Note: Advance written questions by WTO Members and replies provided by the Republic of Korea 
 are reproduced in document WT/TPR/M/137/Add.1 and will be available online 
 at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.  WORLD TRADE  
ORGANIZATION  WT/TPR/M/137 
19 November 2004 
 (04-5025) 
Trade Policy Review Body 
15 and 17 September 2004  
 
 
 
TRADE POLICY REVIEW 
 
REPUBLIC OF KOREA 
 
Minutes of Meeting  
 
Chairperson:  H.E. Ms. Puangrat Asavapisit (Thailand) 
 
 
   P a g e  
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 
II. OPENING STATEMENT BY THE REPRESENTATIVE OF KOREA 4 III. STATEMENT BY THE DISCUSSANT 7 
IV. STATEMENTS BY MEMBERS 9 
V. REPLIES BY THE REPRESENTATIVE OF KOREA AND ADDITIONAL COMMENTS 17 VI. CONCLUDING REMARKS BY THE CHAIRPERSON 24 
  WT/TPR/M/137 
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 I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The Chairperson welcomed Members to the fourth Trade Policy Review of the Republic of 
Korea, including the Korean delegation led by  Ambassador Choi Hyuck, and the discussant 
H.E. Mr. Muhamad Noor Yacob (Malaysia).  As usual, the discussant would speak in his personal 
capacity, and had circulated in advance outlines of the main issues he intended to raise (document 
WT/TPR/D/111). 
2. The Chairperson recalled the purpose of the Tr ade Policy Review Mechanism and the main 
elements of the procedures for the meeting.  The report by the Republic of Korea was contained in 
document WT/TPR/G/137 and that of the WTO Secretariat in document WT/TPR/S/137.  Copies of advance written questions submitte d by Canada;  Chile;  Switzerland;  New Zealand;  Australia;  
People's Republic of China;  Columbia;  Singapore;  Japan;  Indonesia;  United States;  Argentina;  
the European Communities;  Hong Kong, China;  th e Separate Customs Terr itory of Taiwan, Penghu, 
Kinmen and Matsu;  Brazil;  Venezuela;  and Thaila nd had been transmitted to the Korean delegation.  
These questions and the replies to these and othe r questions raised at the meeting would be 
reproduced in WT/TPR/M/137/Add.1. 
3. The Chairperson was struck by Korea’s impr essive economic recovery from the Asian 
financial crisis, which had restored GDP per capita to pre-crisis levels  by 2003.  This was fostered by 
wide-ranging structural reforms, especially in the financial and corporate sectors, and the maintenance 
of outward-oriented trade and investment policies for manufacturing and services, and facilitated by a 
favourable external economic environment.  N onetheless, Korea faced several related economic 
challenges.  These covered areas such as sluggi sh domestic demand, resulting in possible over-
reliance on exports as the main source of current grow th, further trade liberalization, including in the 
highly-protected agriculture sector, and other st ructural reforms to develop a more competitive 
economy;  rationalization of its complex tariff stru cture would improve efficiency.  Members would 
be interested in knowing how Korea was addressing th ese and other challenges.  She also noted that 
its trade policy focus appeared to have shifted to wards greater bilateralism and regionalism.  Whereas 
at the time of the previous Review Korea had no bi lateral preferential trade agreements, it had just 
signed its first such agreemen t and was negotiating others. WT/TPR/M/137 
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF KOREA 
4. The representative of Korea
 reaffirmed his country’s full commitment to open and free trade 
based on the multilateral trading system, and to strengt hening its rules.  Korea also attached great 
importance to the Trade Policy Review Mechanism.   He gave an overview of Korea’s economic 
performance since the last Review in 2000, its cont inuing reform and liberalization efforts, and of 
