Korea Water Resources Corp. and Agricultural and Fishery Marketing
Corp., took place in September 1998.  The KFTC issued corrective orders, ordered these public
entities to  publicly announce their violations of law, and imposed W 650 million in surcharges.  Theinvestigation found, for instance, that Korea Water Resources Corp. attached conditions on its
transactions, fixed the insurance premium, and designated a particular insurance firm as its contractor
when it placed an order for a construction project.
161. In March 1998, the KFTC carried out investigations on undue intra-group transactions
involving eight SOEs, including KEPCO, Korea Te lecom and KOGAS.  Perpetrators were ordered to
publicly announce their violations of law in major dailies and pay W 3.7 billion in surcharges.  The
investigation found that the SOEs under investigation had often given undue subsidies to their
subsidiaries using group negotiation contracts, the contract price in which was higher than the actual
market price.
162. The United States asked for a justification of some chaebols' swapping of subsidiaries under
Korean competition law.  The so-called "Big-Deal" was not initiated by the Government but first
contemplated by the business community.  In late 1997, during the early stages of the economic crisis,
a couple of the economic institutes run by chaebols published a report on the Big Deal.  It was the
Federation of Korean Industries and the top five chaebols that decided on the specific sectors,
affiliates to merge, conditions and timing for the Big Deal.  The Big Deal programme, which wasagreed upon by the top 5 chaebols, was incorporated  into the "Capital Structure Improvement Plan,"WT/TPR/M/73
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which was agreed upon by the conglomerates and their creditor banks.  The Financial Supervisory
Committee is monitoring the implementation of th is programme in the context of supervising
financial prudence, since the programme is an agreement between creditor banks and debtor
enterprises.
163. The KFTC has never forced chaebols to restructure and has never meddled in the specifics of
the Big Deal.  The KFTC, whose function is to assess the competition-restrictiveness of the merger
upon receiving report thereof, is not authorized to compel conglomerates to swap businesses.  The
Big Deal was reviewed and the potential post-merger anti-competitive elements of the proposed
merger assessed, only after the details of the Deal were hammered out between the parties concerned
and then reported to the KFTC.
164. As for the possibility of a monopoly/oligopoly and collusion resulting from the Big Deal,
such worries are not totally groundless since there is a likelihood of market concentration resultingfrom the Big Deal in some markets.  However, as of now, the industries in which the Big Deal
negotiations are under way are free from entry barriers and open to import competition.  Basically, the
KFTC shares the view that the monopoly/oligopoly and entry barriers that may result from the Big
Deal are by no means beneficial to the nation's economy in general and even less so to the efforts of
corporations to enhance their competitiveness.   Thus, where monopoly is feared to come into
existence due to the merger, the KFTC will establish a number of conditions when approving the
merger and/or will take other necessary measures to protect consumers from possible side-effects.
For instance, when approving Hyundai's takeover of Kia Motors in April 1999, the KFTC imposed
conditions on the merging parties to keep price hike rates below export price hike rates in the 1- to
5-ton truck market, since the post-merger market was likely to become monopolistic.
165. In addition, to protect consumers from potential harm, the KFTC is tightly guarding against
the possible abuse of dominance by merged parties, such as unfair price hikes.  In August 1999, forinstance, the KFTC penalized the unfair price hikes for trucks and buses by Hyundai Motors, by
imposing  a monetary penalty of W 1.1 billion for abusing its dominant market position.
(iv) Intellectual Property Rights
General remarks
166. The TRIPS Agreement took effect in Korea early this year.  In the June 2000 meeting of the
TRIPS Council, Korea went through a review of its legislation.  Korea's current intellectual property
protection system is in full conformity with the TRIPS Agreement, and in certain areas, provides even
more extensive protection than what is required by the TRIPS Agreement.
Copyright
167. The European Communities and the United States asked about the "retroactive protection" of
copyrights.  The current Copyright Act grants a 50-year retroactive protection to foreign works, as
well as Korean works, in cases where the author died after 1 January 1957.  Korea believes that its
term of retroactive protection is in line with the relevant provision (Article 18, Paragraph 3) of the
Berne Convention, as incorporated into the TRIPS Agreement, which allows each Member to
determine "the conditions of application" for retroactive protection.  If Korea protected foreign worksfor the full term of protection (life plus 50 years, regardless of when the author died), Korea would be
discriminating against Korean works.  It is to be  noted that, with Korean works, only those works
whose author died after 1 January 1957, receive full retroactive protection because of the legislative
history of the Korean copyright law.WT/TPR/M/73
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168. The European Communities asked about the remo val of excessive exceptions to authors'
rights.  The exception clauses of the Copyright Act enumerate, and thus define, specific cases wherelimitations and exceptions to the exclusive rights are provided, as is the case in other civil law
countries.  By providing specific cases that meet the strict criteria for the limitations and exceptions,
these Articles meet the requirements stipulated in Article 13 of the TRIPS Agreement.
169. The United States asked about Korea's plan to revise the Computer Programs Protection Act
(CPPA).  A draft revision of the CPPA, which brings  the CPPA in line with the exceptions stipulated
in Article 9.2 of the Berne Convention, is now under preparation and expected to be submitted this
year to the regular session of the National Assembly.
Patents
170. The European Communities asked when Korea wo uld take steps to ensure that the rights
conferred by a patent are respected and that retroactive patent protection is granted.  The rightscurrently conferred by a patent are fully protected and respected under the Patent Act, which is in
compliance with the TRIPS Agreement.  For the holder of a patent, the exclusive rights to work his
patented invention, the right to civil relief (i.e. injunction against infringement, recovery of the
patentee's reputation, compensation for damages), and the right to criminal relief are ensured under
Articles 94, 126 to 128, 131, 225, etc. of the Patent Act.  The Patent Act also provides for theretroactive protection of patents, in conformity with Article 33 of the TRIPS Agreement.  By mending
the Patent Act in 1995, the Korean Government extended the term of protection for a patent from
15 years to 20 years.  Taking into account the possibility that the term of protection for certain patents
may be reduced by this amendment, because the starting date for the term of protection was changed
from the date of publishing the application to the date of filing it, the term of protection for these
patents was to be determined according to the relevant provision in the pre-1995 Act.  Article 3(2) of
the 1995 Addendum of the Patent Act stipulates that, in cases where the term of a patent is still valid,or when the application of the patent is pending with the Korean Industrial Property Office (KIPO) at
the time when this Act enters into force, if the te rm is to be shortened due to the implementation of
this Act, its term shall be determined by the earlier provisions.
