RESTRICTED  
  
WT/TPR/G/346  
6 September 2016  
(16-4721) Page: 1/13 
Trade Policy Review Body   Original: English  
 
 TRADE POLICY REVIEW  
REPORT BY  
REPUBLIC OF KOREA 
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the policy statement by the 
Republic of Korea  is attach ed. 
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on the Republic of Korea . WT/TPR/G/346 • Republic of Korea  
 
- 2 - 
 
  Contents  
1   INTRODUCTION  ................................ ................................ ................................ ..........  3 
2   ECONOMIC  AND TRADE ENVIRONMEN T ................................ ................................ ....... 4 
2.1   Economic Growth  ................................ ................................ ................................ ........  4 
2.2   Exports, Imports and the Trade Balance  ................................ ................................ .........  4 
2.3   Foreign Direct Investment  ................................ ................................ ............................  5 
3   ECONOMIC  POLICY  ................................ ................................ ................................ ...... 5 
3.1   Three -Year Plan for Economic Innovation ................................ ................................ ........  5 
3.1.1    Creative Economy  ................................ ................................ ................................ ..... 5 
3.1.2    Structural Reforms  ................................ ................................ ................................ .... 6 
3.2   Regulatory Reforms  ................................ ................................ ................................ ..... 6 
3.3   Sectoral Policies  ................................ ................................ ................................ ..........  7 
3.3.1    Agriculture and Fisheries  ................................ ................................ ...........................  7 
3.3.2    Manufacturing  ................................ ................................ ................................ ..........  8 
3.3.3    Energy  ................................ ................................ ................................ ....................  8 
3.3.4    Services  ................................ ................................ ................................ ..................  9 
4   TRADE AND INVESTMENT  POLICY  ................................ ................................ ...............  9 
4.1   Multilateral and  Plurilateral Trade Agreements  ................................ ................................ 10 
4.1.1    WTO DDA Negotiations  ................................ ................................ ............................. 10 
4.1.2    Plurilateral Trade Agreements  ................................ ................................ ................... 10 
4.2   Trade and Development  ................................ ................................ .............................. 10 
4.3   Regional and Bilateral  Trade Agreements  ................................ ................................ .......11 
4.4   Investment Policy Development  ................................ ................................ ................... 12 
5   THE WAY FORWARD  ................................ ................................ ................................ .. 13 
 
 WT/TPR/G/346 • Republic of Korea  
 
- 3 - 
 
  1  INTRODUCTION  
1.1.  Against the backdrop of a world economy that still displays low growth in the wake of t he 
global financial crisis  in 2008 , Korea is employing domestic policies seeking economic recovery 
through a creative economy and regulatory reform , while on the international stage remaining  
committed to open markets and trade liberalization.  
1.2.  With the in auguration of the  new administration in February 2013, the Creative Economy 
emerged as the Korean Government' s central policy objective. A creative economy is defined as an 
economy that generates new added value, jobs and growth engines through the converg ence of 
people's creativity with science, technology and information and communication technology (ICT).  
Both online and offline platforms for a creative economy  were established . The Creative Economy 
Town  (https://www.creativekorea.or.kr/ ) was launched in 2013 as an online platform to support 
the commercialization of creative ideas . A total of 17 Creative Economy Innovation Centers were 
also established in metropolitan cities and provinces nationwide as of J uly 2015 , serving as  
stepping stones  for the growth of venture companies and small and medium enterprises (SMEs) . 
1.3.  In order to ensure momentum for an economic recovery from the low -growth trend, the 
Korean Government adopted  the 'Three -Year Plan for Economi c Innovation ' in January  2014. Its 
key elements include building an enabling environment for a creative economy and conducting  
structural  reforms in four areas: public institutions,  labour, finance and education . Reform 
measures in the four areas include adjustment  of overlapping functions and introduction of 
performance -based annual salar ies in public institutions; the creation of a fair and flexible labo ur 
market  in the labo ur sector; promotion of the fi ntech industry in the financial sector; and 
structur al reforms of universities .  
1.4.  Recognizing regulatory reform as a way to stimulate investment without spending, the 
Korean Government has placed priority on regulatory relaxation in order to  build a 
business -friendly investment climate  by adopting the "cost-in, cost -out" system, regulation impact 
assessment and the Regulatory Reform Sinmungo .1 
1.5.  Korea has been a long -standing advocate of the WTO regime as a member of the multilateral 
trading system, and is  working to  fully implement the decisions made at the WT O Ministerial 
Conferences held in Bali in December 2013 and Nairobi in December 2015 .  
1.6.  Korea ratified the Trade Facilitation  Agreement  (TFA) in July 2015. Further to this,  Korea is 
now subject to the revised version  of WTO Agreement on Government Procureme nt (GPA) which 
entered into force on 14 January 2016 . Korea participated in the WTO Information Technology 
Agreement (ITA)  expansion negotiations and has been actively engaging in the negotiations for 
the Environmental Goods Agreement (EGA).  
1.7.  Korea continu es to  pursue open markets through high-standard, comprehensive FTAs that 
cover goods, services and investment, while at the same time taking  part in mega -regional FTAs 
alongside negotiations on bilateral FTAs.  
1.8.  The Korean Government has stepped up efforts t o improve the  environment for  foreign 
investment . During the review period, Korea made  continuous efforts to attract high -tech or 
high-value added foreign  investment projects and facilitate foreign investors ' contribution to 
domestic  job creation. In addit ion, the Korean Government enhanced communication with foreign 
investors and mechanisms for their participation by hosing regular meetings between foreign 
investors and government  officials.  
                                                
