WT/TPR/S/204 Trade Policy Review 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) INTRODUCTION  
1. During the period under review (2004-08), no major changes have been made to the structure 
of trade policy formulation in Korea.  Regulator y reform has progressed with emphasis shifting from 
a quantitative reduction of regulations  to improving regulatory quality. 
2. While remaining committed to multilateralism a nd a successful outcome of the Doha Round 
negotiations, Korea has pursued free trade agreements (FTAs) with major trading partners or regional 
groups (ASEAN, Singapore, EFTA, United States) and continues or is planning negotiations with 
others, to establish an FTA network with large ec onomic blocs and newly emerging markets.  Korea 
has continued to provide duty-free treatment to selected imports from least developed countries 
(LDCs).  It has been involved in dispute settlement cases at the WTO. 
3. While inflows of foreign direct investment (F DI) are considerably lower in Korea than in 
most other OECD countries, the authorities recogni ze that FDI is of vital importance to economic 
growth.  Accordingly, several tax and other incenti ves are reserved for foreign-invested companies.  
Moreover, action has been taken to improve both the business and the living environment for 
foreign-invested companies and their employees.  However, FDI in a few sectors remains partially or 
fully restricted (television and radio broadcasting, nuclear power generation). 
(2) GENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK  
4. Since its previous Review, Korea's constitutio nal, executive, legislative, judicial and 
administrative framework has changed little.  
5. A democratic unitary republic, Korea has a presidential parliamentary system.  The 
299-member National Assembly (Parliament) exercises legislative power by enacting laws and monitoring state administration, including control of the Budget.  Executive authority rests with the President and the State Council (Cabinet), which is chaired by the President, and comprises the Prime Minister and all ministers.
1  The current President was elected in December 2007 and took office in 
February 2008; the next presidential election is  due in December 2012.  The last parliamentary 
elections were held in April 2008 and the next are due in four years.  
6. The executive, through relevant ministers, ma inly introduces legislation into the National 
Assembly.2  Korea's legislative framework distinguish es between these acts and subordinate statutes 
issued under authority delegated by specific legisla tion.  In hierarchical order, these consist of 
presidential decrees, ordinances, and administrativ e rules (called directives, regulations or public 
notices).  The State Council endorses presidential decre es.  Ordinances are issued by the responsible 
minister, including the Prime Minister.  Administrative rules, published by the relevant ministry, govern public administration.  When issued under sp ecific legislation or subordinate statutes, these 
rules are generally regarded as supplementary laws.  The President must promulgate bills passed by 
the National Assembly within 15 days by publication in the Official Gazette , unless vetoed by 
                                                     
 
1 The President appoints the Prime Minister (subject to approval by the National Assembly), and 
ministers on the recommendation of the Prime Minister regardless of whether they belong to his party.   
2 Members of the National Assembly can also introduce bills (Article 52 of the Constitution). Republic of Korea WT/TPR/S/204 
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him/her.3  Subordinate statutes are also gazetted.  Laws and subordinate statutes generally enter into 
force 20 days after publication.   
7. Treaties concluded and promulgated under the C onstitution, and generally recognized rules of 
international law have the same force and eff ect as domestic laws.  Proposed treaties must be 
deliberated on by the State Council.  The National Asse mbly has the right to consent to the conclusion 
and ratification of treaties, including on trade, and the President must ratify them.   
8. Korea has an independent judiciary.  Judicial power is vested in the Supreme Court, the 
highest court, 5 high cour ts and 18 district courts, which over see 43 branch courts and 101 municipal 
courts.  The President appoints the Chief Justice of the Supreme Court with the consent of the 
National Assembly for a single term of six years, as well as other justices (on the recommendation of 
the Chief Justice).  A specialized Patent Court a nd Administrative Court also exist (Chapter III);  a 
Constitutional Court is responsible  for constitutional matters, especi ally jurisdiction over judgements 
on the constitutionality of laws, impeachment, dissol ution of political parties, competence disputes 
and constitutional complaints.   
9. Korea has 16 provincial governments and 230 lo wer-level municipalities;  although they are 
empowered to collect local taxes and fees, lo cal autonomy remains limited in certain areas.4  
Provincial governments (headed by an elected governor) serve mainly as administrative intermediaries between the Cent ral Government and lower-level municipalities.  The State has 
constitutional power to "foster, regul ate and coordinate" foreign trade.   
(3) S
TRUCTURE OF TRADE POLICY FORMULATION  
(i) Executive branches of government 
10. There was an overall restructuring of government ministries and agencies in early 2008.  At 
present there are 15 executive ministries.  Two fu rther ministries (Government Legislation, and 
Patriots and Veterans Affairs) are under the Prime Minister's responsibility.  Trade policy formulation 
and implementation involves several ministries:  th e Ministry of Foreign Affairs and Trade (MOFAT) 
has primary responsibility for international trade negotiations, including FTAs, and formulation and 
implementation of trade policies5;  other ministries are involved according to their spheres of 
responsibility.  In 2008, the Ministry of Commerce,  Industry and Energy, which is responsible for 
export and import measures as well as for policies on industry, energy, and resources, was renamed as 
Ministry of Knowledge Economy (MKE);  it now inco rporates certain functions that were previously 
the responsibility of other ministries (i.e. Inform ation and Communications, Science and Technology, 
Finance and Economy).6  Other relevant ministries are also involved in trade policy formulation and 
implementation.  
11. The National Economic Advisory Council (NEAC), advises the President (its chairman) on 
development policies, including domestic and in ternational economic issues affecting national 
                                                      
3 If vetoed, the bill is returned to the National As sembly and re-considered.  If passed again by the 
National Assembly (two-thirds majority of at least half of the members) the bill becomes law within 20 days.   
4 The Special Act on Decentralization Promotion, fully  amended in February 2008, provides for greater 
transfer of authority and financial resources from the Central Government to local governments.   
5 MOFAT has two Ministers;  the Minister of Foreign Affairs and Trade and the Minister for Trade. 
While in principle the Minister of Foreign Affairs and Tr ade is responsible for trade matters, in practice, such 
authority is effectively delegated to the Minister for Trade.  MOFAT's work has been focused on FTA issues.  
For example, MOFAT created a new FTA Division in October 2004.  
6 MKE online information.  Viewed at:  http://www.mke.go.kr/language/eng/about/history.jsp. WT/TPR/S/204 Trade Policy Review 
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welfare;  its Sub-committee on Trade and Industry, which also involves private sector representatives 
(including two foreign representatives) and academ ics, advises on such policies and may launch 
related research projects.  
(ii) Advisory, planning, and other bodies 
12. While no independent statutory body public ly assesses trade or assistance policies from a 
national welfare perspective, trade-related policy fo rmulation is open, fostering greater public debate 
and broader community input.  Many ministries,  including MOFAT and MKE, solicit public views on 
trade-related policies, including over the Internet.  The Government interacts with the private sector, 
especially through consultations with the bus iness community.  MOFAT's Trade Negotiation 
Advisory Council consults on direc tions and strategies of general trade policy; as of April 2006, its 
16 sectoral advisory groups were replaced by advi sory groups for FTA negotiations.  It also organizes 
regular "enlarged meetings to promote trade and investment" to consult with the private sector, 
including foreign firms, on trade and investment policy.  Foreign firms are also represented on the 
Advisory Council for Foreign Investment under I nvest Korea (section (7)), which advises government 
on foreign investment policy.   
13. Several public research institutes publish wi dely on trade-related matters, including on 
multilateral and bilateral policy issues, such as  assessing the impact of bilateral free-trade 
arrangements on Korea.  They include the government-funded think-tank Korea Institute for International Economic Policy (KIEP), the Korean  Institute for Industrial Economics and Trade 
(KIET), the Korea Development Institute (KDI), the Korea Economic Research Institute and the 
Korea Rural Economic Institute (KREI).  The Instit ute for International Trade, run by the Korea 
International Trade Association, works closely with the public sector to develop private sector 
strategies and to promote public debate on Korea's trade policies. 
(4) T
RADE POLICY OBJECTIVES  
14. Korea's general trade policy objective is to build a free and open economy based on market 
principles.  Since its previous Trade Policy Review, Korea's principal trade policy objective has 
remained virtually unchanged;  this has been to promote international competitiveness of its 
businesses and economic growth through openness and reforms.  To meet the challenges of 
globalization and unlimited competition, Korea is pur suing economic and trade diplomacy to build an 
advanced trading country by focusing on the creati on of new growth potential, improved access to key 
markets (through participation in multilateral nego tiations and negotiation of  more FTAs) and close 
economic cooperation with its trading partners.7  To help meet the Government's growth target, trade 
volume should reach US$1 trillion by 2010, making Korea one of the top eight traders.  
15. During the period under review, trade policy obj ectives have reflected those pursued at 
sectoral level.  For example, despite a move towa rds more market-oriented protection in agriculture 
disproportionately high levels of border protection have been maintained, mainly in the form of 
tariffs, for a number of sensitive items (Chapter IV ).  Concessional entry and autonomous tariff quotas 
for inputs have been used to reduce produc tion costs in certain industries (Chapter III). 
(5) TRADE LAWS AND REGULATIONS  
16. Korea has made progress toward improving its regulatory framework.8  Emphasis has shifted 
from a quantitative reduction of the overall stock of regulations to improving regulatory quality.  By 
                                                      