Trademarks/Geographical Indications
171. The European Communities asked when Korea will take the necessary steps to ensure that the
registration of trademarks and geographical indications by European rightholders is respected.  Korea
provides full protection for the trademark holder under the Trademark Act, which accords with the
Paris Convention and TRIPS Agreement.  Geographical indications are protected by several pieces of
legislation: the Trademark Act, the Unfair Competition Prevention and Trade Secret Protection Act,
the Fair Labeling and Advertising Act and the Agro -Fisheries Product Quality Management Act.  In
particular, the Agro-Fisheries Product Quality Management Act provides for a registration system for
the geographical indications of agricultural and fisheries products.  At the present time, only a few
products are eligible for registration.
Enforcement
172. A few Members, including the United States and the European Union, urged for stepped-up
enforcement measures to suppress piracies and counterfeiting.  The Korean Government has been
making steadfast efforts to prevent the infringement of intellectual property rights by undertaking
various enforcement measures, which include the following:
- Wide-ranging enforcement campaigns were waged by the relevant Government
agencies, including the Korean Industrial Property Office (KIPO) and the Prosecutor'sWT/TPR/M/73
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Office, to crack down on the infringement of  IPRs, along with efforts to promote the
public's awareness of the importance of protecting IPRs.  Detailed statistics regardingIPR enforcement activities are annexed;
- The private sector, including individual companies and right holders' associations,
plays an important role in these enfor cement efforts by participating in the
enforcement campaigns and providing in formation to enforcement agencies;
- The level of punishment for intellectual property rights infringements is being
continuously increased, even though the current level is generally higher than that for
other criminal acts of similar gravity;  and
- In light of the importance of an enhanced  flow of information on IPR infringements,
particularly at the border, Government agencies are stepping up their efforts to share
relevant information among themselves as well as with the business community.
173. The United States and Japan asked about special enforcement periods.  Currently,
enforcement activities are not restricted within certain designated periods, but continue throughout the
year.  Thus, special enforcement periods are not necessary.
174. Japan asked about the order issued by the Korean Industrial Property Office (KIPO) to stop
trade in counterfeit goods.  The Commissioner of KIPO may issue an order to stop trade in counterfeitgoods according to Article 8 (corrective recommendation to violations) of the Unfair Competition
Prevention and Trade Secret Protection Act.  The corrective recommendation is given to provide
administrative guidance.  It is intended not to directly impose civil or criminal responsibility on the
traders of counterfeit goods, but to warn them before prosecution that they may be violating relevant
laws, and that, if the violation continues or recurs, they may be reported to criminal authorities.  It
allows for more effective enforcement in the cracking down on counterfeit goods.  In particular, it
makes alleged traders see the illegality of the counterfeiting act before prosecution and therebydiscourages them from committing it.  It also eases the burden of proof on prosecutors in criminal
proceedings.
175. Japan also asked about domestic laws regarding counterfeit foreign brand name products and
Korea's implementation system for protecting IPRs.  It should be noted that local and foreign brands
are fully protected by several relevant pieces of legislation in Korea:  the Trademark Act, the UnfairCompetition Prevention and Trade Secret Protection Act, and the Customs Act.  Any act of using
brands by unauthorized persons without the consent of the right holder of a brand may constitute an
infringement of his trademark rights under the Trademark Act.  Any person who infringes on
another's trademark rights shall be subject to a penalty of imprisonment of up to five years or a fine
not exceeding W 50 million.  Any act of causing confusion with another person's goods by usingbrands that are identical or similar to the other's brands may be deemed as an unfair competition act
and thereby prohibited by the Unfair Competition Prevention and Trade Secret Protection Act.
176. Anti-counterfeiting activities are implemented by a number of agencies:  the Prosecutor's
Office, police, provincial governments, and the Cust oms Office.  In particular, to ensure effective
enforcement, a "Joint Investigation Center" and "I PR Protection Division" have been installed within
the KIPO to exclusively handle IPR infringements.
177. The United States asked about the minimum evidence necessary to take an enforcement
action.  Under the current legal system, investigations can be initiated upon reasonable suspicion.
However, in cases where arrest, seizure, search, or other forms of legal force are involved, probable
cause is required.WT/TPR/M/73
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178. The United States asked what Korea is doing about software piracy in the public sector and
piracy by end-users, as well as what Korea's long term plan is for public education on software piracy.
In 1999, there was an intensive crackdown on computer software piracy, and as a result, piracy in the
Government, as well as public corporations, is practically non-existent.  In January 2000, the
Computer Program Protection Act was amended to allow for the aggravated punishment of repeat
offenders and to give the officials of the Ministry of Information and Communication the authority to
collect, delete or destroy illegally acquired computer programmes.
179. While extensive public campaigns have been conducted by Government agencies until now,
the Korean Government will continue to further promote various education programmes and increase
the public awareness of IPRs, through relevant agencies such as the International Intellectual Property
Training Institute (IIPTI) and the Prosecutor's Office.
180. Japan asked when Korea is expected to accede to the 1991 UPOV (International Union for the
Protection of New Variety of Plants) Convention.  As a step towards acceding to the UPOV
Convention, Korea amended the Seed Industry Act (effective January 1999) to better meet the
requirements of the Convention.  The conformity of this law with the requirements of the Convention
was confirmed by the UPOV Council in September 1999.  Currently, the Korean Government is going
through internal procedures, including ratification from the National Assembly, so that Korea canaccede to the UPOV Convention as early as possible.
181. New Zealand asked about Korea's plant variety protection system.  In 1998, Korea put into
place its plant variety protection system for 27 crops, including rice, barley and soybean.  The plant
variety protection system was applied to another 30 crops, including sweet potatoes, grapes, and
sesame, in May 2000.  As of August 2000, a total of 57 crops are subject to the plant variety
protection system, and a total of 232 plant varieties are registered and protected.