1 The Regulatory Reform Sinmungo is an online one -stop regulation suggestion processing system 
operated to manage citizens' suggestions regarding regulatory reforms.  WT/TPR/G/346 • Republic of Korea  
 
- 4 - 
 
  2  ECONOMIC  AND TRADE ENVIRONMEN T 
2.1  Economic Growth  
Relatively moder ate GDP growth  rate and employment rates  
2.1.  Although Korea' s economy has been growing steadily since 2012, GDP growth has yet to 
recover  to the levels recorded before the global financial crisis  in 2008 . Real GDP increased from 
approximately ₩1,342 trillion in 2012 to ₩1,464 trillion in 2015.2 While GDP growth remains 
below pre -crisis levels, rising only from 2.29% in 2012 to 2.6% in 2015, this is higher than the 
OECD average of below 2%.3 Considering that Korea' s world GDP ranking rose from 1 4th in 2013 
to 11th in 2015, the country 's economy has performed relatively well despite the global low -growth 
environment .4 
2.2.  The employment rate remained steady at roughly 65% , as 65.7% of the age group 15 -64 
was employed in 2015, up 1.5  percentage  points from 2012.5 Youth employment also grew by 
1.1 percentage points  from 2012 to 41.5% in 2015.6 
2.2  Export s, Import s and the Trade Balance  
Export and import growth slowdown since  2012  
2.3.  The worldwide low -growth trend is evident in the deterioration of the trade cl imate , with 
global trade in goods dropping by 13% in 2015 compared to the previous year.7 Korea's export 
growth has slowed  since 2012, recording a slight increase of above 2% in 2013 and 2014, but a 
decrease of 8% in 2015 compared with the previous year.8 Imports are in a similar situation, 
registering two -digit growth during the recovery from the economic crisis and then shrinking  – 
albeit slight ly – from 2012, followed by a 16.9% decrease in 2015.9 Korea has maintained a trade 
surplus since 2009, which grew in volume from US$28.3 billion in 2012 to US$90.3 billion in 
2015.10 Despite challenging export conditions due to a worldwide contraction in demand, Korea 
has managed to position itself as the world's sixth -largest exporter and tenth -largest importer.11  
2.4.  Major export items include semiconductors, automobiles, vessel parts/marine structures, 
wireless communication devices, petroleum products, flat panel displays and sensors, with 
semiconductors in particular accounting for a growing share . Crude oil, semico nductors, natural 
gas, petroleum products, wireless communication devices and vehicles have been among Korea' s 
main imports,  with a marked decline in  the share of crude oil due to falling international oil 
prices.12  
2.5.  Korea's geographical distribution of tra de has undergone no notable changes since 2012, with 
exports as of 2015 delivered mostly to Asia (56.3%), North America (14.1%) and Europe (12.6%). 
As for imports,  the top trading regions were Asia (46.9%), Europe (17.3%) and the Middle East 
(15.7%), while  the Middle East lost much of its share compared to 24.6% in 2012 due to a drop in 
crude oil prices.13 
2.6.  Exports (receipt s) in services fell slightly from US$103.5 billion in 2012 to US$97.9 billion in 
2015, while imports (expenditure s) grew from US$108.7 bil lion in 2012 to US$113.6 billion in 
                                                
2 Bank of Korea, Eco nomic Statistics System (last viewed online on 7 July 2016).  
3 OECD, Economic Surveys: Korea 2016.  
4 IMF, World Economic Outlook (April 2016).  
5 Korean Statistical Information Service, Economically Active Population Survey (Annual), last viewed on 
22 July  2016.  
6 Korean Statistical Information Service, Economically Active Population Survey (Annual), last viewed on 
22 July 2016.  
7 WTO, International Trade Statistics (7 April 2016).  
8 Korea International Trade Association, K -Statistics (last viewed online on  23 June 2016).  
9 Korea International Trade Association, K -Statistics (last viewed online on 23 June 2016).  
10 Korea International Trade Association, K -Statistics (last viewed online on 23 June 2016).  
11 Korea International Trade Association, K -Statistics (l ast viewed online on 20 July 2016).  
12 Korea International Trade Association, K -Statistics (last viewed online on 24 June 2016).  
13 Korea International Trade Association, K -Statistics (last viewed online on 24 June 2016).  WT/TPR/G/346 • Republic of Korea  
 