7 Ministry of Foreign Affairs and Trade (2007). 
8 OECD (2007h);  and APEC (2007). Republic of Korea WT/TPR/S/204 
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December 2007, the Regulatory Re form Task Force (RRTF) under the Prime Minister's Office had 
drafted 1,822 detailed improvement plans relating to 68 strategic areas;  the RRTF facilitates reform 
of "bundle regulations" that involve multiple ministries, rather than single regulations.9  B e t w e e n  
2004 and 2007, the Business Difficulties Resolutio n Center (BDRC), a one-stop ombudsman under 
the Prime Minister's Office, received 1,887 complain ts from businesses on regulatory issues, of which 
1,167 were resolved satisfactorily.  The authorities plan, inter alia,  to re-examine and reorganize 40% 
of the existing regulations, to upgrade the regulator y system, and to transform regulations with the 
largest impact on society and the economy.  
17. Because treaties constitutionally have the same effect as domestic laws, Korea's multilateral 
commitments became enforceable domestically when the Government promulgated the WTO 
Agreement in December 1994.10  WTO provisions can, in principle, be invoked in domestic courts.  
This has never happened, however , and there have been no cour t cases where domestic laws have 
conflicted with WTO rules. 
18. Korea attaches high priority to making laws transparent and readily accessible, including by 
foreigners.  Many Korean laws are available in English, and are obtainable on the Internet from 
websites maintained by relevant ministries and agen cies.  The Ministry of Government Legislation 
(MOLEG) makes laws and regulations availabl e on its Internet homepage (http://www.moleg. 
go.kr/English/).11  It also publishes a monthly periodical, Legislation,  which contains information on 
all laws and regulations enacted  or amended during the month as well as any other important news 
relating to legislation.  An agency's legislative pl an, proposed laws and regulations are also disclosed 
on MOLEG's website;  while all th e regulations under current law are open to the public through the 
website of the Regulatory reform Committee, ordina ry citizens can post their opinions.  However, 
accessibility of legislation and sub-legal requireme nts in English remains a significant issue for 
foreign stakeholders:  while MOLEG has provided E nglish translation of many Korean laws, many 
sub-legal regulations remain  available only in Korean.12  The MKE publishes regulations (mainly 
certification requirements) affecting foreign trade in the Consolidated Public Notice on Guidelines of 
Exports and Imports , which is revised whenever required (last  revision in April 2008).  Korea's main 
trade-related laws have been am ended since 2004.  In June 2004, Pr esidential decree "regulation on 
concluding FTAs" (not an official translation) was introduced to, inter alia , ensure transparency for 
any FTA negotiations.   
19. In the period under review, Korea has made ma ny notifications to the WTO (Table II.1).  
Korea submits tariff and trade data annually to th e WTO Integrated Data Base;  the latest data 
submitted were for 2008.13 
                                                      
9 OECD (2007h). 
10 The Special Act on the Implementation of the Agr eement Establishing the World Trade Organization 
on 1 January 1995, gazetted on 31 D ecember 1994, was last revised on 14 December 2007 to simplify its 
original text.  
11 MOLEG is responsible for legislative affairs and reviews all draft acts and subordinate statutes to 
ensure their necessity, constitutionality, and legal relevance, consistency, and clarity. 
12 OECD (2007h). 
13 WTO Secretariat information and document G/MA/IDB/2/Rev.27, 11 April 2008. WT/TPR/S/204 Trade Policy Review 
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Table II.1 
Latest WTO notifications, as at end-June 2008  
Agreement Requirement/content Periodicity WTO document and date  
(latest document if recurrent) 
Agreement on Agriculture 
Articles 10 and 18.2 Tables ES.1 and ES.3 – Export subsidies Annual G/AG/N/KOR/36, 27/02/2007 
Article 18.2 Table MA.2 – Imports under tariff 
quotas Annual G/AG/N/KOR/38, 01/03/2002 
Article 18.2 Table DS.1  – Domestic Support Annual G/AG/N/KOR/37/Corr.1, 19/03/2007 
Articles 5.7 and 18.2 Table MA.5 – Special safeguards Ad hoc G/AG/N/KOR/39, 01/03/2007 
Agreement on Implementation of Article VI of the GATT 1994 (Anti-dumping) 
Article 5.8 Time-period for determination of 
negligible import volumes Ad hoc G/ADP/N/100/KOR, 13/02/2003 
Article 16.4 Reports concerning anti-dumpi ng actions Ad hoc G/ADP/N/172, 20/06/2008 
 Semi-annual reports of anti-dumping 
actions (taken within the preceding six 
months) Semi-annual G/ADP/N/166/KOR, 16/04/2008 
Article 18.5 Laws and regulations Once by 03/1995, then 
changes G/ADP/N/1/KOR/5, 25/04/2001 
Articles 16.5 Competent authority to initiate anti-
dumping investigations Once, then changes G/ADP/N/14/Add.17, 07/10/2003 
Agreement on Implementation of Articl e VII of the GATT 1994 (Customs valuation) 
Article 22.2 Changes in laws, regulations and 
administration Ad hoc G/VAL/N/1/KOR/2, 27/04/2001 
Agreement Implementation of Article XX IV:7(a) of the GATT 1994 (Free-trade areas)  
Article XXIV of the 
GATT 94 and 
Article V:7(a) of the 
GATS Free-trade area for trade in goods and 
trade in services Ad hoc S/C/N/373 and WT/REG217/N/1, 
28/08/2006 
General Agreement on Tariffs and Trade (GATT) 1994  
Article XXVIII:5 Reservation of  right to modify schedule 
of concessions for a three year period Triennial G/MA/147, 11/03/2003 
General Agreement on Trade in Services 
Article III:4 and IV:2 Contact and e nquiry points Within two years from 
entry into force of WTO, 
then changes S/ENQ/78/Rev.9, 01/12/2006 
Article XXI:1(b) Claim of interest in members' proposed 
modification of schedules Ad hoc S/L/226, 27/05/2005 
Agreement on Import Licensing Procedures  
Article 7.3 Replies to questionnaire on import 
licensing procedures Annual for questionnaire G/ LIC/N/3/KOR/6, 27/09/2007 
Agreement on Government Procurement 
Article XIX:5 Government procuremen t statistics  GPA/84/Add.1, 12/10/2006 
Article XXIV:6(a) Modifications to Appendi ces I to IV Ad hoc GPA/W/284, 13/11/2003 
Annex 3 Threshold values in nationa l currencies  GPA/W/251, 18/02/2003 
Agreement on Import Licensing Procedures 
Articles 5.1, 5.2, 5.3 Notification of an automatic import 
licensing programme for certain steel 
products. Ad hoc G/LIC/N/2/KOR, 12/01/2007 
Article 7.3 Replies to questionnaire on important 
licensing procedures  G/LIC/N/3/KOR/6, 27/09/2007 
Agreement on Safeguards  
Article 12.1(a) – (c), 
and Article 9.1, 
footnote 2 Investigations, findings, and decisions 
related to safeguard measures Ad hoc G/SG/N/11/KOR/2/Suppl.1, 07/08/2000 
Article 12.5  Consultations  Ad  hoc G/SG/N/12/KOR/1, 16/05/2002 
Table II.1 (cont'd) Republic of Korea WT/TPR/S/204 
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Agreement Requirement/content Periodicity WTO document and date  
(latest document if recurrent) 
Article 12.5 and 
Article 7.4 Mid-term review of safeguard measur es Ad hoc G/SG/N/13/KOR/2, 23/07/2001 
Article 12.6 Laws and regulations Once by /03/ 1995, then 
changes G/SG/N/1/KOR/5, 26/10/2001  
Agreement on the Application of Sanitary and Phytosanitary Measures  
Article 7 and Annex B Laws, regulations and emergency 
measures 
Enquiry points Ad hoc 
 