IV. TRADE POLICIES BY SECTOR
(1) Agriculture and Livestock
182. Uruguay and New Zealand asked questions concerning the agricultural domestic support
policy of the Korean Government.  Korea believes that the role of agriculture is not confined to food
production, but also includes various positive functions, such as food security, environmental
conservation, rural viability, and the preservation of traditional culture.  Therefore, the value ofagriculture cannot be measured, based simply on its share of GDP or its contributions to commercial
trade.
183. Currently, most domestic support for agriculture in  Korea is provided to facilitate agricultural
structural adjustments, as well as to promote sustainable agricultural and rural development, in
compliance with the UR Agreement on Agriculture.
184. Every year, the Korean Government has been reducing its market price support, including in
the rice purchase programme which accounts for most of Korea's AMS reduction commitments, in
order to faithfully implement Korea's commitments to reduce domestic support.  Korea has been
reducing the number of the domestic support programmes that have trade distortive effects, while
increasing those programmes and activities that are allowed under the UR Agreement on Agriculture,such as direct payments and investments in structural adjustment.
185. The European Communities asked a question about the Dairy Promotion Association.  The
Dairy Promotion Association (DPA) consists of dairy farmers, milk companies and producers'
organizations, and its purpose is to build up a voluntary dairy supply and demand system.  TheWT/TPR/M/73
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Ministry of Agriculture and Forestry (MAF) contributes, on a provisional basis, to the DPA fund,
which was established for the purpose of improving dairy marketing.  When the DPA is wellestablished in the future, it will operate without any financial support from the MAF.  The Chairman
of the DPA is elected by the DPA members, and the Chairman appoints the directors of the DPA.
There is no DPA funding provided by the Dairy Promotion Act.  The Korea Dairy & Beef Farmers'
Association, which is a member of the DPA, volunt arily raises funds, which are to be used for the
marketing promotion of dairy products.
186. Australia, the European Communities, the United States, and Uruguay asked questions about
the liberalization of rice and beef.  Rice in Korea is  subject to special treatment as a result of the UR
negotiations.  The issue of whether or not rice will be subject to tariffication will be decided through
negotiations, which will be conducted in 2004, as stipulated in Annex 5 of the WTO Agreement on
Agriculture.
187. For the establishment of a tariff-only regime on beef imports, Korea has already put into place
all the relevant domestic legislation and regulations.  With regard to the role of the LPMO (Livestock
Products Marketing Organization), the LPMO itself does not purchase beef, as of the year 2000.
From 2001, the LPMO will engage only in the domestic resale of imported beef, rather than directly
import the beef.
188. The European Communities asked about the credit mismanagement by the National
Agricultural Cooperatives Federati on (NACF).  NACF's loans to farmers can be classified into three
types:  policy fund loans, mutual credit loans, and agri-business loans.
189. Bad loans were the result of short and long-term factors, including:
- A deterioration in the farm economy caused by price hikes of farm inputs and a
considerable fall in the prices of outputs;
- An increase in farmers' financial difficulties, which can be attributed to agricultural
output losses caused by an outbreak of foot and mouth disease (FMD) and natural
disasters;
- Farm bankruptcies due to farmers' lack of managerial ability and excessive farm
investments;  and
- A rise in the amount of bad loans, which can be attributed to creditors' difficulties in
identifying farmers' financial situation, due to the absence of reliable account books.
(2) Manufacturing
(i) Automobiles
190. The automobile market access in Korea has been one of the main concerns for Korea's trading
partners.  In order to address these concerns, the Korean Government has taken a series of measures inthe area of tariffs, taxes, standards, and certification, since 1998.  In particular, the Korean
Government has made steadfast efforts to correct the public's false perceptions of imported cars –
specifically, to correct the belief that there is an alleged linkage between the ownership of foreign cars
and tax audits.  Further, the Korean Government is taking a proactive approach aimed at promoting
the sales of imported cars in Korea.  For example, the Korean Government sponsored the 2000 ImportMotor Show in May this year.  President Kim sent a personal congratulatory message, while the
Prime Minister and two other Ministers attended the opening ceremony in support of the event.  As aWT/TPR/M/73
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result, the show was a great success, with a half a million visitors.  The Korean Government also
decided to use imported cars as official vehicles for the October 2000 ASEM Summit Meeting inSeoul, while two Ministers purchased foreign passenger vehicles for their official use.  Such efforts
will continue.
191. Partly as a result of these efforts, the sales of imported cars have been steadily increasing.
Statistics show a 100% increase in the sales of imported passenger vehicles during the first
seven months of this year, compared to the same period last year.  We expect this trend to continue.
192. Korea has also taken steps to simplify standards and certification procedures for automobiles.
The Korean Government supports the global process of harmonizing technical regulations for motor
vehicles, equipment, and parts.  To this end, Korea intends to join the UN/ECE 1958 Agreement and
the Global Agreement this year, and is therefore making every effort to complete the domestic
procedures required to accede to the Agreements.
193. The Czech Republic asked about automobile taxation.  The Korean Government has already
streamlined the auto vehicle tax system and reduced the tax burden on passenger vehicles with large
engine displacement in January 1999.  As a result, the tax differential between passenger vehicles
with below and above 800 cc engine displacement has been reduced to a negligible level of 1.8 cents
per cc.  A further streamlining of the tax regime and reduction of the tax burden will be considered aslong-term objectives.
(ii) Shipbuilding
194. In an effort to reduce the prevailing imbalance between the supply and demand in the world's
shipbuilding market, and to ensure fair competition in the world market, Korea and the European
Communities signed the "Korea-EC Agreed Minutes", in June 2000.  In the Agreed Minutes, the
Korean Government confirmed that it would not provide the shipbuilding industry with any support
that is inconsistent with WTO rules.  Korea a nd the European Communities also agreed that all
financial institutions should conduct their business with shipbuilders in a commercially sound manner.
195. In line with the Korean Government's policy of  non-intervention, all financial institutions,
including public banks, must follow strict commer cial standards when providing financing to Korean
shipyards.  The Korean Government is fosterin g an environment to facilitate the corporate
restructuring process, on the basis of market principles, in all industries, including the shipbuildingindustry.  Thus, the restructuring process should be undertaken by the companies and creditors, based
on commercial considerations.