- 5 - 
 
  2015.14 These shifts can be attributed to  a decline in exports of transportation and construction 
services and growing imports in tourism.15  
2.3  Foreign Direct Investment  
Inbound FDI rises, outbound FDI  remains steady  
2.7.  Korea' s inbound foreign direct investment (FDI) calculated on an arrival basis has grown from 
US$10.7 billion in 2012 to US$16.4 billion in 2015.16 By sector, FDI inflows are climbing 
significantly in services relative to manufacturing, and by region, investment from the U.S. and 
China  showed a notable increase  from 2013 through 2015 .17 
2.8.  Outbound FDI calculated on a remittance basis  changed slightly from US$ 28.5 billion in 201 2 
to US$27 billion in 2015.18 The service sector  display s steady growth in FDI outflows, whi le 
investment in the U.S. remains consistently  high, while investment in China is falling.19 Outbound 
FDI to Japan recorded marked growth in 2015.  
3  ECONOMIC POLICY  
3.1  Three -Year Plan for Economic Innovation  
3.1.  In order to ensure momentum for an economic recovery f rom the low -growth trend of the 
global economy and the fast-changing trade environment, the Korean Government developed the 
Three -Year Plan for Economic Innovation in February 2014. Its key elements include building an 
enabling environment for a creative e conomy and conducting  structural  reform in four areas: 
public institutions,  labour, finance and education.  
3.1.1   Creative Economy  
3.2.  The Creative Economy is defined as an economy that underscores creativity as a central 
economic value, and generates new added value , jobs and growth engines through the 
convergence of people's creativity with science, technology and ICT .20 
3.3.  Both online and offline platforms were established  to lay the groundwork  for a creative 
economy.21 In September 2013, the Creative Economy Town  (https://www.creativekorea.or.kr/ ) 
was launched as an online platform to support the commercialization of creative ideas so that they 
can be translated into business start -ups and added value. A total of 17 Creat ive Economy 
Innovation Centers were also established in metropolitan cities and provinces nationwide as of 
July 2015, serving as  stepping stones  for the growth of venture companies and small and medium 
enterprises (SMEs).  
3.4.  Efforts were made to lower existi ng entry barriers such as  location and environment -related 
regulations  so as to facilitate the easy and swift establishment of start -ups. The Government is 
also addressing areas where a lack of appropriate guidelines results in delays  in product launches, 
another challenge for foreign investors.  
3.5.  Such actions have contributed to supporting  the growth of  venture start -ups and SMEs as 
well as foster ing regional  industries and creat ing jobs. The Creative Economy Innovation Centers 
established nationwide have i ncubated and supported around 2,540 start -ups and SMEs and 
attract ed ₩260 billion worth of private investment  as of June 2016.  
                                                
14 Bank of Korea, Economic Statistics  System (last viewed online on 24 June 2016).  
15 Bank of Korea, Economic Statistics System (last viewed online on 24 June 2016).  
16 Ministry of Trade, Industry and Energy, Foreign Investment Statistics  (last viewed online on 
23 June 2016).  
17 Ministry of Trad e, Industry and Energy, Foreign Investment Statistics (last viewed online on 
23 June 2016).  
18 Export -Import Bank of Korea, Foreign Investment Statistics (last viewed online on 23 June 2016).  
19 Export -Import Bank of Korea, Foreign Investment Statistics (las t viewed online on 23 June 2016).  
20 https://www.creativekorea.or.kr/town/introduce  (last viewed online on 17 July 2016).  
21 Ministry of Culture, Sports and Tourism, Three -Year Policy Review of t he Park Administration , p. 10 
(March 2016).  WT/TPR/G/346 • Republic of Korea  
 