Ad hoc G/SPS/N/KOR/284, 10/06/2008 
 
G/SPS/ENQ/19, 25/01/2006 
Agreement on Subsidies a nd Countervailing Measures  
Article 25.1 to 25.6 Annual report on subs idies Annual G/SCM/N/71/KOR, 02/08/2001  
Article 25.11 Semi-annual report on countervailing 
duty actions Semi-annual G/SCM/N/107/Add.1, 24/04/2008 
Article 25.12 Competent authority to initiate 
countervailing investigations Ad hoc G/SCM/N/18/Add.19, 20/10/2004 
Article 32.6 Laws and regulations Once by 03/1995, then 
changes G/SCM/N/1/KOR/4, 25/04/2001 
Agreement on Technical Barriers to Trade  
Articles 10.1 and 10.3 Enquiry points  Once, then changes G/TBT/ENQ/32, 07/03/2008  
Article 10.6 Proposed and adopted technical 
regulations Ad hoc G/TBT/N/KOR/177, 09/06/2008 
Annex 3C Acceptance of code of good pr actice Ad hoc G/TBT/CS/N/139, 30/01/2002 
Agreement on Text iles and Clothing 
Articles 2.8(b) and 
2.11 Products to be integrated in third stage At least 12 months 
before entry into effect G/TMB/N/390, 01/03/2001 
Agreement on Trade-Related Aspect s of Intellectual Property Rights  
Article 63.2 Laws and regulations  Once, then changes IP/N/1/KOR/T/2/Add.1, 28/11/2005 
Article 69 Contact points Once, then changes IP/N/3/Rev.9, 08/11/2005 
Agreement on Trade-Rela ted Investment Measures  
Article 6.2 Publications Once, then changes G/TRIMS/N/2/Rev.13, 21/02/2005 
Source:  WTO Secretariat.  
(6) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Korea and the WTO 
20. Korea participates actively in the WTO and is co mmitted to the multilateral trading system.  It 
supports a strong rules-based system that secur es market access to promote global economic growth 
and development.  Korea accords at least MFN tr eatment to trading partners, including 20 non-WTO 
Members and 4  other countries under bilateral agreements.14  Korea regards trade with North Korea as 
intra-Korean commerce in acco rdance with the 1992 Agreement on Reconciliation, Non-aggression 
and Exchange and Cooperation.  Such trade is ther efore exempt from tariffs.  Trade with North Korea 
still requires approval from the Minister of Unifica tion on the kind of products traded, the type of 
transaction, and the settlement method.15  
                                                      
14 The non-WTO Members are:  Afghanistan, Bhutan, Lao PDR, Iran, Iraq, Lebanon, Syrian Arab 
Republic, Yemen, Nauru, Vanuatu, Independent State of Samoa, Union of the Comoros, Liberia, Ethiopia, 
Somalia, Andorra, Monaco, San Marino, Vatican City, and the Russian Federation.  The 4 others are:  Sudan, Kazakhstan, Uzbekistan, and Belarus. 
15 The Agreement on intra-Korean Transaction based on Clearing Se ttlement System (22 April 2004) 
has not been implemented due to a disagreement over the target items and the lack of will on the part of WT/TPR/S/204 Trade Policy Review 
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21. Korea is an export-dependant country and one of  the biggest beneficiaries of the multilateral 
trading system;  it is an original Member of th e WTO.  Korea is also a signatory and observer, 
respectively, of the plurilateral Agreements on Government Procurement and on Trade in Civil 
Aircraft.  It ratified the Fourth and Fifth protoc ols to the General Agreement on Trade in Services on 
Basic Telecommunications and Financial Serv ices on 27 November 1997 and 27 January 1999, 
respectively.  It was also an original Memb er of the Information Technology Agreement. 
22. Korea attaches high priority to the successful conclusion of the Doha Development Agenda 
(DDA).  It has participated actively in the nego tiations and has developed detailed positions in all 
negotiating areas.  Korea is keen to ensure th at the DDA achieves a balanced outcome between 
developed and developing Member interests.  Kore a believes in the benefits  of multilateralism and has 
developed through trade;  it considers that more than  70% of its development is due to trade and that 
special consideration should be given to deve loping countries to ease their development process.16  
Korea believes that trade liberalization in the agricu ltural sector should take place at a pace that takes 
into account Members' sensitivities in order to ra ise the overall level of ambition of the ongoing 
multilateral trade negotiations. 
23. Korea has made use of the multilateral dis pute settlement mechanism to resolve trade 
disputes.  Since its last Review, Korea has been di rectly involved in four cases (Table II.2), three as a 
complainant and one as a respondent.  It has also participated as a third party in 14 cases. 
Table II.2 
Involvement in the WTO disput e settlement mechanism, 2004-08 
Dispute Complainant/ 
respondent  (WTO document) Request for 
consultation Panel report 
circulated Appellate Body 
report circulated/ adopted 
As a complainant     
European Communities - Aid for 
Commercial Vessels Korea/EC 
(WT/DS307) 13.02.04   
Japan – Import Quotas on Dried Laver 
and Seasoned Laver Korea/Japan 
(WT/DS323) 01.12.04 01.02.06 
Mutually agreed 
solution notified:  
23.01.06  
Japan – Countervailing Duties on 
Dynamic Random Access Memories 
from Korea Korea/Japan 
(WT/DS336) 14.03.06 13.07.07 28.11.07/17.12.07 
As respondent     
Korea – Anti-Dumping Duties on 
Imports of Certain Paper from Indonesia Indonesia/Korea 
(WT/DS312) 04.06.04 28.10.05 
Adoption: 28.11.05 
Request for 
implementation 
panel: 22.12.06 Circulation:  
28.09.07 
Adoption: 22.10.07  
Table II.2 (cont'd) 
                                                                                                                                                                     
North Korea.  Although a relevant agreement was signed between South and the North Korean banks, its 
implementation was delayed.  According to a survey conducted in January 2008 by the Ministry of Unification 
and the Korea International Trade Asso ciation, indirect transactions betw een North and South Korea account for 
19% of their total trade while direct exchanges represen ts 52%.  It is thought that South Korean businesses 
maintain indirect transactions through Chinese intermediaries to avoid various business risks. 
16 WTO document WT/MIN(05)/ST/19,  14 December 2005. Republic of Korea WT/TPR/S/204 
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Dispute Complainant/ 
respondent  
(WTO document) Request for 
consultation Panel report 
circulated Appellate Body 
report circulated/ 
adopted 
As a third party Complainant    
European Communities – Selected customs matters United States 
(WT/DS315/1) 21.09.2004 16.06.2006 13.11.2006/ 
11.12.2006 
European Communities and certain 
member States – Measures affecting 
trade in large civil aircraft United States 
(WT/DS316/1) 06.10.2004   
United States – Measures affecting 
trade in large civil aircraft European 
Communities 
(WT/DS317/1) 06.10.2004   
United States – Measures relating to 
zeroing and sunset reviews Japan 
(WT/DS322/1) 24.11.2004 20.09.2006 09.01.2007/ 
23.01.2007 
Brazil – Measures affecting imports of retreaded tyres European 
Communities (WT/DS332/1) 20.06.2005 12.06.2007 –/17.12.2007 
United States – Measures affecting 
trade in large civil aircraft (second complaint) European 
Communities (WT/DS353/1) 27.06.2005   
Turkey – Measures affecting the 
importation of rice United States 
(WT/DS334/1) 02.11.2005 21.09.2007 –/22.10.2007 
United States – Anti-dumping measure 
on shrimp from Ecuador Ecuador 
(WT/DS335/1) 17.11.2005 30.01.2007 –/20.02.2007 
European Communities and certain 
member States – Measures affecting trade in large civil aircraft (second 
complaint) United States 
(WT/DS347/1) 31.01.2006   
European Communities – Anti-dumping 
measure on farmed salmon from 
Norway Norway 
(WT/DS337/1) 17.03.2006 16.11.2007 –/15.01.2008 
United States – Measures relating to 
shrimp from Thailand Thailand 
(WT/DS343/1) 24.04.2006 29.02.2008  
United States – Continued existence 
and application of zeroing methodology European 
Communities (WT/DS350/1) 02.10.2006   
China – Measures affecting the 
protection and enforcement of intellectual property rights United States 
(WT/DS362/1) 10.04.2007   
China – Measures affecting trading 
rights and distribution services for certain publications and audiovisual 
entertainment products United States 
(WT/DS363/1) 10.04.2007   
Source: WTO Secretariat.  
(ii) Regional agreements 
(a) Asia-Pacific Economic  Cooperation (APEC)  
24. Korea has traditionally given APEC high importanc e and intends to meet APEC's target of 
free and open trade, including in services and investment by 2020 as envisaged for developing 
economies (2010 for developed economies).  This is to be achieved on a voluntary and non-binding 
basis (concerted unilateral liberalization) using Individual Action Plans (IAPs) containing intended 
action in 15 policy areas.  Th e IAPs are updated annually. 
25. APEC has engaged in extensive work on RT As/FTAs and is developing "model measures" 
chapters that could be used by members in th eir negotiations in order to achieve high-quality, 
comprehensive RTAs/FTAs.  In November 2006, A PEC leaders approved measures on:  cooperation;  WT/TPR/S/204 Trade Policy Review 
Page 26 
 