196. In the course of Daewoo Group's restructuring, the creditors conducted a workout programme
to divide Daewoo Heavy Industries (DHI) into two units:  shipbuilding and machinery.  The
programme was aimed at improving the financial structure and strengthening the competitiveness ofthe shipbuilding unit so that it can be freed from DHI's financial burdens, which are the result of the
financial difficulties of Daewoo Group as a whole.  This workout programme was undertaken
voluntarily by 58 credit banks, including Korea Development Bank, on the basis of purely
commercial considerations.  The mere fact that Korea Development Bank, a government-owned
financial institution, is included in the group of creditors does not mean that subsidies are beinggranted by the Government.
197. Export credit for Korean shipyards can be categorized as export loans and repayment
guarantees.  The KEXIM (Korea Export and Import Bank) has played and is still playing a key role as
one of the domestic financial institutions providing export loans and repayment guarantees to Korean
shipyards.WT/TPR/M/73
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198. The key terms of the export loans, such as the interest rate and the need for collateral, are
determined by considering all factors, including the adequacy of the contract price, the credit rating
and shipbuilding capability of the borrowers, and the viability of the project.  The interest rates on
credit are operated according to OECD guidelines and imply no subsidy factors.
199. The premium system of KEXIM's repayment guarantee programme is operated on a fully
commercial basis, and the terms of the repayment guarantees reflect the substantial commercial risks
that stem from the shipyard's precarious situation.  KEXIM has made considerably large profits fromrepayment guarantee programmes.  The refund guarantees provided by KEXIM have been used in
consistency with the terms of the OECD Understanding on Export Credit for Ships.
(iii) Textiles and Clothing
200. The word "silk waste" should be replaced with "silk yarn" as indicated by Japan.
(iv) Pharmaceuticals
201. The Korean Government has implemented co mprehensive regulatory reform in the
pharmaceuticals industry since early 1998.  The medical insurance reimbursement system has been
reformed in order to prevent discrimination against imported pharmaceutical products.  IPR protection
has also been strengthened.
202. Since 1 July 1999, imported pharmaceutical products have been listed on the Medical
Reimbursement Price Schedule on equal footing with domestic ones.  As a result, there is no
discrimination against imported pharmaceutical product s in Korea's medical insurance regime.  Also,
the actual transaction price (ATP) system was introduced on 15 November 1999.  All medical
facilities, including pharmacies, have been required to submit data on the actual transaction price,
since 1 August 2000, when the separation of prescribing and dispensing pharmaceuticals was
implemented.  If pharmacies do not submit data on the purchasing price, they will not be reimbursed.
In addition, two new systems for establishing reimbursement prices for new products have beenintroduced:  A-7 pricing for innovative new products and the comparative pricing method for other
new products.
203. In order to qualify for A-7 pricing, the sponsoring firm must demonstrate that the drug in
question offers a significant improvement over existing products in terms of cost or therapeutic effect.
It may submit evidence concerning:  economic feasibility, clinical data which shows the improvedtherapeutic effect, R&D expenditure data, and other data.  Decisions on A-7 pricing are left to the
discretion of the Reimbursement Pricing Review Committee and the Special Pricing Expert
Committee, whose members are drawn from the Korean Consumer Protection Board, hospitals,
pharmacists, herbal doctors, and medical doctors as sociations, as well as pharmaceutical wholesalers,
the Federation of Medical Insurers, and the Korean Pharmaceutical Manufacturers Association.
204. All drugs that do not qualify for A-7 pricing and have compounds not listed in the Medical
Reimbursement Price Schedule are priced under th e comparative pricing method.  Sponsor companies
are invited to submit a list of ten comparable products, from which the Committees select five for
pricing purposes, based on the following criteria in descending order:
1. Same effect; same type;  same pharmacomechanism;
2. Same effect; same type;  different pharmacomechanism;
3. Same effect;  different product type;WT/TPR/M/73
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4. Similar effect;  same product type;  and
5. Similar effect;  different product type.
205. Under the ATP system, each medical facility has to submit its purchasing list of
pharmaceutical products to the insurer on a quarterly basis.  The actual transaction price is reviewed
twice a year to adjust the ceiling price.  The Ko rean Government, along with the insurer, conducts
spot checks in facilities and pharmacies, in order to keep them from submitting falsified data on the
purchasing price.  If the Government finds that the prices requested by medical facilities andpharmacies exceed the ATP, any illegal margins from falsified prices will be forfeited.  Moreover, if
the falsification is considered intentional, a comprehensive inspection will be conducted, and criminal
fraud charges and fines equal to five times the illegal profits can be imposed.
206. The overall assessment of ceiling prices will be made later this year.  On 1 October 2000, the
ceiling prices of some pharmaceutical products were adjusted to reflect the assessment of transactionprices between 15 November and 31 December 1999.
207. An electronic reporting system for all purchasers of pharmaceutical products is being
established and will be implemented in May 2001.  However, the use of the electronic reporting
system is not mandatory.
208. Data protection has been significantly strengthened by recent reform efforts.  The undisclosed
data submitted by the original applicant to the Government has been granted protection since the
Ministerial Regulation of the Pharmaceutical Affairs Act was revised on 18 July 1994, to introduce
the re-examination system under which undisclosed data concerning new drugs is protected for
six years.  The amendment went into effect on 1 January 1995.  In order to specify more clearly the
exclusive rights of an original applicant with re gard to his/her undisclosed data, the Pharmaceutical
Safety and Efficacy Review Regulation was amended on 11 February 1999.
209. The protection of undisclosed information, as stipulated in Article 39 of the WTO/TRIPS
Agreement, has been reinforced under the current legal system.  For example, under Article 127 of the
Korean Penal Code, public officials or former public officials who have disclosed confidential
information that was obtained during the course of discharging their  duties are subject to penal
servitude or imprisonment for up to two years, or a suspension of civil rights for up to five years.
210. Moreover, the Korean Government amended Article 72-9 of the Pharmaceutical Affairs Act
to provide that the undisclosed information submitte d to the Government for the purpose of obtaining
product approval is protected against unfair commercial use.  However, disclosure is allowed in
exceptional cases, where the disclosure is needed for the protection of public interest and handling of
emergency situations, which is in line with Article 39.3 of the TRIPS Agreement.