- 6 - 
 
  3.1.2   Structural Reforms  
3.6.  With the aim of building fundamental strength for recovery of the Korean economy , Korea 
has been undertaking s tructural reforms for  four major areas , namely public institution s, labo ur, 
finance and education , under the Three -Year Plan for Economic Innovation.  
3.7.  The Korean Government took several measures  in order to enhance efficiency in public 
institutions. Struct ural reforms of public institutions have been implemented, including the 
adjustment  of overlapp ing functions among institutions , downsizing of non -core businesses, and 
improvement of management  effectiveness. A reform on the public employee pension scheme was 
conducted  in May 2015 , followed by debt reduction and functional restructuring  for the public 
sector. Public institutions  have also adopted p erformance -based annual salary22 and wage peak 
systems .23 As a result  of these efforts , the financial  soundness of public institutions was greatly 
enhanced through reduction in overall public debt, which dropped from 220% in 2012 to 183% in 
2015. Furthermore , financial  resources saved by the wage peak system will be utilized to support 
the creation of more than 8,000  jobs in 2016 and 2017.  
3.8.  In the labour sector , work is being done to create a fair and flexible labo ur market and 
heighten stability. Based on  a tripartite agreement among labour, management and the 
Government in September 201 5, working hours are being red uced; criteria and procedures for new 
employment  and employment termination clarified; the amount and period of employment benefits 
extended ; and terms of employment for contract workers improved. Relevant law revisions are 
underway  in the National Assembl y.  
3.9.  In the financial sector, t he Government set up  a plan for the promotion of the fi ntech 
industry in May 2015  in order to promote a new kind of financial  industry  combined with IT. T he 
plan enables  consumers to create bank accounts without making persona l visits to financial 
institutions through non -face-to-face identification  checks. It also repealed related regulations such 
as those requiring installment of security programs and use of public certification programs . In 
addition, crowd funding and intern et-only banks are now legalized in an attempt to promote the 
fintech industry in Korea.  
3.10.   In the education sector , structural reforms of universities have  been conducted in order to 
ensure the quality of higher education in Korea. Reflecting the actual supp ly and demand of youth 
job seekers and hiring businesses, structural reforms of universities are being encouraged by 
adjusting the number of students admitted to departments  as well as  expanding integrated 
industrial -academia vocational schools.  University  enrolment quotas  will be reduced considering a 
change of demographic trends. In addition, the  newly -enacted  legislation on the promotion of 
liberal arts aims to nurture  students’ talents in liberal arts and contribute to strengthening the 
capacity of univ ersities in the liberal arts field.   
3.2  Regulatory Reforms  
3.11.   The Korean Government places a priority on regulatory reform, which is deemed as the best 
way to stimulate investment and consumption without spending . In line with  the principle of  global 
regulatory reform led by APEC and the OECD , Korea has made bold efforts to eliminate  
unnecessary regulations, while revising  and reinforc ing those that are closely related to people's 
safety and lives.  
3.12.   Strong leadership guided the creation of a regulatory reform fram ework . Launched  in 
March  2014, the Ministe rial Meeting  on Regulatory Reform  is chaired by the President while 
another mechanism,  on-site inspection meetings for regulatory reform, is  led by the Prime 
Minister.  
                                                
22 The performance -based annual  salary system, which currently applies only to high -level officials, will 
be expanded to cover government employees above the assistant -director level.   
23 The wage peak system mean s the gradual reduction of salaries after a certain age in exchange for 
extending the retirement age. The introduction of the salary peak system for all public institutions  has been 
finalized as of end of December 2015.  WT/TPR/G/346 • Republic of Korea  
 
- 7 - 
 
  3.13.   The entire regulatory system was  also improved  through measures such as the "cost -in, 
cost-out" system , regulation impact assessment and the Regulatory Reform Sinmungo24 among 
others.  
3.14.   Introduced  in January 2014, t he "cost -in, cost -out" system offsets the cost of newly creating 
or reinforcing regulatio ns by abolishing or relaxing existing regulations. Regulations can now be 
analysed in more detail thanks to  the adoption of  the regulation impact assessment system in a 
number of areas including competition, SMEs and technical regulations. Through the  Regulatory 
Reform Sinmungo , a total of 3,549 suggestions have been accepted out of 9,069, indicating an 
acceptance rate of approximately 40%.  
3.15.   As a result of these efforts, a total of 3,992 regulations were  eased or revised  during the 
period from  March 2014  to the end of 2015 , and the resulting economic impact is estimated to  
reach KRW 20 trillion.   
Box 3.1 International Views on Korea's Economic Innovation Policies  
 Three -Year Plan for Economic Innovation: Appraised  by the IMF and OECD  in 2014  as an 
exemplary model among G20 economic growth strategies in terms of growth effectiveness; 
Korea ranked first on th e Bloomberg Innovation Index.  
 
 Creative economy and regulatory reform: Ranked fourth overall, first among G20 members 
and third among OECD members on the World Bank's Doing Business 2015 list.  
 
 Sovereign credit rating: Korea's rating upgraded by credit rating agencies (S&P: A+ to AA - in 
September 2015, Moody's: Aa3 to Aa2 in December 2015) . 
 
3.3  Sectoral Policies  
3.3.1   Agriculture and Fisheries  
Continuing to open agricultural markets and future industrialization for the fishing 
industry   
3.16.   A substantial portion of Korea's agricultural market has been opened through a large 
number of FTAs. As of 2015, Korea's imports of agric ultural and livestock food products recorded 
approximately US$30.2 billion, of which imports from FTA partners amounted to approximately 
US$2 4.9 billion, or 8 2.4%. 
3.17.   In compliance with its obligations under the WTO Agreement on Agriculture, the Korean 
Govern ment terminated its special treatment  of rice under Annex 5 of the Agreement , and from 
January 2015 began applying customs duties. Tariff rates were set pursuant to the Agreement's 
guidelines.  
3.18.   The Rural Industrial Convergence Zone was adopted in 2014 to r elax regulations and 
strengthen value chains in a bid to reinforce agricultural competitiveness.  Furthermore , the 
previously complex certificate of origin and verification procedures required for exports were also 
simplified.  
3.19.   The fisheries industry is mak ing the transition from "catching fish" to "breeding fish" 
through offshore, biofloc25 and smart farm aquaculture, by using information technology (IT) and 
biotechnology (BT). Quality management is  another  priority . Tools such as Hazard Analysis and 
Critica l Control Points ( HACCP ) and the Seafood Traceability System  are in place to  ensur e the safe 
provision of marine products.  
3.20.   In August 2015, the Government enacted the Fishery Resources Management Act to 
systemize protection measures in order to manage fish ery resources  more efficiently . Korea is also 
                                                