 
trade in goods;  technical barriers to trade;  transparency;  government procurement;  and dispute 
settlement.  Eleven model measure s remain under discussion.  At their March 2008 meeting held in 
Lima, APEC Senior Officials discussed, inter alia,  the status of the ongoing WTO negotiations and 
regional economic integration.17  Supporting the multilateral trading system remains the highest 
priority for APEC economies.  It was agreed to implement the recommendations of a report on 
regional economic integration, endorsed by APEC  Economic Leaders in 2007, including practical and 
incremental steps to explore a Free Trade Area of the Asia-Pacific (FTAAP). 
26. Korea hosted the 2005 APEC Summit in Busan an d has played a leading role in establishing 
mid-term directions for trade and investment lib eralization and adopting th e Busan Road-map, which 
has revitalized the APEC process.  Furthermore, Korea pledged to contribute US$2 million to the 
APEC Support Fund in support of capacity building projects for developing member economies in the budget years 2007 to 2009.  It has also initiated a study on ways to confront the challenges and 
impediments related to socio-economic disparity i ssues and hosted an international APEC symposium 
on these issues in Seoul in 2006.  
27. APEC's strengthened peer review process is aimed at examining more rigorously the progress 
of member economies in achieving the Bogor target s.  Korea was reviewed in July 2007.  The 
independent study prepared as part of that review concluded that "in many respects progress has been 
continuous and impressive" but "there has been little  change in the main tariff and non tariff measures 
as applied on an MFN basis.  Agriculture is still th e area where the highest levels of protection apply 
and represents the toughest hurdle to meeting the Bogor goals".
18  
(b) Association of Southeast Asian Nations (ASEAN) 
ASEAN+3 
28. Korea attaches high priority to closer trade relations and other ties with ASEAN.  The 
ASEAN+3 members (China, Japan, and Republic of Korea) agreed in November 2002 to study and 
formulate options to gradually establish an East Asia Free Trade Area. (EAFTA).  A Joint Expert 
Group (JEG) for Feasibility Study on EAFTA, es tablished in 2004, submitted its 2006 report 
("Towards an East Asia FTA:  Modality and Ro admap"), to the ASEAN Economic Ministers+3 
Meeting in 2007.  It recommends mainly that:  the EAFTA process should start within the ASEAN+3 
framework;  the EAFTA should be comprehensive in  scope with substantial liberalization in all 
sectors;  and economic development cooperation in itiatives with specific action plans must be an 
integral part of EAFTA.  Korea proposed the Phase II study, involving an in-depth, sector-by-sector 
analysis, to examine concrete elements of EAFTA, such as market access for goods, services, and 
investment, and rules of origin.  The first meeting was in June 2007;  a final report will be submitted 
in 2009. 
ASEAN 
29. An ASEAN and Korea (Rep. of) Free Trade Agreement on goods was signed in August 2006 
and entered into force on 1 June 2007 for Ko rea, Singapore, and Malaysia.  Korea and ASEAN 
members except for Cambodia, Myanmar, Brunei Darussalam, and Thailand have implemented the 
agreement.  Under the agreement, the tariff rat es on 90.8% (4,742 items) of all products will be 
reduced gradually to zero by 2010, and the rates on  5.4% (282 items) of items will be reduced to a 
range from zero to 5% by 2016.  Trade in 3.1% (160 items) of tariff items will be liberalized in 
                                                      
17 APEC online information.  Viewed at:  http ://www.apec.org/apec/news___ media/media_releases/ 
030308_pe_som1workplan.html. 
18 APEC (2007). Republic of Korea WT/TPR/S/204 
 Page 27 
 
 
four ways:  50% tariff rate capping;  tariff reducti on by 20%;  tariff reduction by 50%;  or tariff quota 
system.  The remaining 0.77% (40 items, including ri ce) of tariff items are to be exempted from tariff 
concessions.  In December 2007, Thailand (the only ASEAN member that had not signed the 
agreement) and Korea completed their bilatera l negotiations for Thailand's accession to the 
agreement.  The Korea-ASEAN FTA in Trade in  Services was signed in November 2007 and is 
expected to enter into force in 2008.  The level of Korea's commitments was similar to its offer for the 
Doha Round, which exceeds its GATS commitments.  The number of the sectors or sub-sectors open 
to foreign suppliers increased, and limitations on bo th market access and national treatment in certain 
sectors or sub-sectors decreased. 
(c) Asia-Pacific Trade Agreement (APTA) 
30. Korea is a party to the APTA (previously ca lled the Bangkok Agreement), which is aimed at 
achieving trade liberalization among the less devel oped members of the United Nations Economic and 
Social Commission for Asia and the Pacific (UNESCAP).19  Following China's accession in 2001, 
members initiated a revitalizati on process, including a third round of negotiations from October 2001 
to mid 2005 with the objective of deepening a nd widening concessions.  Furthermore, APTA 
launched the fourth round of trade negotiations to deepen the tariff cuts and widen its coverage in 
October 2007.  The APTA contains a consolidated list of tariff concessions (resulting from the three 
rounds of trade negotiations) for members.  Under this agreement, China and Korea (Rep. of) grant 
concessions on 1,697 (eight-d igit HS) and 1,367 (ten-digit HS) items, respectively. 
31. UNESCAP, which functions as the Secretariat for the agreement, has, inter alia,  provided 
WTO training programmes to build up regional expe rtise on these issues, research, and undertake 
analytical studies on DDA issues and participation of LDCs and land-locked countries in the global 
economy through WTO-consistent regional trade arrangements.20   
(d) Asia-Europe Meeting (ASEM)21 
32. The informal process of dialogue and cooperation among 45 members, (EC States, the EC, 
the ASEAN Secretariat, and 16 Asian countries) addresses political, economic, social, and other 
issues to strengthen regional relationships.  The Tr ade Facilitation Action Plan (TFAP) aims to reduce 
non-tariff barriers, increase transparency, and prom ote trade opportunities between the two regions.  It 
specifies bi-annual "concrete goals" in the priori ty areas of customs, standards and conformity 
assessment, public procurement, quarantine and SPS,  intellectual property, mobility of business 
people, and other trade activities, such as market ac cess in distribution.  Concrete goals adopted for 
2005-06 are in the priority areas of customs procedures, standards and conformity assessment, 
intellectual property rights, and e-commerce, and th e related working groups have made progress;  
Korea has contributed to the cooperation in e- commerce as co-facilitator, keeping the ASEM 
eCOMMERCE website up-to-date.  The Investment Promotion Action Plan (IPAP) continues to promote two-way investment by focusing on investment promotion and policy issues.  ASEM 
members negotiating regional and bilateral free- trade arrangements are to ensure that these 
complement multilateral rules and are WTO-consistent.
22  The Asia-Europe Business Forum (AEBF) 
fosters regional cooperation among the private sector.  The ASEM Trust Fund also financed technical assistance on financial sector restructuring and addressing poverty.   
                                                     
 
19 The Bangkok Agreement (signed in 1975) was revi sed recently and renamed the Asia Pacific Trade 
Agreement (APTA);  it entered into force on 1 Se ptember 2006 (see WTO document WT/COMTD/N/22, 
27 July 2007).  
20 See UNESCAP (2006). 
21 Europa online information.  Viewed at:  http://ec.europa.eu/external_relations/asem/intro/index.htm. 
22 Chair's Statement, 8th ASEM Senior Officials Meeting on Trade and Investment, 17 July 2002, Bali. WT/TPR/S/204 Trade Policy Review 
Page 28 
 