211. The United States and the European Communities raised some concern over the lack of
coordination and linkage among government agencies.  It is true that the KFDA does not conduct
patent reviews when approving the registration of a drug.  However, in order to enhance the
protection of pharmaceutical-related patents, the relevant Ministerial Decree was amended on
3 March 2000, to clearly state that the manufacturing of a patent-infringing drug is illegal.
- The decree prohibits sponsor firms from applying for the approval of drugs that have
been proven to infringe existing patents.  The sale or manufacturing of drugs
infringing existing patents is also prohibited in Korea by the Patent Act.WT/TPR/M/73
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- Moreover, the KFDA has recently amended the Pharmaceutical Affairs Act to enable
the KFDA to cancel the registration of a drug when it is proven that the drug infringesexisting patents.
- As far as the Korean Government understands, there are very few countries, if any,
that conduct patent reviews during the process of granting approval for drugs.
212. On toll manufacturing, a pharmaceutical company is able to subcontract the manufacturing or
the examination of pharmaceutical products to another company without relinquishing the productlicence to the manufacturing company.  The manufacturing of pharmaceutical products can be
subcontracted only to companies that have manufacturing facilities.
(v) Cosmetics
213. The European Communities expressed concern over the new Cosmetics Act, which entered
into effect as of 1 January 2000.  In order to implement this new law, the Presidential Decree of theCosmetic Act entered into force on 1 July 2000, and the Ministerial Decree of the Cosmetic Act on
19 July 2000.  With the enforcement of the new Cosmetic Act, the restrictions on the manufacturing
and import of cosmetic products have been reduced considerably.  For example, the licensing system
for the manufacturing of cosmetics has been replaced by a notification system, and the previous
requirement of product-specific licences for importing and manufacturing cosmetics has beeneliminated.  The category of "functional cosmetics" was also introduced in the new regime.  The
Korean Government is not considering any further amendments at this time.
214. As for a product containing a new ingredient, product approval is not necessary.  Under the
previous system of the Pharmaceutical Affairs Act, product approval was granted for new ingredients
when the review of the specifications and safety was completed.  However, under the new system of
the Cosmetic Act, such product approval is not required.  The detailed requirements and the scope of
data to be submitted are provided in the Regulation of the Evaluation of Functional Cosmetics, etc.(KFDA Notification 2000-33, 21 July 2000).
215. With regard to the documents that a cosmetics importer should retain in its possession,
Article 7 and Annex 1 of the Ministerial Decree of the Cosmetics Act require the following:
- Records of the recall of any imported products that do not meet the safety, validity or
quality standards (these records should be kept for 2 years);
- Import management records which contain information regarding the product name,
specifications and content s of ingredients, manufacturer's name in the manufacturing
country, review notification of functional cosmetics or of new ingredients that are
introduced for the first time in Korea, description of the product in Korean, samples,
test method, date of initial import (clearance), date and quantity of import (clearance)per manufacturing number, date and result of quality test per manufacturing number,
distributors, and date and quantity of sales;  and
- Record of quality control, if the imported product has undergone quality tests.
(3) Services
(i) Financial Services
216. Korea has achieved a higher level of deregulation and liberalization in the financial services
sector since 1996, especially after the Asian financial crisis.  The aim of such measures has beenWT/TPR/M/73
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based on the strategy of shifting the modus operandi of the financial market toward an open and
market-based system by introducing advanced financial managerial techniques and increasingcompetition.
217. The United States asked when foreign investors can purchase majority shares in Korean banks
and insurance companies.  Presently, foreigners can own majority shares in Korean domestic banks
with approval from the Financial Supervisory Commission (FSC).  Furthermore, there are no
measures discriminating between residents and foreigners in the equity sharing of Korean banks.  Andthere is no limitation on foreign investors purchasing the shares of insurance companies.
218. Japan inquired about the screening conditions for parent banks in allowing the establishment
of foreign bank branches in Korea.  For the purpose of ensuring the sound management of foreign
bank branches, the Korean Government reviews, inter alia,  (i) whether the parent banks are under
appropriate prudential regulations in their home countries, (ii) whether they have sound financialstructures, and (iii) whether they have the ability to implement international financial operations.
219. Australia asked if the Korean Government has an intention to abolish the limitations on the
provision of non-commercial banking services and lending by foreign banks and on the capitalization
of foreign bank branches.  The Korean Government will maintain the present limitation on the banks'
provision of non-banking services, due to prudential reasons.  However, there is no discriminationbetween foreign banks and domestic banks in applying this restriction.  Like domestic banks, foreign
banks can carry on other financial activities, including securities and insurance business, by setting up
affiliates.
220. Hong Kong, China asked about mandatory lending to small and medium-sized companies.
The Bank of Korea imposes a mandatory lending obligation to SMEs on all banks that enjoy the
"discount window" of the central bank.  According to the obligation, such banks are required to lend
to SMEs at least 45% of any increase in their to tal lending.  This requirement aims at supporting
SMEs, which thereby enhances the sustainable growth and social stability of the overall economy.
Foreign banks, which enjoy the "discount window" of the Bank of Korea, are also required to lend at
least 35% to SMEs.  However, this is not mandatory if they do not use the discount window of the
central bank.  The central bank recommends foreign banks to lend to SMEs a minimum of 25% of any
increase in their total lending, but this is only a recommendation, not an obligation.
221. Canada asked about the approval requirements for new financial products.  In principle, all
new financial products or services are subject to approval by the supervisory authority.  However, in
practice, the authorities approve most of the new financial products or services by simply reviewing
the contract conditions or the submitted notification.  The main purpose of this requirement is to
protect consumers, not to regulate financial products and services.
222. The European Communities requested a list of the types of financial transactions that are still
subject to restrictions.  The detailed list of capital account transactions, for which the approval of
authorities is required, is described in the Regulation on Foreign Exchange Transactions.  The
following is an abstract list of the transactions.
- Securities issued by individuals and non-profit entities;
- Derivatives transactions by residents, which are not conducted by foreign exchange
banks;
- Foreign savings by individual and corporate residents, which exceed the permitted
amount;WT/TPR/M/73
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- The borrowing and issuing of securities that have less than a one-year maturity, and
securities which are denominated in foreign currencies, except those transactions thatare conducted by foreign exchange banks or financially sound corporations;
- Issuance of Korean won-denominated securities by non-residents;
- Korean won-denominated lending by foreign exchange banks and institutional
investors, amounts of which exceed W 100 million;  and so forth.