24 The ministry or office concerned will promptly examine whether to accept suggestions on regulation 
and respond within 14 days under the real name of responsible person such as a bureau director or manager . 
25 Biofloc is an aggregate of bacteria, plankton, protozoa, etc. Biofloc aquaculture  uses microorganisms 
to decompose and purify pollutants in aquaculture water.  WT/TPR/G/346 • Republic of Korea  
 
- 8 - 
 
  extending efforts to restore the coastal ecosystem and create spawning grounds and habitats by 
building marine ranches, marine forests and artificial fishing banks.  
3.3.2   Manufacturing  
Promoting convergence of manuf acturing industry and IT  
3.21.   To respond proactively to the "smart revolution ", the convergence of manufacturing and IT 
that succeeds the industrial and information revolutions, the Korean Government launched the 
Manufacturing Innovation 3.0 Strategy in June 2 014. Key elements of the strategy  include 
promoting the use of smart factories to fundamentally innovate production systems using IT, 
software and the Internet of Things (IoT); designating special zones for the demonstration and 
pilot operation of innovati ve products; and laying the groundwork for new industrial convergence.  
3.22.   The strategy seeks  to apply IT, software and IoT to existing production systems with the 
aim of  building an intelligent and optimized production process, and to put 10,000 smart factor ies 
into use by 2020, mostly among SMEs. As of the end of 2015, a  total of 1,240 companies took part 
in this initiative , which brought benefits including  increase d productivity, improve d quality, and 
cost and delivery time  cuts. Standards and accreditation  procedures for smart factories were also 
set up to encourage the spread of voluntary use in the private sector.  
3.23.   Special zones for demonstration and pilot operation were designated to demonstrate and 
test highly innovative products such as unmanned aerial  vehicles and autonomous cars. This will 
be accompanied by efforts to make regulatory improvements.  
3.24.   The Korean Government also seeks to facilitate smooth market entry and swift investment 
in new convergence  industries. To this end, a Negative Rules Evalua tion System was adopted, 
under which rules related to investment are screened on a negative list approach, alongside the 
existing fast -track licensing system. The Government is also preparing  the enactment of the 
Special Act on the Designation and Operatio n of Regulation -Free Zones to Promote Local 
Industries , which would temporarily lift regulations inside certain region s.   
3.25.   New convergence products that could not be released on the market due to lack of 
accreditation criteria will be given licensing permi ssion by developing appropriate criteria within 
six months. Regulations related to new industries have shifted to a system of negative control ; 
once a business  sector raises difficulties due to a specific regulation , the regulation will be 
abolished unless  specifically prohibited by law.  
3.26.   The push for the enactment of the Special Act on the Designation and Operation of 
Regulation -Free Zones to Promote Local Industries is an illustration of  the efforts being made 
toward bold deregulation in new industries at the local level. The alleviation of core regulations 
related to business type, location and so forth  is expected to help provide a platform to promote 
local industries that harness local strengths and characteristics. For new technology fields in which 
it is unclear whether regulations apply, the agency in charge is required to  provide confirmation 
within a set period so as to eliminate gray zones.  
3.3.3   Energy  
Creating new energy industries and boosting the share of new and renewable energy  
3.27.    In response to  the global movement toward  reducing  greenhouse gas emissions and saving 
energy, Korea launched the 2nd National Energy Master Plan in January 2014. The plan supports a 
fundamental policy paradigm shift from supply -led energy provision driven by the Government  to 
demand -centered management that can attract efficient investment from the private sector.   
3.28.   Under this plan, the Korean Government developed a more detailed New Energy Industry 
Development Strategy  in three stages , in July 2014, November 2015 and July 2016, to attract 
private investment and encourage SME participation in the energy sector.  
3.29.   The supply quota of new and renewable energy was raised to stimulate production and 
distribution. In order to expand private sector participation in the energy marke t, the direct sale of  WT/TPR/G/346 • Republic of Korea  
 