 
(e) Asia Cooperation Dialogue (ACD) 
33. The ACD, launched in June 2002, aims to serve  as a "missing link" for all Asian sub-regions 
to create strategic partnerships and cooperation by drawing upon and combining Asia's diverse 
strengths so as to position it as a viable partner for other regions.23  The 30-country ACD has rapidly 
enhanced cooperation on dialogue and projects.  ACD Ministerial Meetings have been held annually 
to discuss developments, issues of regional coope ration, and ways to enhance and solidify Asian 
unity.24  Many countries have proposed to be "prime and co-prime movers" in  19 areas of cooperation, 
including energy, agriculture, biotechnology, tourism, poverty alleviation, information technology development, e-education,  and financial cooperation.   
(iii) Bilateral agreements 
34. During the period under review, while remain ing committed to multilateralism Korea has 
pursued intensively the negotiation and conclusion of FTAs with major trading partners.  Although 
Korea views FTAs as complementary to the multilateral system and to promoting global trade liberalization, it has also at times questioned the im pact that the proliferation of regional FTAs could 
have on the "validity" of the WTO.
25  According to the authorities, FTAs are one of the key ways to 
upgrade the economic system, since trade liberaliz ation through FTAs would bring about greater 
competition and higher global standards, pushing towa rds a higher level of efficiency, an advanced 
economic structure and strengthened competitiveness.26  Reportedly, these trade agreements and 
negotiations are expected to contribute to driving reforms and deregulation in some sectors that are 
still lagging and could benefit from further liberalization.27  The authorities consider that such reforms 
and deregulation would be beneficial for all Kore a's trading partners.  Ko rea will be considering 
multilateralizing certain commitments undertaken in services under FTAs.  
35. The negotiation of FTAs has been contentious. It  has aroused public interest and debate and 
politicized Korea's international economic policy and given rise to strong opposition by domestic 
interest groups28, thus obliging the authorities to adopt adjustment measures in support of companies 
that seem seriously injured by  FTA-created import competition.29  Following the entry into force of 
the Korea-Chile FTA (see below), as from 1 April 2004 a structural adjustment scheme was put in place for Korean farmers affected by FTAs (Chapters III and IV).  Some W 1.2 trillion were set aside for a compensation scheme until 2010;  by 2007, W 201 billion had been paid to 14,964 farming 
households who stopped production of grapes, kiwi fruit, and peaches.
30  From April 2007, support 
for structural adjustment may also be requested by manufacturers and related service providers adversely affected by FTA liberalization (Chapters III and IV).  Beneficiaries are companies seriously injured by substantial increase of imports from FTA partners, whose sales or production is reduced by 
more than 25% because of import competition.  Supp ort measures take the form  of loans, consulting 
and information services, and reemployment assistance. 
                                                     
 
23 Members are Bahrain, Bangladesh, Bhutan, Brunei  Darussalam, Cambodia, China, India, Indonesia, 
Iran, Japan, Kazakhstan, Republic of Korea, Kuwa it, Lao PDR, Malaysia, Mongolia, Myanmar, Oman, 
Pakistan, the Philippines, Qatar, Russian Federation, Sa udi Arabia, Singapore, Sri Lanka, Tajikistan, Thailand, 
United Arab Emirates, Uzbekistan, and Viet Nam. 
24 ACD online information.  Viewed at:  http://www.acddialogue.com/web/2.php. 
25 Statement by Minister of Trade, Ministerial Conference, Cancun, 10-14 September 2003 (WTO 
document WT/MIN/903)/ST/15, 10 September 2003). 
26 APEC (2006). 
27 OECD (2007h). 
28 APEC (2007). 
29 APEC (2007). 
30 APEC (2007). Republic of Korea WT/TPR/S/204 
 Page 29 
 
 
(a) Korea-Chile FTA31 
36. Under the agreement, which entered in force on 1 April 2004 (notified to the WTO the same 
month)32, Korea undertook to eliminate tariffs on 96.3% of  its tariff lines (HS96), equivalent to 99% 
of its imports from Chile in 2003, within ten year s.  Korea's tariff elimination schedule saw the 
immediate liberalization of virt ually all industrial products.33  The agreement will ultimately liberalize 
bilateral trade in all Korea's manufactures, fisherie s and forestry products.  Liberalization of farm 
products is partial and protracted:  15.6% of ag ricultural items became i mmediately duty-free, 38% 
are to be liberalized after five years, and 16.7% are to be liberalized over seven, nine, and ten years;  a 
few are subject to a 16-year timetable for duty elim ination.  Still others are liberalized within a 
tariff-rate quota or are subject to tariff-rate quot as.  The outcome on some 391 agricultural items 
(including 18 items subject to tariff quotas) was le ft to the Doha Developm ent Agenda negotiations;  
21 items, including rice, apples, and pears, were permanently excluded from liberalization.  Other 
provisions of the agreement cover investment promo tion (and liberalization), the expansion of trade in 
services34, a safeguard provision for surges in agricultu ral imports, dispute resolution procedures, 
government procurement, strengthe ning intellectual property rights including geographic indicators, 
and detailed rules of origin.  Korea's co mmitments under the Agreement exceed its GATS 
commitments. 
37. Reportedly, there has been substantial increase in bilateral trade since the entry in force of the 
agreement;  the authorities attribute this to the dram atic rise (by 526%) of Korea's exports to Chile and 
in part, to the increase (by 220%) of Korea's imports  from Chile, due mainly to the surge of copper 
and other metal prices over the past four years. 
(b) Korea-Singapore FTA35 
38. Under the agreement with Singapore, which ente red into force on 2 March 2006 (notified to 
the WTO the same month)36, all Korean exports received immediate duty-free entry into Singapore 
and Korea's immediate liberaliza tion for goods from Singapore covered 59.7% of its tariff lines;  
further liberalization of 17.8% and 14.1% of its tariff  lines is expected within five years and ten years, 
respectively.  The agreement covers all services ex cept air traffic services and public services and, as 
in Korea's other FTAs, it provides for national treat ment, prohibiting each party from requiring a local 
presence, with a few reservations, based on a negativ e list approach.  Korea's commitments under the 
agreement exceed its GATS commitments.  Similarl y it provides for dispute resolution procedures, 
government procurement, strengthe ning intellectual property rights including geographic indicators, 
and detailed rules of origin.  The agreement is sch eduled to be considered in the WTO Committee on 
Regional Trade Agreements (CRTA) in November 2008.   
                                                      
31 Based on information in APEC (2007). 
32 Korea and Chile jointly notified the KCFTA to  the WTO under GATT Article XXIV and GATS 
Article V in April 2004 (WTO documents WT/REG169/N/1 and S/C/N/302 of 19 April 2004, and 
WT/REG169/1 of 30 April 2004).  The agreement was considered by the Co mmittee on Regional Trade 
Agreements (CRTA) based on a factual presentation by the WTO Secretariat on 26 July 2005 (WTO document 
WT/REG169/3, 1 July 2005). 
33 APEC (2006). 
34 The agreement covers all services except for the financial services sector, air traffic services, and 
public services.  It provides for national treatment and prohibits each Party from requir ing a local presence, with 
limited exceptions on a negative list approach. 
35 Based on information in APEC (2007). 
36 Korea and Singapore jointly notified the KSFT A to the WTO under GATT Article XXIV and GATS 
Article V in February 2006 (WTO documents WT/REG210/N/1 and S/C/N/363 of 24 February 2006). WT/TPR/S/204 Trade Policy Review 
Page 30 
 