Korea’s trade policy goals within th e multilateral and regional context. 
(i) Economic conditions and performance  
5. The Korean economy had grown consistently with  short-term ups and downs since the last 
Review.  However, growth had begun to stabilize, r eaching around 5.5% during the first half of 2004, 
and was expected to be about 5% for the full year.  Unemployment had remained stable at below 4% 
and inflation kept within a manageable range of  2% to 4%.  Externally, the global slowdown had 
decreased exports and imports by over 12% in 20 01.  This negative performance was offset by a 
rebound of about 8% in 2002, and in  2003 exports grew robustly by 19.3% and imports by 17.6%.  
This upbeat trend had continued in 2004.  Due to its positive trade performance, Korea had run 
significant current account surpluses for the past four years.  The exchange rate also had been fairly 
stable.   In the wake of the 1997 economic crisis, Korea had substantially libera lized and improved its 
FDI regime, leading to historic peaks of FDI in flows of over US$ 9 billion in both 1999 and 2000.  
Since then, inflows had decreased considerably, in pa rt due to the global trend of falling FDI triggered 
by the world economic downturn from the second half of 2000.   
(ii) Economic reform and liberalization 
6. Faced with various domestic and internationa l challenges, Korea had continued economic 
reform and liberalization efforts over a broad range of areas, especially in services and agriculture, in 
the firm belief that only these could help guarantee sustained economic prosperity.  As a result of the 
on-going restructuring efforts in the financial sect or, banking had been further consolidated and the 
number of commercial banks decreased from 33 at the end of 1997 to 19 by the end of 2003.  Bank managers now placed greater focus on profitability th an on asset growth, and ba nks had advanced risk 
management systems.  Furthermore, since the last Review, almost all entry barriers to foreign banks 
had been lifted.  In the corporate sector, the Ba nkruptcy Act was amended to  facilitate and speed-up 
the court-driven process of liquida tion or rehabilitation of ailing companies.  Mergers and acquisitions 
and sales to corporate restructuring companies had been pursued actively, an d corporate governance 
practices and norms improved to promote greater transparency and accountability. 
7. Labour-sector reform focused on nurturing a more  cooperative and constructive culture with a 
view to achieving greater flexibility and stability.  In particular, the Government introduced the 
"Roadmap for Industrial Relations Reform" in  September 2003.  Its key objectives included 
minimizing the social costs arising from labour disputes, and strengthening social protection for vulnerable workers.  Public-sector reform continue d to promote efficiency and transparency through 
privatization and enhancement of competition.  By 2001, eight of the eleven state-owned enterprises 
(SOEs) designated in the 1998 privatization pl an had been sold.  The remaining SOEs had 
substantially strengthened requireme nts for public disclosure of mana gement information, and were 
subject to greater public scrutiny. 
8. In parallel with structural reforms, regulator y reform and foreign investment liberalization 
had been pursued actively.  In 1998, the Regulat ory Reform Committee was established and in two 
years had cut the total number of regulations by ha lf.  In 2003, ten key areas for regulatory reform 
were identified, such as foreign investment, financia l services, logistics and distribution, and land use. 
9. FDI liberalization was a top government priority  since the 1997 economic crisis.  The Foreign 
Investment Promotion Act, first enacted in 1998, was revised in December 2003, with a view to  WT/TPR/M/137 
 Page 5 
 