- 9 - 
 
  electric power produced from solar energy  to consumers or businesses will be allowed. Companies 
using energy storage system s (ESS) will be permitted to engage in the electricity sales business, 
and investors in new energy industries  such as ESS  will be able to purchase electricity directly 
from the electric power market. In addition, complicated regulations will be modified to foster new 
energy industries including electric vehicles, solar energy and ESS.  
3.30.   In the Fourth Basic Plan for Technology Development, Application and Deployment of New 
and Renewable Energy developed in September 2014, the  Korean  Government set a target of 
raising the rate of new and renewable energy  supply from 3.2% of that of primary energy in 2012 
to 11% and fro m 3.7% of total electricity supply in 2012 to 13.4% by 2035 . To achieve this target, 
solar energy and wind power will be developed into major energy sources, the goal being to boost 
their utilization share from 2.7% in 2012  to 14.1% and from 2.2% in 2012 to 18.2%  respectively  
by 2035 .  
3.31.   In June 2016, Korea announced restructuring measures for public energy companies in a 
move to enhance the efficiency and management of public firms in the energy sector. Similar or 
overlapping functions in public organization s will be consolidated or merged, underperforming 
businesses disposed of, non -core business reduced and companies gradually opened to 
competition.   
3.3.4   Services  
Establishing the legal basis and supportive infrastructure  
3.32.   Korea recognizes that the performance o f its service sector lags  behind those of developed 
economies , in large part due to a  policy focus  on manufacturing and a wide spectrum of 
regulations. In this light, the  Korean  Government is preparing  the enactment of new framework 
legislation on s ervice industry development, and in July 2016 unveiled the Service Economy  
Development Plan as a comprehensive measure to foster the service sector.  
3.33.   Currently awaiting approval by the legislative body, this framework act  seeks  to promote  
the systematic developmen t of the service sector . Once the bill is passed , Korea will set up a 
government -wide implementation framework in the form of a committee on the  advancement of 
service industry development and five -year master plans .  
3.34.   The recently announced Service Economy  Development Plan contains a policy agenda for 
the transition to a developed economy driven by services. Current government  policies in the 
areas of public procurement, venture business certification and site regulations  which were 
designed for the manufac turing sector will be amended  to allow easy access  for the service sector.  
Added value will be heightened in key manufacturing sectors through the deployment of business 
services such as design and engineering.  Furthermore, the integrated trade information  portal  
(http://www.tradenavi.or.kr/ ) will support providing  related information on the service sector.  
3.35.   Regulations that serve as barriers to growth will be modified, especially in service sectors 
with great gro wth potential, such as tourism, content, medical, educational, financial, software and 
logistics services. Related measures are expected to attract more investment and create jobs, and 
will be supported by reform of relevant laws and regulations.  
3.36.   One such measure is the Culture Creation  and Convergence Belt, which has been in 
operation since February 2015. This measure aims to provide a basis for economic reform by 
helping to create a new paradigm of the creative economy and playing a pivotal role in cultur al 
enrichment. Programs are provided  to help innovative start-ups share and combine creative ideas 
with an aim of commercialization . Meanwhile, the Tourism Promotion Act was amended in 
December 2015 to ease regulations on hotel construction, thereby consol idating  essential tourism 
infrastructure.  
4  TRADE AND INVESTMENT  POLICY  
4.1.  Following  the inauguration of the new administration in February 2013, the functions of trade 
negotiation, implementation and domestic measures were consolidated under the Ministry of 
Trade, Industry and Energy to enhance the effectiveness of trade policies. While openness is still WT/TPR/G/346 • Republic of Korea  
 
- 10 - 
 
  the keyword for Korea' s trade policy, the new administrati ve structure now also enables 
collaboration and communication with the business community  and the ge neral public.  
4.1  Multilateral and Plurilateral Trade Agreements  
4.2.  As a Member of the WTO, Korea has attached great importance to WTO -led trade 
liberalization, adopting it as the core principle of its trade policy, and continues to seek 
liberalization in goods, services and investment.   
4.1.1   WTO DDA Negotiations  
4.3.  Korea is a strong advocate of the WTO's commitment to pursu e trade liberalization as a 
means of  economic growth as well as its fundamental principle of benefiting all member countries 
through the development and implementation of multilateral rules.  
4.4.  In line with this principle, Korea contributed to  producing  the Bali Package in December 2013 
and the Nairobi Package in December 2015, and is presently working to ensure their full 
implementation.  
4.5.  After negotiat ions on the TFA were concluded in December 2013, Korea ratified the 
agreement in July 2015.  Prior to the ratification, Korea enhanced its ability to implement key TFA 
provisions  by accelerating clearance  procedures, enabling web -based information disclosur e, and  
applying a single window customs clearance system through  the launch of UNI -PASS, a 
fourth -generation e -clearance platform , in April 2016 .26  
4.6.  The Tenth WTO Ministerial Conference in Nairobi produced outcomes on preferential  rules of 
origin for least developed countries (LDCs)  and preferential treatment in favour  of service  and 
service suppliers of LDCs. Even before  these decisions, Korea has long been offering benefits to 
LDCs. LDCs have been benefiting from preferential treatment in services since Ju ly 2015 . 
Value -added rules have made the determination of rules of origin simpler, and the value of foreign 
input allowed in LDC imports has been extended to 60%, a level on par with developed countries.  
4.1.2   Plurilateral Trade Agreements  
4.7.  Being an original par ty to the WTO GPA, Korea is now subject to the revised GPA which 
entered into force  for Korea on 14 January 2016.  The implementation of  the revised GPA is 
expected to  enhance efficiency and transparency and provide foreign suppliers and service 
providers w ith wider market access to Korea' s government procurement market.   
4.8.  Korea was also a party to the 1996 ITA and participated in the ITA expansion negotiations , 
which  were concluded in December 2015. Korea is currently undertaking  the necessary WTO and 
domes tic procedures for its implementation.  
4.9.  As part of efforts to protect the environment and to promote trade in environmental goods 
and services, Korea is an active participant in the negotiations on the WTO EGA.  
4.2  Trade and Development  
4.10.   Strongly committed to  the integration of developing countries and LDCs into the multilateral 
trading system,  Korea is  taking active part in trade capacity -building activities at the WTO level.  
4.11.   The amendment to the Presidential Decree on Preferential Tariff s for Least -Develope d 
Countries has been allowing LDCs duty -free, quota -free (DFQF) market access for 4,870, or 
93.6%, of all tariff lines since January 2012.  
4.12.   Korea has donated approximately US$5 million overall as of 2016 to the WTO Doha 
Development Agenda Global Trust Fund (DDA GTF), which was established in December 2001 to 
provide technology support and capacity -building assistance to LDCs in the area of trade. A total of 
                                                