 
(c) Korea-EFTA FTA 
39. Under this agreement with EFTA States (Icela nd, Lichtenstein, Norway, and Switzerland), 
which entered into force on 1 September 2006 (notified to the WTO the same month)37, the parties 
undertook to eliminate all tariffs on substantially al l trade in goods with the exception of agricultural 
goods, which are subject to separate agreements wi th each respective member state of EFTA.  All 
Korean exports will enter EFTA duty-free and Korea w ill eliminate tariffs on 95.4% of its tariff lines 
(excluding basic agricultural items) within seven years.38  The agreement covers all services except 
for air traffic services and public services,  as well as dispute resolution procedures, government 
procurement, strengthening intellectual property righ ts including geographic indicators, and detailed 
rules of origin.  Korea's services commitments under this agreement, almost equivalent to its DDA 
revised offer, exceeding those under GATS.  The agreement is scheduled to be considered in the 
CRTA in November 2008.   
(d) Korea-United States (KORUS) FTA 
40. Under this wide-ranging agreement, which was si gned in June 2007 and is to be ratified by 
the National Assembly in 2008, Korea undertook to eliminate tariffs on 94% of its non-agricultural 
tariff lines within three years of its entry in force, w ith virtually all remaining tariffs eliminated within 
ten years.  More than half (US$1.6 billion) of current U.S. farm exports to Korea will become duty-free immediately;  most remaining tariffs and quotas will be phased out over the first ten years.
39  
Special safeguards are provided for Korea's most sensitive items, including oranges, soyabeans, 
potatoes, powdered milk, and natural honey.40  Rice is exempt from any tariff obligation.  Concerning 
automobiles, Korea undertook, inter alia,  to amend taxes whose rates vary according to engine 
displacement, such as the Special Consumption Tax and the Annual Vehicle Tax (Chapter III).  Other 
sectoral arrangements involve textiles, pharmaceu ticals, and numerous services sectors, including 
financial, telecommunications, and e-commerce ser vices.  The agreement also improves conditions 
with respect to trade remedies,  outward processing, government procurement (reduction of minimum 
procurement value), intellectual property rights (e xtension of copyright protection to 70 years), 
regulatory transparency, and labour and environmental standards.  
41. According to a joint study by 11 research in stitutions (published in 2007), the KORUS FTA 
could increase Korea's GDP by 6% within ten years of  its entry in force, raise consumer welfare by 
2.9%, create 336,000 jobs, and improve its trade balance vis-à-vis  the United States and the world.41 
(e) FTA negotiations 
42. Korea is pursuing negotiations with other majo r trading partners on a "multi-track" basis to 
establish an FTA network with large ec onomic blocs and newly emerging markets.42  It is currently 
negotiating with ASEAN, the EC, Canada, Mexico, and India.  FTA  negotiations with Japan have 
                                                      
37 Korea and EFTA states jointly notified the KE FTA FTA to the WTO under GATT Article XXIV and 
GATS Article V in August 2006 (WTO documents WT/REG217/N/1 and S/C/N/373 of 28 August 2006). 
38 APEC (2006). 
39 Office of the United States Tr ade Representative, "Trade Fact s Free Trade with Korea Brief 
Summary of the Agreement", June 2007.  Viewed at:  http://www.amchamkorea.org/publications/information_ 
detail.jsp?id=127 [19 March 2008];  and USTR Press release "United States and the Republic of Korea Sign 
Landmark Free Trade Agreement", 30 June 2007.  Viewed at:  http://www.ustr.gov/Document_Library/ 
Press_Releases/2007/June/United_States_the_Republic_of_Korea_Sign_Lmark_Free_Trade_Agreement.html [19 March 2008]. 
40 Ministry of Foreign Affairs and Trade (2007). 
41 Ministry of Foreign Affairs and Trade (2007). 
42 Ministry of Finance and Economy (2007a) . Republic of Korea WT/TPR/S/204 
 Page 31 
 
 
been in a deadlock since 2004.  A first round of negotiations with the Gulf Cooperation Council 
(GCC) countries was planned for July 2008.  
43. A joint study for a prospective Korea-China- Japan FTA is under way by Korean research 
institutions.  A Korea-China FTA Joint Study is due to be finalized in 2008.  Joint feasibility studies, 
at private level, were completed for FTAs with MERCOSUR countries (December 2006), 
New Zealand (November 2007), and Australia (April 200 8);  a study on FTA prospects with Peru is 
under way (May 2008). 
44. Despite the benefits seen by Korea, negotiati on of numerous FTAs is likely to make the 
Korean trade regime more complex, involving for ex ample different tariffs being applied to the same 
imports from various sources and the administration of several rules of origin (Chapter III).  This is 
likely to reduce economic efficiency by undermining the transparency of Korea's trade protection in 
unpredictable ways and introducing economic distortions.  The authorities indicate that Korea has not 
yet witnessed any negative side-effects due to FTAs, and recognize that their administration is the key 
to their success.   
(iv) Unilateral and other trade preferences 
45. In January 2008, Korea unilaterally expa nded preferential duty-free access on selected 
imports of 3,790 (six-digit HS2007) tariff items  from 50 UN-defined least developed countries 
(Presidential Decree on Preferential Tariff for Least-Developed Countries) (Table III.2).43  Korea has 
not invoked provisions enabling such preferences to be suspended in respect of imports causing or 
threatening to cause injury to domestic industries.  
46. Korea grants reciprocal tariff preferences on 9 six-digit tariff items to 43 countries under the 
Global System of Trade Preferences Among De veloping Countries (GSTP).  In addition, it 
participates in the GATT Protocol Relating to  Trade Negotiations Among Developing Countries 
(TNDC), and grants concessional tariffs on 6 six-digit tariff lines for 12 countries (Table III.2).  
Recently, annual imports under these schemes were :  US$3 million or 0.001% of total imports 
(GSTP) and US$8 million or 0.002% (TNDC). 
47. Only Norway and the Russian Federation acco rd Korea developing country preferences.44  In 
this respect, the practical effects of developing count ry status retention for Korea are limited.  Korea 
opts to retain developing country status,  a highly sensitive economic and political issue, in the WTO 
and other relevant international fora.45 
(7) FOREIGN INVESTMENT REGIME  
48. Korea remains an important source of FDI for the rest of the world (Chapter I), and welcomes 
inward FDI as vital to the economy's growth and providing the necessary financial and technological 
resources for economic restructuring and enhancing international competitiveness.  FDI is seen as a 
means of technology and know-how transfer as well as a major contributor to export and employment 
growth;  "foreign-capital invested" companies pl ay an increasingly vital role in the economy.46  
                                                      
43 WTO document WT/COMTD/N/12/Rev.1, 28 April 2000. 
44 The utilization rate under Norway's GSP scheme is 83.7%. 
45 It appears that the main rationale for retention of developing country status is linked to concerns that 
agriculture remains vulnerable;  according to an APEC report, Korea appears to retain this status to benefit from 
the timeframe for developing countries for fulfilling th e APEC Bogor goal (section (6)(ii)(a)) (APEC, 2007). 
46 In 2005, foreign invested companies accounted for 6.1% of employment in manufacturing and 
contributed to 12.1% of total domestic sales and 16.9% of total exports.  WT/TPR/S/204 Trade Policy Review 
Page 32 
 
 
During the period under review, Korea has implemen ted measures to help improve both the business 
environment and living cond itions;  labour unions support efforts to attract FDI.47  Nevertheless, 
Korea's share of global inward FDI has reportedl y been declining steadily since 2004, when the 
country accounted for 1.2% of the global mark et's total FDI, sliding to 0.6% in 2006.48  This seems to 
be, inter alia,  due to the manufacturing sector's relatively weak record in attracting FDI;  Korea's 
negative perception of mergers and acquisitions, and consequent regulatory obstacles to this type of 
investment;  a fall in large-scale investment opportun ities;  and a decrease in investment by existing 
multinational corporations.  The authorities indicate, inter alia,  that these developments are widely 
observed in other parts of the world and that duri ng the first quarter of 2008, investment by existing 
foreign-invested companies increased by 75.7% compar ed with the same period last year.  Korea is 
committed to improving its system of incentives offered to foreign investors, and continues to revise 
laws and regulations designed to promote FDI and to offer tax and other benefits. 
49. The Foreign Investment Promotion Act (FIPA)  permits all FDI types, which include:  
establishment of new businesses, purchase of shares in existing businesses, mergers and acquisitions, 
with at least 10% foreign ownership;  and loans of five years or longer from foreign parent or 
affiliated companies.49  Korea abides by OECD Codes of Liberalization of Capital Movements and of 
Current Invisible Operations, and the National Treatment Instrument.  
50. MKE has responsibility for FDI inflows, and MOSF for outflows.  The Commission on 
Foreign Direct Investment (CFDI) ma kes all major policy decisions on FDI.50  Korea has continued to 
promote and facilitate FDI through the Korea Trad e Investment Promotion Agency (KOTRA), the 
official investment promotion agency, which ope rates over 100 trade centres worldwide.  Its main 
promotional arm, Invest Korea, serves as a "one -stop shop" to help foreign investors complete 
necessary administrative procedures, and with investme nt planning, legal, and tax matters.  The Invest 
Korea portal site provides foreign investors with information and replies on investment procedures 
and grievance resolution.   
51. Korea's investment regime is applied on an MFN basis.  Foreign investors enjoy more 
favourable tax treatment and selection of business  sites than nationals, and are assured national 
treatment and freedom in performing FDI activiti es, except as provided in other laws.  No FDI 
restrictions are allowed, unless they threaten national security, public order, public health, 
environmental preservation, or social morals, or are r estricted by the FIPA or under other legislation, 
such as the Fisheries Act, Maritime Act, and Telecommunications Business Act.  Under the 
Foreigner's Land Acquisition Act ( 1999, fully revised), foreigners, including non-residents, are now 
given national treatment in the acquisition of  land, without limits on land use or land size.   
52. Korea continues to provide a range of tax in centives for FDI (Table II.3).  These generally 
consist of:  full and partial corporate income tax concessions for up to seven years (since 2005);  
similar concessions on various local taxes (acquisiti on, property, registration, and property taxes);  
and full exemptions from customs duties (customs, special excise, and value-added taxes) on imported 
capital goods for up to three years.  They apply to "greenfield" FDI (where no previous investment 
                                                      