 
 
 improving the business and living co nditions for foreign investors.   On-going FDI liberalization 
would remain high on the agenda. 
10. Korea believed that its reforms, liberalization e fforts, and structural adjustment had improved 
the economy’s efficiency and resilience.   Over the last four years, th e share of the services sector in 
GDP had increased by 4.4 percentage points to 69.7% while the shares of manufacturing and 
agriculture had decreased to 26.6% and 3.6%, respectiv ely.  This amply demonstrated that significant 
structural adjustment had occurred in Korea. 
(iii) Korea’s trade policy:  goals and actions 
(a) Implementation of WTO commitments 
11. Korea’s trade policy served as an important to ol for building a more open and advanced 
market economy based on open and fair competition.  Its primary trade policy goal was to strengthen 
the rules-based multilateral trading system that pr ovided an open and free trade environment.  Korea 
offered a good example of successful economic deve lopment within the free and open global trading 
system, and was firmly convinced the WTO was the b est avenue for greater global prosperity.  Since 
the last Review, access to the Ko rean market had improved significantly.  In 2003, the overall trade-
weighted applied tariff rate of 4.87% for all products  (including agricultural) products was well below 
the average applied rate of 12.83%.  Access fo r agricultural imports had improved with on-going 
restructuring of the sector.  Agricultural im ports rose by 23.1% from $8.5 billion in 2000 to 
$10.5 billion in 2003, more than  double overall import growth of 11.4%.  The decreased self-
sufficiency rate from 29.7% in 2000 to 27% in 2003 also reflected increased market access for 
agricultural imports.   
12. Korea had achieved considerable progress on technical barriers to trade.  As of 
December 2003, 99.3% of its nearly 10,000 standa rds subject to harmonization had been harmonized 
with international standards.  Also, 1,800 new Kor ean Standards were to be  harmonized with ISO/IEC 
standards by the end of 2004.  SPS arrangements ha d also been improved.  In August 2002, Korea 
introduced the "system of prior-confirmed regist ration of imported food" to simplify inspection 
procedures and an Internet-based reporting syst em for food imports to ensure promptness and 
transparency.  
13. Korea’s efforts over the past four years to simplify and expedite customs procedures had 
produced tangible results through accessi on to the Revised Kyoto Convention. 
14. New government procurement measures, includi ng the "Government e-Procurement System" 
(GePS) introduced in September 2002, have enha nced transparency, effi ciency, and accessibility. 
15. Korea had done its best to refrain from using contingency measures.  Although it had resorted 
to anti-dumping measures in response to unfair trad e practices in several instances, Korea had not 
taken any safeguard measures nor imposed any countervailing duties since the last Review. 
16. Korea believed that proper protection of intellectual property was not just about fulfilling its 
international obligations, but was a critical requireme nt of good public policy in the information age.  
Further steps would therefore be taken to join a dditional WIPO treaties and new measures introduced 
to strengthen IPR protection.  The Consultative Committee on IPR Protection, an inter-ministerial 
body established in 2004, had identified 15 specific tasks in its Comprehensive Plan for IPR Protection, which included an enhanced public awareness campaign.   WT/TPR/M/137 
Page 6  
 