(ii) Communications
223. The Presidential Decree for the Telecommunications Business Act was amended in 1999, and
became effective January 2000.  This decree provides statutory provisions under which telecom
service suppliers are required to supply universal services.  The Ministerial Ordinance, which was
amended at the same time, provides details on the calculation of compensation for losses incurred by
designated universal service suppliers from the provision of such services, the cost-sharingmethodology among designated and other non-designated service suppliers, and the timing of the
payment of compensation.  Universal service suppliers are designated among telecommunications
service suppliers, taking into account their scale of  business, qualities of their services, tariffs, and
technical capabilities.  Currently, Korea Telecom is designated as a universal service supplier in the
areas of local telephone and pay phone services.  The designated service suppliers provide universalservices on behalf of itself and other non-designated telecom service suppliers, and the losses incurred
by the designated universal service supplier, from th e provision of such services, are shared with other
non-designated service suppliers.  A foreign firm, if qualified, can become a universal service
provider.  The provision of universal services is stipulated in the Telecommunications Business Act,
which was effective January 2000.
224. Since September 1998, the ceiling on the equity ownership of Korea Telecom by foreigners
has been maintained at 33%, as stipulated in the Telecommunications Business Act.  The KoreanGovernment is currently preparing a revision of the Telecommunications Business Act in order to
raise the ceiling to 49%, effective January 2001.  However, the 15% ceiling for individual ownership
will be maintained.  The Government plans to complete the privatization of Korea Telecom by
June 2002.
225. Japan asked how KOBACO (Korean Broadcas ting Advertising Corporation) allocates
advertising time for television and radio.  The legal basis for the allocation of advertising time by
KOBACO is provided in Article 73.2 of the Broadcasting Act, and the details are provided in
Article 59.1 of its Presidential Decree.
- Commercial broadcasting time is limited to 10% of the total broadcasting time,
including advertising time.  Interim commercials that interrupt a program are notallowed, except for sports and cultural or art performances that have a mid-recess or
preparation period.  The number of commercial breaks on the radio is limited to 4 per
hour, and the number of advertisements is limited to 4 per commercial break, while
each advertisement must be under 1.20 minutes.  For television, commercial breaks
are limited to 2 per hour, and advertisements are limited to 4 per program, while eachadvertisement must be under 1.30 minutes.
- Station ID advertising, in letters or pictures, which appears on the TV screen shall be
limited to the announcement of the name of the broadcasting corporations and
program announcements.  The frequency is limited to 6 times per hour, and eachWT/TPR/M/73
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advertisement cannot be more than 10 seconds.  The size of the caption cannot be
larger than one-fourth of the total size of the television screen.
226. The price of advertising is fixed.  However, public interest advertisements, advertisements for
new products and seasonal products, advertisements for the products or services of SMEs and local
advertisers, etc. will be considered more favorably than others.
227. Japan inquired about the recent regulatory changes in Korea's broadcasting sector.  Korea
recently consolidated the Cable TV Act, the Cable TV Management Act, the Broadcasting Act, andthe Korea Broadcasting System Act into the New Broadcasting Act, which was effective March 2000.
The New Broadcasting Act strengthens the authority of the Korean Broadcasting Commission,
enables satellite broadcasting, establishes the Broadcasting Development Fund, and reinforces
viewers' rights.  The New Act also partially opens the cable television and satellite broadcasting
industry to investment.
228. Japan asked about the functions of the Korean Broadcasting Commission (KBC).  Under the
New Broadcasting Act, effective March 2000, the administrative power over the broadcasting sector
was transferred from the Ministry of Culture and Tourism to the KBC.  The KBC is in charge of the
overall broadcasting policy and regulations for terrestrial, cable and satellite broadcasting.  Its mission
includes the establishment of a basic plan for broadcasting, recommendation of broadcasting operatorsfor licences, arbitration of disputes between broadcasters, enforcement of fair trade in program
distribution, dealing with viewer complaints, the establishment of basic plans for the raising and
operating of the Broadcast Development Fund, and the determination and notification of the required
proportion of out-sourced production.
229. The European Communities asked if Korea has plans to dismantle the Yonhap news agency's
monopoly over the distribution of news.  Under the current Registration of Periodicals Act, a news
agency does not need a government license for business operations.  Anybody that meets certaincriteria can register and do business.  Yonhap is at present the only registered news agency, and thus
enjoys monopolistic profits, but there is no law supporting and protecting this monopolistic right.
Therefore, the European Communities' argument that the Government ensures Yonhap's monopolistic
position is not true.  The European Communities also inquired about some tax exemption measures
applied to the Yonhap news agency.  The Value-added Tax Act provides for tax exemptions tonewspaper, magazine, and news agencies.  These tax exemptions are provided based on a
consideration of public interest.  Other items subject to tax exemption includes, for example, tap
water, medical and health services, education services, passenger transport services, etc.
230. Hong Kong, China asked whether Korea would consider reviewing or phasing out the screen
quota system for motion pictures.  The screen quota system is the minimum necessary means forpreserving cultural diversity and Korea's cultural identity, as well as to ensure the protection of the
domestic film industry.  Therefore, Korea needs to maintain the system until the domestic movie
industry becomes sufficiently competitive.
231. The United States asked if the further liberalization of broadcast television programs is
planned.  Under the previous Broadcasting Act, the foreign program quota had been directly subject tothe Presidential Decree of the Broadcasting Act.  The ceiling for the foreign broadcasting program
quota for terrestrial broadcasting had been 20% of the total weekly broadcasting hours, and the ceiling
for the foreign broadcasting program quota for cable television had been 50% of the total weekly
broadcasting hours.  Under the New Broadcasting Act, the proportion of Korean-made programs that
broadcasters must program must be more than the compulsory program ratio required by the KoreanBroadcasting Commission.  However, the required proportion of Korean programs, as notified by
KBC (Korean Broadcasting Commission), is not to exceed 80% of the total monthly broadcastingWT/TPR/M/73
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hours in the case of terrestrial broadcasting; and for cable television and satellite broadcasting, the
required proportion of Korean programs, as notified by KBC, is not to exceed 50% of the totalmonthly broadcasting hours.  Consequently, und er the New Broadcasting Act, the proportion of
foreign broadcasting programs permitted can be increased depending on the policy of the KBC.