47 APEC (2006). 
48 Korea Herald,  "A need to improve FDI policies", 2 January 2008.  Viewed at:  
http://www.investkorea.org/InvestKoreaWar/work/ik/e ng/nr/nr_01_read.jsp?no=608300001&l_unit=90202&bn
o=801020012&page=7&sort_num=3713 [25 March 2008]. 
49 The legislation also recognizes foreign ownership of below 10% as FDI, where the investor enters 
agreements concerning officer's dispat ch or appointment;  a t echnical licence or joint re search/development;  or 
the supply and purchase of products /raw materials exceeding one year. 
50 The CFDI consists of representatives of variou s agencies and ministries, such as MOSF and MKE, 
and heads of relevant local and city governments. Republic of Korea WT/TPR/S/204 
 Page 33 
 
 
exists) and foreign stock acquisitions in el igible advanced technology investments and 
industry-supporting service industries.  The number of eligible industries was raised from 578 to 634 in July 2003 (FIPA and the Special Tax Treatment Control Law of 1999).  Minimum FDI levels for these tax incentives apply to firms established in foreign investment zones (FIZs), free trade zones 
(FTZs), free economic zones (FEZs), etc. (Table II.3)  Considerable assistance in the form of location 
support (rent deduction on exclusive rental estate, rental  of public property), subsidy for industrial site 
(for purchase or rental of land), subsidy for employme nt (education and training), cash grant, facilities 
support, etc. is also available under the local governments' Foreign Investment Support Policy.
51   
53. According to the authorities, tax concessions can  be decisive in attracting FDI among similar 
countries;  most beneficiaries in Korea indi cate that these incentives have facilitated foreign 
investment.  However, these results do not take into account whether such investment would have 
been undertaken without the incentives.  All inv estment incentives (whether assisting foreign or 
domestic investors) risk subsidizing efficient inv estments, which need no such assistance and would 
have been undertaken anyway (thereby providing windf all gains to investors at taxpayers' expense), or 
worse, making some inefficient investments profitabl e.  Tax incentives, therefore, may contribute to 
inefficient allocation of resources in Korea.52  The cost effectiveness of tax incentives is also 
questionable.53  They can undermine public accountability a nd fiscal transparency, especially where, 
as in Korea, there is no detailed information on re venue forgone from various tax incentives or any 
systematic evaluation of the effectiveness of such ince ntives.  Care is therefore needed to ensure that 
the financial and efficiency costs of investment incentives do not exceed their stated benefits.  The 
authorities indicate, inter alia,  that tax incentives are provided for a maximum of seven years, and that 
efforts are made to ensure the tr ansparency of the incentive system, to reassess the criteria for granting 
incentives and their duration. 
54. Government approval of FDI is not required.  Prior notification by foreign investors is 
needed, and this can be made at domestic or forei gn bank offices in Korea, Invest Korea or at any one 
of KOTRA's overseas trade centres.54  Foreign-capital invested companies must also register to be 
eligible for incentives.  MKE approval is still requ ired, however, to invest in 90 designated Korean 
defence-related companies;  these include many majo r electronic and industrial conglomerates that are 
also major producers of non-defence products.   
55. As of 2008, out of a total 1,083 business sectors (based on the Korea Standard Industrial 
Classification) only three sectors (television and ra dio broadcasting, and nuclear power generation) 
are fully closed to foreign investment, and a furt her 26 are partially restricted (including rice and 
barley growing) (Table II.4).55  Foreign companies can establish local branches subject to notification 
and registration as a foreign-investment company, ma intained for statistical and procedural purposes.   
Foreign financial institutions are subject to a pproval requirements under the Banking Act, Insurance 
Business Act, and Securities and Exchanges Act.  Public sector infrastructure projects are open to 
greater private sector participation, including by foreigners, who, according to authorities, have the 
same access as domestic investors.   
                                                      
51 Invest Korea online information.  Viewed at:  http://www.investkorea.org/InvestKoreaWar/ 
work/ik/eng/bo/bo_01.jsp?code=102010703#article3. 
52 Even where the market is claimed to have failed to finance enough efficient investment due to 
"externalities" (social benefits from the investment that ar e not fully reflected in private costs), such as in R&D, 
it is unclear whether tax incentives can ef fectively address such "market failure". 
53 Experience of other OECD economies suggests that tax incentives are seldom cost-effective.  Most 
econometric studies show that forgon e tax revenues exceed incremental inve stment induced from tax incentives.  
Tax holidays in particular are an ineffec tive incentive, compared with tax credits. 
54 Post notification within 30 days is allowed for stock transfers related to mergers and acquisitions. 
55 The number of partially closed sectors increased from 14 to 27 because of the partial opening of 
closed sectors and the disagregation of some partially closed sectors. WT/TPR/S/204 Trade Policy Review 
Page 34 
 
 
Table II.3 
Summary of FDI tax incentives, 2008 
 
(a) National tax (corporation tax, income tax) and local taxa (acquisition tax, registration tax, property tax) reduction 
Business category Investment amount Re duction period and details Remarks 
1. Industry support service & high degree technology business   
Manufacturing Over US$30 million  
Tourism Over US$20 million  
Logistics Over US$10 million  
2. Businesses in stand-alone type  foreign investment zones (FIZ)b 
R&D Over US$5 million 
More than two foreign-
invested companies Over US$30 million Seven years in total (apply the 
following ratio to the amount 
multiplied by the foreign 
investment ratio) 
- 100% for five years after 
income creation 
 
- 50% for next two years Hiring more than ten 
employees with Master's 
degree or above;   
Limited to the above four 
businesses 
3. Businesses in complex type foreign investment zones (FIZ)   
Manufacturing Over US$10 million  
4. Businesses in free trade zones (FTZ)   
Logistics Over US$5 million  
5. Businesses in free economic zones   
Manufacturing Over US$10 million  
Tourism Over US$10 million  
Logistics Over US$5 million  
Medical institution Over US$5 million  
6. Free economic zone (FEZ developer   
– Over US$30 million;  over 50% of foreign 
shares and US$500 million on business 
costs  
7. Businesses in business city development zone   
Manufacturing  
Engineering  
Additional 
communication  
Information processing 
& other computer operation-related businesses  
Science & technology 
service  
Tourism  
Culture industry  
Various facilities  
Renewable energy 
generation Over US$10 millionc 
 
R&D  
Logistics Over US$5 milliond  
8. Business city developer   
– Over US$30 million;  over 50% of foreign 
shares and US$500 million on business 
costs Total of five years (apply the 
following ratio to the amount 
multiplied by the foreign 
investment ratio) 
- 100% for three years after 
income creation  
- 50% for next two years 
 
JEJU INTERNATIONAL FREE CITY    
9. Businesses in Jeju high-tech  science and technology complex  
Bio engineering  
Information 
communication  
Culture industry  
High-tech and products  Five years in total (unrelated to 
foreign investment ratio) 
- 100% for three years after 
income creation 
- 50% for next two years On condition of entry by 
31 December 2009, 
reduction only for national 
tax Republic of Korea WT/TPR/S/204 
 Page 35 
 