17. On dispute settlement, Korea recognized th e importance of the WTO mechanism as a 
fundamental pillar of the multilateral trading syst em.  It had relied on this mechanism as both a 
complainant and defendant where a mutually agreed solution could not be found. 
(b) DDA negotiations 
18. Along with efforts to uphold WTO rules and nor ms, Korea participated actively in the Doha 
Development Agenda (DDA) negotiations.  As an economy heavily dependent on global trade, it 
attached utmost importance to th eir success.  Korea welcomed the Doha work programme adopted by 
the General Council on 1 August 2004.   
19. Korea would do its best in agriculture to achieve a reasonably balanced outcome between 
competing interests and concerns.  In non-agricultu ral market-access negotiations, an area that would 
potentially bring the greatest gains for all member s, Korea looked forward to reaching an early 
agreement on a tariff-cutting formula.  In serv ices, Korea remained firmly committed to active 
participation, as evidenced by offers in lega l service and education;  existing offers in 
telecommunications and construction had also been improved.  Korea believed that current rules, 
especially the Anti-Dumping Agreement, must be clar ified and improved to prevent potential abuse;  
it was encouraged that in-depth informal discussions had occurred since early 2004.  Korea also 
welcomed trade facilitation talks within the cont ext of the DDA negotiations and hoped to see 
practical norms established that would substantially reduce transaction costs, which would benefit all 
members. 
20. Korea was firmly committed to the developmen t dimension in the negotiations;  it believed 
that the only way forward was together.  Korea woul d continue to help deve loping countries be better 
prepared to benefit from the negotiations and to bett er integrate into the global trading system.  As 
part of such efforts, it had significantly expa nded tariff-free access for LDC products and offered 
technical assistance on WTO issues. 
(c) FTAs and bilateral trade relations 
21. While firmly committed to the multilateral trading system, Korea was also seeking 
supplementary trade liberalization through bilatera l and regional free-trade agreements.  It believed 
that FTAs could supplement multilateral efforts towa rds global trade liberalization by helping to 
accelerate economic reform and trade liberalization.  Korea was a newcomer to FTAs:  it had only one, with Chile, and was currently negotiating agreem ents with Japan and Singapore.  Korea was also 
jointly studying the feasibility of  FTAs with ASEAN and EFTA.  In regional and inter-regional fora, 
such as APEC, ASEM, and ASEAN+3, Korea was promoting trade and investment liberalization as 
well as economic cooperation.  In 2005, Korea woul d host the APEC Economic Leaders’ Meeting, 
which hoped to promote greater prosperity in the Asia-Pacific region.  
(iv) Conclusion 
22. Korea was fully committed to WTO principles,  rules, and standards.  These had been 
important instruments in advancing the Korean eco nomy.  Its past success was witness to the wisdom 
of these principles.  While seeking regional a nd bilateral arrangements for additional openness
 and 
liberalization, Korea remained firmly committed to th e WTO.  It wanted to be at the forefront in 
collective efforts to make the Doha Deve lopment Agenda negotiations successful.    WT/TPR/M/137 
 Page 7 
 
 
 
 III. STATEMENT BY THE DISCUSSANT 
23. The discussant  (Ambassador Muhammad Noor Yacob) stated that Korea had achieved an 
incredible record of growth and modernization to  be among the top ten world trading nations.  As 