26 A system that allows trading companies to submit all import -related requested documents through a 
single window.  WT/TPR/G/346 • Republic of Korea  
 
- 11 - 
 
  US$1 million was also donated to the Tier 1 projects of the Enhanced Integrated Framework (EIF),  
which  was launched in September 2007 with the aim of supporting LDCs' trade capacity -building 
and integration into the multilateral trading system. Korea plans to continue participating in the 
GTF and EIF Tier 2 projects in an effort to  create more opportunitie s and benefits through trade 
and market development.  
4.13.   On a separate note, Korea is sharing with developing countries its experience in designing 
and managing a customs clearance system. As part of these efforts, Korea has been supporting 
business process r eengineering (BPR) for customs administration in 14 countries since 2012. 
Around 400 customs officials are invited to Korea every year to share knowledge in risk 
management and other issues.  
4.3  Regional and Bilateral  Trade Agreements  
4.14.   Korea has continued to p ursue FTAs with the conviction that market  openness  and 
liberalization contribute to strengthening national competitiveness. Eight  new FTAs have been  
concluded since 2012, including those with the U.S. and China . As of 2016, Korea is connected to 
52 countr ies through a network of 15 FTAs.  
4.15.   Korea seeks comprehensive,  high-standard FTAs that cover not only goods, but also 
services, investment and rules. Having signed  FTAs with  some of the world's largest economies 
including the U.S.,  the EU and China, Korea i s engaged in negotiations for the Korea -China -Japan 
FTA, the Korea -Central America FTA, the Korea -Ecuador SECA and the Korea -Israel FTA.  
Table 4.1 Overview of Korea's FTAs  
Phase  Trading Partner  Progress  Notes  
In force  
(7) Chile (April 2004), Singapore (March 2006), EFTA (September 2006), ASEAN 
(September 2009), India (January 2010), Peru (August 2011), EU (December 2015)  
Recently entered 
into force  
(8) U.S. Entered into force in 
March 2012  Tariffs eliminated  for 96% of all 
tariff lines within 5 years of entry 
into force  
Turkey  
(Framework 
Agreement, Agreement 
on Trade in Goods)  Entered into force in 
May 2013  Tariffs eliminated for all tariff lines 
within 10 years of entry into force 
(Korea: 99.6%, Turkey: 10 0%) 
Australia  Entered into force in 
December 2014  Tariffs eliminated for the majority of 
tariff lines within 10 years of entry 
into force (Australia: within 5  years)  
Canada  Entered into force in 
January 2015  Tariffs eliminated for the majority of 
tariff lines within 10 years of entry 
into force (Korea, Canada: 97.5%)  
China  Entered into force in 
December 2015  Tariffs eliminated for over 90% of 
all tariff lines within 20 years of 
entry into force  
Services and investment: Follow -up 
negotiations on libera lization to 
begin within 2 years of entry into 
force 
New Zealand  Entered into force in 
December 2015  New Zealand to eliminate tariffs 
within 7 years, and Korea within 15 
years, of entry into force  
Viet Nam Entered into force in 
December 2015  Additional  tariff reduction on 
sensitive and highly sensitive tariff 
lines that are not covered by the 
Korea -ASEAN FTA: 94.7% for Korea 
(+3 percentage points compared to 
Korea -ASEAN FTA), 92.2% for 
Vietnam (+6 percentage points 
compared to Korea -ASEAN FTA)  
Product -specific rules of origin 
improved  WT/TPR/G/346 • Republic of Korea  
 