 
Business category Investment amount Re duction period and details Remarks 
10. Businesses in Jeju investment promotion district  
Tourism 
Culture industry 
Various facilities 
Renewable energy 
generation 
Electronics, electrical, information, new 
material, and bio 
engineering industries 
Foreign educational 
institutionse 
Medical institutions Over US$5 million On condition of entry by 
31 December 2009 
11. Businesses in free trade zones  
Manufacture Over US$10 million with more than 
100 full-time employees 
Logistics Over US$5 million  
On condition of entry by 
31 December 2009 
12. Jeju investment promotion district developers   
– Over 50% of foreign shares and 
US$100 million no business costs  
– Over US$10 million Five years in total (apply the 
following ratio to the amount multiplied by the foreign investment ratio) 
- 100% for three years after 
income creation 
- 50% for the next two years  
 
(b) Exemption of tariffs, special excise tax, value-added tax, etc. 
Business category Taxes Items Remarks 
Industry support service & high degree 
technology business Tariff;  special excise 
tax;  value-added tax 
Businesses in stand-alone type foreign invested zones (FIZ) Tariff;  special excise 
tax;  value-added tax 
Businesses in complex-type foreign invested zones (FIZ) 
Businesses in free trade zones (FTZ) 
Businesses in free economic zones (FEZ) 
Free economic zone (FEZ) developer Tariff Capital goods imported with 
invested cash or as investment object On condition of import 
within three years from the day of declaring 
foreign investment 
JEJU INTERNATIONAL FREE CITY    
Businesses in Jeju high-tech science and 
technology complex Tariff Tariff reduced goods under Item 5, 
paragraph 1, Article 90 of the Customs Law for use in R&D 
Businesses in Jeju investment promotion district Tariff Goods for which import 
declarations are made within three years from the day of designation as Jeju investment promotion district, which has been checked by 
the director of the Jeju International 
Free City Development Center On condition of import 
by 31 December 2009 
a According to the local government regulations, the period of lo cal tax reduction may be extended up to 15 years, or the reduc tion 
ratio can be increased. 
b Free export zones (Iksan, Massan) are considered as stand-alone  type foreign investment zones, with no limitations on 
investment amount for establishing factory facilities within. 
c On the condition to enter before 31 December 2009, a choice is given between the above reduction and the corporate city 
reduction of national and local tax "regar dless of foreign investment ratio" upon an investment of over W 10 billion. 
d On the condition to enter before 31 December 2009, a choice is given between the above reduction and the corporate city 
reduction of national and local tax "reg ardless of foreign investment ratio" upon an investment of over W 5 billion. 
e Foreign education institution, internati onal high school, edu cational institution. 
Source:  Invest Korea online information.  Viewed at:  http://www.investkor ea.org/InvestKoreaWar/data/bbs/20080507/ 
tax_reduction_20080507.pdf.  WT/TPR/S/204 Trade Policy Review 
Page 36 
 
 
56. MKE regularly publishes FDI restrictions in English in the Consolidated Public Notice .56  In 
addition to FIPA restrictions, it contains restric tions on foreigners' capital transactions, including:  
acquisition of securities, establishment of domestic  branches by foreign companies, foreign 
investment by business sectors, registration of ship s and aircraft, "legally monopolistic" businesses;  
acquisition of domestic qualifications by foreigne rs (pilots, lawyers, architects, and public 
performances);  and on foreigners' entry and reside nce in Korea.  Invest Korea also frequently 
publishes updated information on adjustme nts in its foreign investment policy. 
Table II.4 
FDI restricted sectors, 2008 
Sector/business  FDI limitation 
A.  Closed  
Radio broadcasting Wholly closed 
Television broadcasting Wholly closed 
B.  Partially closed  
Growing of cereal crops and other crops Allo wed except for rice and barley growing  
Beef cattle farming  Less than 50% foreign equity 
Inshore fishing Less than 50% foreign equity 
Coastal fishing Less than 50% foreign equity 
Publishing of newspapers Less than 30% foreign equity 
Publishing of magazines and periodi cals Less than 50% foreign equity 
Processing of nuclear fuel Allowed except for the manuf acture and supply of nuclear fuel for nuclear power 
plants 
Electric power generation Nuclear power generation busin esses are excluded and the ratio of power generation 
facilities purchased by foreigners from KE PCO (Korea Electric Power Corporation) 
must not exceed 30% of total domestic power generation facilities 
Electric power transmission Allowed provided total foreign e quity is less than 50% and the largest shareholder is 
Korean  
Electric power distribution and ales Allowe d provided total foreign equity is less th an 50% and the largest shareholder is 
Korean 
Meat wholesaling Less than 50% foreign equity 
Coastal water passenger transport Allowe d between South and North Korea and le ss than 50% foreign equity:  foreign 
investors must enter into joint ventur es with domestic shipping companies 
Coastal water freight transport  Allowe d between South and North Korea and le ss than 50% foreign equity:  foreign 
investors must enter into joint ventures  with domestic shipping companies  
Scheduled air transport Less than 50% foreign equity 
Non-scheduled air transport Less than 50% foreign equity 
Leased line service No more  than 49% foreign equity 
Wired telephone and other co mmunications No more than 49% foreign equity 
Wireless telephone No more than 49% foreign equity 
Other electric communications  No more than 49% foreign equity 
Domestic banking Allowed only fo r commercial and local banking 
Radioactive waste disposal Permitted except for radioac tive waste management under the Electricity Business Act 
Broadcasting via satellite No more than 33% foreign equity 
Cable networks No more than 49% foreign equity 
Program providing No more than 49% foreign equity 
News agency activities Less than 25% foreign equity 
Source: Korean authorities. 
                                                      
56 Also available at Invest Korea online informa tion.  Viewed at:  http://www.investkorea.org. Republic of Korea WT/TPR/S/204 
 Page 37 
 
 
57. Foreigners, regardless of residence status, can purchase land subject to the same restrictions 
as Korean nationals.57  Exclusions are limited to land of military, cultural or environmental 
significance, and farmland designated for rice and barley.58  Foreign ownership of Korean land grew 
9.9% in 2007 to 198.16 million squa re meters or 1.85% of the nation' s land.  Nationals and foreigners 
receive the same treatment for land expropriated by  the State for public works (Act on Acquisition of 
and Compensation for Lands to be Used for Pub lic Works, which replaced the Land Expropriations 
Act). 
58. The independent Foreign Investment Ombudsman, appointed by the President, located within 
KOTRA and staffed with personnel from Invest Ko rea, handles specific grievances encountered by 
foreign investors established in Korea, and in conj unction with Invest Korea, operates an Investment 
Home Doctor Service that provides one-to-one service.59  Korea is a member of the International 
Center for Settlement of Investment Disputes (IC SID) and the Multilateral Investment Guarantee 
Agency (MIGA). 
59. Korea's FTAs contain clauses protecting all forms of investment, including enterprises, debt, 
concessions, contracts and intellectual property ri ghts (section (6)(iii)).  Agreements contain 
comprehensive rules for all forms of investment: national treatment and MFN treatment;  disciplines 
stronger than the WTO rules on performance requireme nts (e.g. domestic content) that distort trade 
and investment;  free transfer of funds and saf eguard measures;  protection from expropriation 
without prompt, adequate, and effective compensa tion;  a minimum standard of treatment;  and 
freedom in hiring senior managers.  Korea will mi nimize investment performance requirements in 
signing FTAs.60 
60. Korea has signed bilateral investment agreemen ts (including FTAs) for the protection of FDI 
with 95 countries;  82 are in force.  Foreign in vestors are not subject to double taxation as long as 
their home country is a signatory to a double taxa tion avoidance convention (DTAC) with Korea;  
76 countries have signed conventions with Korea, of which 70 are in force.  Korea plans to extend the 
bilateral DTAC network to countries in the Commonw ealth of Independent States, Latin America, and 
Africa to promote the cross-border capital flows. 
                                                      
57 Foreign land ownership may be denied to nationa ls of countries that do not allow Koreans to 
purchase land.  However, such reciprocity conditions have not been used. 
58 To acquire other farmland, foreigners, like Koreans, must be directly involved in farming. 
59 From 2000 to end 2005, the Ombudsman had r eceived more than 2,400 grievance cases from 
foreign-invested firms in Korea covering issues including customs, construction, financial affairs, labour, 
taxation, legal matters, and investment procedures.  Invest Korea online information.  Viewed at:  http://www.i-
ombudsman.or.kr/InvestKoreaWar/work/ombsman/eng/au/index.jsp?num=3). 
60 APEC (2006).