testimony of its economic transformation, agriculture accounted only for some 4.4% of GDP, industry for 37.6%, and services 58%.  Services accounted for 69% of employment, industry 21.5%, and 
agriculture 9.5% in 2001.  Only 4% of the population were below the poverty line in 2001.  Close 
government-business cooperation and the contribution of workers had helped achieve this success 
through the late 1980s.  The Government had promot ed the import of raw materials and technology, 
and encouraged savings and investment.  Following  the East Asian financial crisis, Korea’s wide-
ranging reforms had underpinned the recovery.  Of c ourse more needed to be done, not least in the 
agriculture sector. 
(i) Macroeconomic environment 
24. The economy’s growth had continued in recent years, ranging from 3.1% in 2003 to 9.5% in 
1999.  Per capita GDP, at over US$12,000, had recove red to pre-crisis levels.  In PPP terms, this 
translated to US$17,700 in 2003, compared with  US$28,000 for Japan and US$5,000 for China.  
Inflation remained subdued within the Government’s target range of 2.5% to 3.5%, but was expected 
to come under pressure in 2004 due to higher oil pr ices.  Korea maintained a large current account 
surplus of about 2% of GDP in 2003, and foreign reserves had risen steadily from US$96 billion in 2000 to US$155 billion, equa l to ten months of imports.  The fi scal deficit remained manageable at 
1.6% of GDP. 
25. Among the challenges the Korean economy faced  was high export dependence.  Declining 
private consumption and FDI inflows had affected dom estic demand.  Oil prices were likely to impact 
on the economy, which imported some 3 million barrels of oil daily, equal to 12.9% of total imports. 
Thus, while earlier forecasts saw the economy achieving 5% to 5.8% growth in 2004, some analysts had raised the spectre of stagflation.  This coul d hopefully be avoided as oil prices had recently eased. 
(ii) Trade policy regime 
26. Trade represented over 70% of GDP in recent y ears.  Total exports were US$194 billion in 
2003, of which over 90% were industrial goods.  As ia was Korea’s largest  export destination, 
accounting for 51% of total exports.  China and Japan largely accounted for the growing Asian trade.  
China overtook the United States in 2003 as Korea’s la rgest trading partner, and exports to China 
accounted for 18% of total exports.  Asia was also an important source of imports for Korea, with 
Japan and China accounting for 33% of total impor ts.  The import share from the United States and 
EU were each 14%, while the share for Latin America was 2.5%.  Major import items were raw 
materials, crude oil and gas, and ma nufactured goods, including semi-conductors. 
27. Korea’s trade objective was for exports to be an engine of growth to achieve per capita 
income of US$20,000 by 2010.  It had achieved signifi cant strides, particularly in enhancing industrial 
exports such as motor vehicles, steel, and IT products. 
28. Korea participated actively in the WTO mu ltilateral trade negotiations although its position 
towards liberalization was not always consis tent in the various negotiating areas.   
29. Korea had bound 91% of tariff lines. Bound MFN rates averaged 17.2% in 2004, while 
applied rates averaged 12.8%.  The relatively high MFN rate reflected higher tariffs in agriculture, 
averaging 52.2%, while industrial tariffs averaged 6.7%.  There were also concerns over the tariff 
regime’s complexity, including the use of multiple  bands, existence of small rate differences and WT/TPR/M/137 
Page 8  
 