- 12 - 
 
  Phase  Trading Partner  Progress  Notes  
Colombia  Entered into force in 
July 2016  Tariffs eliminated for the majority of 
tariff lines within 10 years of entry 
into force (Korea: 96.1%, 
Colombia: 96.7%)  
Negotiations  
concluded  
(1) Turkey  
(Agreement on 
Services an d 
Investment)  Concluded in 2014, 
officially signed in 
February 2015  - 
Under negotiation  
(5) Korea -China -Japan FTA  10 rounds of official 
negotiations  - 
Korea -Central America 
FTA 4 rounds of official 
negotiations  - 
RCEP 13 rounds of official 
negotiatio ns  Negotiations targeted for conclusion 
in 2016  
Korea -Ecuador SECA  2 rounds of official 
negotiations  - 
Korea -Israel FTA  Negotiations launched 
in May 2016, 1 round 
of official negotiations  - 
Source:  Ministry of Trade, Industry and Energy , http://www.fta.go.kr  
4.4  Investment Policy  Development  
4.16.   The Korean Government has recently stepped up efforts to improve the  environment for  
foreign investment  by enhancing  communication with foreign investors  and reducing  regulations , 
with considerable results in terms of FDI attraction.   
4.17.   Annual FDI inflow (arrival basis)  has increased significantly over the past two years, but the 
yearly FDI inflow  (net basis)  has remained stagnant or declined  due to the impact of investment 
capital w ithdrawals following profit ga ins. 
Table 4.2 Realized FDI and FDI Net Inflow, 2011 -2015  
(Unit: US$ million)  
 2011  2012  2013  2014  2015  
FDI inflow (arrival basis)a 6,642  10,712  9,861  12,078  16,444  
FDI inflow ( net basis)b 9,773.0  9,495.9  12,766.6  9,273.6  5,042.0  
a Ministry of Trade, Industry and Energy, Foreign Investment Statistics  (last viewed online on 
23 June 2016).  
b Bank of Korea, Economic Statistics System  (last viewed online on 24 June 2016).  
Improving foreign investment  attractiveness   
4.18.   The Korean Government has made continuous efforts to attract high -tech or high -value 
added foreign  investment projects and facilitate foreign investor’s  contribution to domestic  job 
creation.  
4.19.   In October 2014 , the Enforce ment Decree and Enforcement Rules  of the Foreign Investment 
Promotion Act  were amended to provide  incentive for global business headquarters and R&D 
centers . Foreign workers and technicians who work in these headquarters or R&D centers receive 
income tax i ncentives.  
4.20.   Foreign -invested companies that  generate more employment are eligible for  extra reduction 
of rental fees for state property  in accordance with the amendment to the Enforcement Decree of 
the Foreign Investment Promotion Act  in October 2014 . The scale of job creation is now reflected 
more extensively in  determining  corporate tax cuts for foreign -invested companies in accordance 
with the amendment to the Restriction of Special Taxation Act  in December 2015.  WT/TPR/G/346 • Republic of Korea  
 
- 13 - 
 
  Enhancing communication and conducting regulatory  reform for foreign investment  
4.21.   As part of efforts to improve the transparency of foreign investment -related policy, the 
Korean Government  is enhancing communication with foreign investors and mechanisms for their 
participation. For example, regular  meetings between foreign investors and government  officials in 
charge of foreign investment related polices are held to facilitate  communication. In addition, the 
Regulatory Information Portal ( http://e.bet ter.go.kr/engMain.laf ) was opened in July 2015 to 
promote foreign investors ' participation in the policy -making process.   
4.22.   In a move to promote joint investment ventures between domestic and foreign companies, 
the Foreign Investment Promotion Act was amen ded in December 2014 to allow the establishment 
of a third -tier subsidiary of a parent company (to partially own shares),  on the condition that it is a 
joint stock corporation with a foreign company . This represents a  deregulation  of the Monopoly 
Regulatio n and Fair Trade Act,  which prohibited second -tier subsidiaries of parent holding 
companies from owning stock in a second -tier company’s subsidiaries.  
4.23.   Amendments to the Foreign Investment Promotion Act in July 2016 have helped streamline 
foreign investmen t procedures. Reporting and registration procedures for different types of 
investment are now simpler  with fewer documents required . 
5  THE WAY FORW ARD 
5.1.  The Korean Government will continue to seek ambitious and hig h-standard  trade 
liberalization c onforming to the WTO rules.  Korea will support the multilateral trading system  
under the auspices of the WTO and contribute to the advancement of the remain ing DDA 
negotiations and new issues such as electronic commerce. Committed to pursuing this goal beyond 
tariff el imination, Korea will continue to eliminate  non-tariff barriers,  open services and investment  
markets and  proactive ly respond  to the spread of mega -FTAs.  
5.2.  Furthermore , the Korean Government will work to  promote a  creative economy  for the 
growth of new indus tries and recovery of economic growth. Korea will also undertake institutional 
improvement s in the form of regulatory reform as a way to enhance market transparency and 
efficiency , which will in turn boost productivity.  This will be accompanied by constant  efforts to 
build a transparent investment environment.  
 
 
__________