Hereafter, the KBC will implement its policy on foreign broadcasting program quotas considering the
effects of foreign programs on cultural identity and the domestic industry.
232. Japan asked why the Korea Communications Commission (KCC), and not the Korea Fair
Trade Commission (KFTC), is in charge of regulating the telecommunications sector.  Japan also
asked what the role of the Korea Consumer Protect ion Board is in the area of telecommunications.
The KCC strictly enforces anti-competitive activities under the Telecommunications Act.  The Korea
Consumer Protection Board is not involved with the regulatory regime of the telecommunications
sector.
233. Japan asked what the policy objectives were for splitting cable television (CATV)
broadcasting into three different sectors in 1993.  With the launch of cable television in 1995, cable
TV operators were divided into three groups:  syst em operators (SOs), program providers (PPs), and
network operators (NOs).  Under this old policy, th e cross-ownership of these operations was strictly
forbidden.  The roles of these three groups were defined as follows:
- System Operator (SO):  local broadcasting station which transmits programs and
decides on the channel programming in a district;
- Program Provider (PP): those who produce pr ograms exclusively for broadcasting on
the channels of a System Operator;  and
- Network Operator (NO):  those who build and operate the network through which the
programs are transmitted from the System Operator to the homes of cable TV
subscribers.
234. The goals of the old policy were as follows:
- SO licences were regionally distributed, so that SOs could fulfill their role of
providing local communities with media services;
- Cross-ownerships were not allowed among SOs, PPs and NOs, which allows
operators to concentrate on core businesses and increases the competitiveness of eachsector.  This policy was designed to effectively establish the cable TV industry in its
early stages;
- In consideration of the high fixed investment required for cable TV network
infrastructure,  public companies such as Korea Electric Power Co. and Korea
Telecom were selected as NOs.  This broug ht in more credible network building and
management abilities.  The non-cross-ownership conditions were imposed for the
purpose of building a network infrastructure in a short period of time;  and
- Conglomerates' participation as PPs is allowed, except for news and general channels,
which contributes to the development of the media contents industry, which, in turn, is
indispensable to the development of the media industry.
235. Japan then went on to ask whether the Government will allow the integration of these
different operators into a single business.  With the amendment of the Cable Television BroadcastingWT/TPR/M/73
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Act in 1999, cross-ownership among SOs, NOs and PPs has been allowed in the cable TV industry,
under certain conditions.  Adopted in 2000, the New Broadcasting  Act, which integrates theregulations on  terrestrial and cable TV broadcasting, continues to support this policy.  Based on the
New Broadcasting Act, cross-ownership between PPs and satellite operators is allowed in satellite
broadcasting, since the situation is different from that of when cable television was first launched in
1995.
236. The goal of the new policy is to improve the efficiency of the cable TV industry by allowing
cross-ownership among SOs, NOs and PPs in cable TV.  The separation of NOs and SOs had resulted
in management inefficiency in the cable TV industry, such as poor transmission in the subscription
services area.  In order to cope with these problems, cross-ownership among SOs, NOs and PPs is
now allowed under certain conditions to encourage the development of the cable TV industry.  Also,
to provide complementary services as Internet Service Providers, SOs need to own transmission lines.Cross-ownership between SOs and NOs is allowed under certain conditions, in order to increase
management efficiency through the expansion of business opportunities.  Finally, the cross-ownership
between SOs is allowed under certain conditions to enlarge the market to realize the economies of
scale.
237. Canada inquired about Korea's plan to approve M&As between facilities-based service
suppliers, which do not undermine fair competition and user protection.  Such M&As between
facilities-based service suppliers have been allowed, in order to increase competition and facilitate the
voluntary restructuring of the telecommunications sector.  Only the acquisition of facilities-based
service suppliers by non-service providers is prohibited.  The measure permitting M&As was put into
effect in January 1999, following the revision of  the Telecommunications Act in September 1998.
(iii) Transport
238. Norway asked whether it would be possible to receive figures on the participation of foreign
shipping companies in the transportation of seven items, which were previously closed to foreign
shipping companies.  Korea does not keep such statistics, since the Government has liberalized these
items, and all transactions are conducted autonomously between the shipping companies and shippers.
239. Norway asked if there were any plans to open local tanker shipping services.  Korea has
already opened every passage shipping services area except for coastal shipping.
240. Norway also asked what the requirements were for foreign companies or persons in engaging
in the Korean shipping industry.  According to Articles 26 and 27 of the Maritime Transport Act, a
foreign company should apply to the Ministry of Maritime Affairs and Fisheries for registration, by
submitting the required documents, which consist of a certificate of the vessel's nationality, the
vessel's inspection papers, the business plan, the articles of association, and the registration ofincorporation.  The criteria for registration are: the corporation must be prescribed in the
Commercial Act;  it must have W 500 million or more in capital;  and the vessel must be over
5,000 gross tonnage (different standards apply for the transportation of fishery products).  Also, those
who wish to engage in ocean-going transportation business in Korea must comply with Article 6 of
the Maritime Transportation Act.
241. With regard to Canada's question about the shipping industry, the Korean Government
confirms that the Shipping Industry Promotion Act was indeed abolished.  Hong Kong, China and the
European Communities inquired about the alleged plan to subsidize national shipping companies.
This seems to be based on a local newspaper article, as mentioned in the Secretariat's Report
(para. 124).  It is confirmed that such a plan never existed.WT/TPR/M/73
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242. In response to the European Communities' question on special funds for helping shipping
companies, Korea had never created a fund for its shipping companies.  Hong Kong, China also askedwhether Korea has established a subsidy for shipping companies.  Korea has not established such a
subsidy.  Also, in response to the European Communities' questions, Korea does not operate a
cargo-sharing scheme, and has never concluded preferential shipping agreements with any country.
243. Japan requested more details on certain aspects of Korea's International Vessel Registration
System.  To qualify for international vessel registration, ships must be:  (i) greater than 500 tonnes,(ii) less than 20 years in age, and (iii) either listed in the Korean registry, or a non-Korean vessel
rented by passengers or freight transportation operators under the condition that the vessel's
nationality will be registered as Korean.  The criteria for  such international vessels hiring foreigners
as crew members are determined by the Minister of Maritime Affairs and Fisheries, in consultation
with various interested parties and relevant Government agencies.