sometimes use of decimal rates.  Recourse to adju stment tariffs also added to complexity.  Since 
improved customs procedures was a Korean trade-re lated strategic goal under its regulatory reform, 
simplifying the tariff regime could be looked at with some priority. 
30. Also notable was Korea’s invol vement in FTA negotiations. The first FTA was concluded 
with Chile and negotiations with a number of ot her countries, including Japan and Singapore, were 
under way.  The possibility of such an agre ement with China was also being studied. 
31. In recent years, Korea had stepped up efforts to attract FDI by increasingly liberalizing its 
regime.  Sectoral FDI restrictions were being reviewed and more free trade zones created.  Total inward FDI between 2000 and 2003 am ounted to US$42 billion, with the EU, United States and Japan 
the most important sources.  Outward FDI was also s ubstantial, rising to US$4.8 billion in 2003, after 
declining in 2001 and 2002.  China was an increasingly important destination.   WT/TPR/M/137 
 Page 9 
 
 
 
 IV. STATEMENTS BY MEMBERS 
32. Members commended the Korean Government for its efforts to liberalize trade and 
investment, and encouraged further opening of th e economy.  Such policy reforms were seen as 
instrumental to its on-going recovery since the l ast Review, which was impressive given the Asian 
financial crisis and certain adverse external devel opments that had affected in particular foreign 
investment.  Pre-crisis GDP per head had been rest ored by 2003.  However, Members noted that the 
recovery’s over-reliance on exports, especially to Ch ina, as the main source of growth since 2003, 
compounded by sluggish domestic demand, raised su stainability concerns, and suggested that this 
demand mis-match posed economic challenges for Korea.   They welcomed its active participation in 
and strong support of the rules-based multilateral trading system, including the Doha Development 
Agenda, in which Korea had benefited significan tly.  Members highlighted Korea’s growing and 
important role in global trade, and their significant bilateral trade and investment links.    
33. The representative of Canada  noted Korea’s commitment to improved efficiency.  Sustained 
structural reforms had stabilized the financial a nd corporate sectors and liberalized trade and capital 
accounts, including inbound foreign investment.  He welcomed Korea’s efforts to strengthen trade and 
business laws and enhance market transparency, and encouraged further reforms to invigorate 
domestic consumption and business investment.  Korea was committed to a free and open economy based on market principles, including fair compe tition and liberalized trade.  While it pursued a 
number of regional trade agreements in Asia, Korea participated actively in the WTO.  Canada noted 
Korea’s complex tariff regime and related transpar ency problems, and that agricultural tariffs, in 
particular, were quite high.  It welcomed Korea’ s move to address tariff parity between competing 
products, as demonstrated by the tariff rate quota (T RQ) established for feed peas, and encouraged it 
to implement comparable tariff treatment for edible  oil products.  Facilitating greater market access to 
foreign products and services would bring about econo mic gains for all, including Korea.  Canada was 
concerned about its sanitary and phyto-sanitary m easures.  Comparable controls and testing of 
domestic and imported products were in tegral to ensuring health safety but also to facilitating trade.  
Canada noted Korea’s efforts to harmonize regulati ons with international food standards to reduce 
technical barriers to trade, and ur ged it to adhere to international guidelines such as those of the OIE. 
34. The representative of Chile
 saw trade as an important engine  of growth and development.  
Korea was essentially very open, and had ta ken a pragmatic approach to free-trade 
agreements/regionalism as a usef ul complement to multilateral ne gotiations.  The two countries had 
formed the world’s first trans-Pacific FTA.  A lthough the Korea-Chile agreement was a modern, 
comprehensive, WTO-compatible FTA, which had succ essfully reinforced bilateral trade and laid the 
basis for future bilateral and multilateral liberalizati on, Chile wished to expand coverage to include 
especially agricultural items excluded from full liberalization.  It welcomed Korea’s recent reforms in 
customs, government procurement, and services ai med at greater efficiency, transparency and 
competitiveness.  Chile disagreed with Korea’s high agricultural support, especially price support, and 
welcomed recent reforms aimed at making the sector more market-oriented.  However, these seemed 
too timid, and Chile encouraged Korea to  give such reforms renewed urgency. 
35. The representative of Switzerland  noted that Korea’s current imbalanced growth based almost 
exclusively on strong export growth showed need  for continued reform.  Multilateral policies on 
agriculture should reflect the sector’s intrinsi c multifunctional nature.  Korea and many other 
countries followed a multi-layer based approach to  external economic policy, focused on multilateral 
trade cooperation.  However, other forms of trad e cooperation, regional or bilateral, had become 
increasingly attractive for designing a coherent tr ade policy.  Korea had implemented its first 
comprehensive bilateral free-trade agreement w ith Chile, and had numerous  other bilateral and 
regional contacts, including with EFTA, aimed at free-trade agreements.  Sound labour-management 
relations were crucial for domestic and foreig n investment. Greater labour flexibility and a WT/TPR/M/137 
Page 10  
 