244. In regards to tax exemptions for international vessels, when the vessels are sold, 80% of the
profits can be regarded as corporate losses.  In addition, if a replacement vessel is purchased within
three years of the sale, preferential treatment is gi ven in calculating depreciation costs.  International
vessels, if registered, are exempted from the acquisition tax and 50% of property taxes.
245. With regard to air transportation, Hong Kong, China asked about the scope of investment
opportunities in the new Inchon International Airport.  It is confirmed that there is no restriction on
the form of investment.  In other words, both portfolio investments and direct investments are
allowed.  There is no specific investment limitation that is applied only to foreigners.  The ceiling on
an individual's equity ownership is 15%, regardless of the nationality of the investor.
246. In response to New Zealand's inquiry about whether Korea is considering pursuing other
Open Skies Agreements, Korea's policy on air passenger transportation favours a gradual, progressive
liberalization.  While Korea has signed an Open Skies Agreement with one aviation partner, thearrangement was pursued as a part of this policy direction, and a similar arrangement may not be
appropriate with every aviation partner.  Thus, the one Open Skies Agreement does not imply that
Korea is embarking on a path to conclude Open Skies Agreements with every country.
247. Hong Kong, China also asked about the detailed plan for the privatization of railroad
operations.  In July 2000, the Korean Government established a committee to set up a railroadstructural improvement plan.  The committee is expected to establish, by the end of 2000, a concrete
plan for privatization, including a schedule for private participation and foreign investment.
Privatization is expected to begin within a few years, once the legal framework is established.
(iv) Distribution and e-commerce
248. The Korean Government reformed the regulatory framework for the distribution sector by
replacing the "Wholesale and Retail Industry Promotion Act" with the "Distribution Industry
Promotion Act" in July 1997.  This legislation improved the business environment for the distribution
sector, replaced the licensing requirement for large-size retail shops with a registration requirement,
and also streamlined procedures by reducing the number of required documents.  Registration
normally takes a week to be completed.  However, Hong Kong, China referred to cases whereregistration and approval procedures took much longer.  Such a situation may arise if the registration
involves exceptional circumstances, for example, where investors wish to build shops in greenbelt
areas where the building of commercial structures is restricted.  As a matter of fact, foreign companies
have increased investments in Korea's distribution sector  over the past three years.  During this period,
Carrefour opened 17 new branches, Walmart 5 branches, and Tesco 3 branches, with little difficulty.WT/TPR/M/73
Page 108
249. The European Communities inquired about the liberalization of distribution services in the
context of Korea's UR schedule.  Korea's UR schedule of specific commitments includes theeconomic needs test (ENT) in the distribution sector and the prohibition of the establishment of
department stores and shopping centers by foreign investors.  However, the Korean Government lifted
the ENT requirement and prohibition of foreign investment, by amending the Distribution Industry
Development Act in January 1996.
(v) Other Services
250. Regarding the current status of Korea's liberalization of the legal services sector, at the time
of Korea's admission into the OECD, the Attorney-a t-Law Act of Korea was amended by eliminating
the nationality requirement in the granting of the el igibility to practice as a domestic lawyer.  In June
1999, Korean representatives expressed the principle of a gradual liberalization of legal services
during the CIME/CMIT Joint Meeting.  In July 1999, a Working Group for the Liberalization ofLegal Services was established, comprised of representatives from the Ministry of Justice, Supreme
Court, Korean Bar Association, and the Korea Patent  Attorneys Association.  Currently, the Working
Group is conducting a study on the liberalization models of various countries, and the report is
scheduled to be released around December 2000.  Based on this report, a proposal for Korea's
liberalization of legal services will be drafted, and will subsequently be presented during the servicesnegotiations.
Annex 1
Privatization of major state-owned enterprises (Plan as of 2000)
KT (Korea Telecom) Government will sell 25% of its stake by the end of 2000 through a strategic alliance or public
sale in the market (leaving a 33.4% stake).
- Sale of remaining stake and privatization completed by June 2002.
KT&G  (Korea Tobacco & Ginseng) Sell shares of Government and banks, through DR or other forms in the foreign market.
- Production monopoly will be abolished.
POSCO  (Steel) Privatization has been completed as of October 2000.
KEPCO  (Electricity) Restructuring of Electricity Industry.
- Generation divisions will be separated as subsidiaries of KEPCO and competition will be
introduced after the legislation is passed in the National Assembly.
- Privatization process for one generating company will start immediately after the
separation.
Hanjung Strategic alliance and IPO in September 2000.
- 24% of share sold through IPO.
- Auction for the shares by the end of the year.
KOGAS Increase capital by issuing new shares.
KDHC  (District heating) Sell more than 51% of common shares by October 2001.
Inchon International Airport Sell more than 51% of common shares by 2002.
Housing Guarantee Privatization from 2002.WT/TPR/M/73
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Annex 2
Detailed statistics regarding IPR enforcement activities
1996 1997 1998 1999
Number of raids
Copyright piracy 7444 7476 8163 10134
Trademark Infringement 4067 4110 4461 6760
Number of prosecutions
Copyright piracy 884 775 1110 1490
Trademark Infringement 3231 3402 3408 5316
Number of convictions
Copyright piracy 728 557 1022 1678
Trademark infringement 2717 2926 2936 4401
Amount of fines
Copyright piracy:
More than W 10,000,000 0 0 1 4
W 5,000,000-10,000,000 0 0 7 14
W 1,000,000-5,000,000 88 74 122 170
Less than W 1,000,000 612 458 834 1372
Trademark infringement:
More than W 10,000,000 31 38 44 41
W 5,000,000-10,000,000 155 161 161 218
W 1,000,000-5,000,000 949 1171 1471 1985
Less than W 1,000,000 714 879 950 1861
Jail terms
Copyright piracy:
M o r e  t h a n  2  y e a r s 1137
1-2 years 1 0 2 3
6 months-1 year 2 1 0 0
Less than 6 months 0 0 0 0
Trademark infringement
More than 2 years 323 285 102 104
1-2 years 187 151 42 23
6 months-1 year 356 231 5 7
Less than 6 months 0 1 0 0
Note: Other requested data (i.e. amounts and types of infringing items, the number of convictions for software piracy and the ty pes of
sentences imposed) which is not indicated on the table, is not available.
__________