strengthened social safety net, especially the pensio n system, would be desirable.  Switzerland asked 
for Korea's assessment of the current situation and for details of measures taken to further improve 
labour market flexibility.   Pharmaceutical companies claimed that Korean drug registration 
requirements for submission of de tailed data were too extensive.  Switzerland enquired whether Korea 
intended to further review these requirements, and if it recognized GMP certificates issued by foreign 
authorities based on relevant WHO or  other international standards.   
36. The representative of New Zealand
 noted Korea’s significant progress in financial sector 
liberalization, improved customs systems, improved transparency, notification or regulatory changes, and alignment with international standards in certa in areas.  He congratulated Korea on bringing laws 
and regulations into WTO conformity, and for fu rther opening its economy to trade and foreign 
investment.  New Zealand encouraged  Korea to continue this trend, particularly for primary products.  
High border protection and domestic support for an inefficient agri culture sector caused significant 
downsides.  Reduced farm protection would impr ove Korean efficiency and competitiveness and 
substantially benefit consumers.  Korea was enc ouraged to use trade-driven measures to promote 
adjustment in weak sectors.  New Zealand welc omed renewed interest in improving agriculture 
competitiveness, and Korea's efforts to shift agricultural subsidies from amber box to green box 
provisions would help.  The removal of beef me asures in January 2001 had demonstrated that 
sensitive sectors could adjust successful ly to greater foreign competition.  New Zealand noted Korea's 
increased interest in pursuing FTAs to expand trad e opportunities through greater liberalization, but 
that agricultural exclusions and deferrals in the Chile FTA had undermined its liberalizing impact on 
Korea's trade regime in areas where most prot ection existed.  Korea was encouraged to seek 
comprehensive agreements to include agriculture.   
37. New Zealand acknowledged Korea's substantial e fforts to liberalize foreign investment to 
help create a more business-friendly environment.  More concerted efforts to deal with trade 
restrictive measures would benefit investment and contribute to Korea's goal of becoming a regional 
hub.  It encouraged Korea to establish a Trade Ombudsman to allow companies to resolve trade-
related disputes with ministries.  Improved ru les to promote domestic competition were also 
acknowledged, and increased openness  and domestic competition in products where Korea was a 
world leader would benefit consumers and make it less susceptible to anti-dumping action.  Korea's 
quarantine arrangements, especially for fruit, and ot her SPS requirements were relatively strict.  New 
Zealand still experienced an overly rigid and ine fficient approach from gove rnment agencies, which 
accorded insufficient priority to  the goal of using less trade restrictive measures to meet SPS 
objectives, where possible.  Korea needed to im prove areas such as risk assessment, equivalence, 
streamlining of information requirements, transpar ency, and removing duplicative testing measures.  
New Zealand welcomed Korea’s moves to apply inte rnational SPS standards.  Its developing country 
status for certain trade purposes would receive great er scrutiny as income and technology levels rose. 
38. The representative of Australia
 noted that Korea had led the region in financial, corporate, 
labour, and public-sector reforms following the 1997 Asian financial crisis.  He welcomed its 
commitment to widen reforms and liberalization efforts, and to focus on creating a more business-
friendly economic environment.  Decentralization and balanced na tional development across regions 
was important in advancing economic reform.  Au stralia urged Korea to accelerate and intensify 
agricultural reforms to reduce tariff protection a nd domestic support.  Ec onomic and development 
gains inherent in the Doha mandate would be diffi cult to realize if Members remained preoccupied 
with exceptions for sensitive products, flexibilities, and non-trade concerns.  Australia was interested 
in Korea’s recent preferential trade agreement with  Chile and its current ne gotiations with Singapore 
and Japan.  It hoped Korea would negotiate FTAs to promote comprehensive trade liberalization 
across all sectors, consistent with its commitmen t to strengthening the multilateral trading system. 
39. The representative of the People’s Republic of China  noted that Korea had continued to 
liberalize trade and investment policies since its last Review.  Its new policy direction towards 
increased interest in regional free-trade agreements  was a natural response to the growing worldwide  WT/TPR/M/137 
 Page 11 
 
 
 
 trend of "regionalization", and complemented tr ade liberalization provided it did not go beyond the 
rules, principles, and spirit of the multilateral tr ading system.  China was concerned with several 
aspects of Korea’s trade regime, including high ag ricultural protection, an over-complicated tariff 
regime, SPS and TBT related measures,  and the import bidding system.   
40. The representative of Colombia  referred to the important role trade policy had played 
following the Asian financial crisis , and welcomed Korea’s efforts to abide by the rules of the 
multilateral trading system.  Korea had promot ed innovation and technological progress in 
manufacturing and services as part of its successful strategy of world leadership in key sectors where it had comparative advantage.  Its customs procedur es and technical norms ne eded to be rationalized, 
and tariff and tax structures were complex, especially  for agriculture.  Colombia encouraged Korea to 
improve conformity evaluation and mutual recognition in key areas such as pharmaceuticals, 
cosmetics, and some food products.  Its recent ten-y ear agricultural reform programme would help the 
sector respond to greater global liberalization.  Colombia welcomed Korea’s recent regional trade initiatives, which recognized the complementarity of  trade agreements with the multilateral trading 
system.  Some 12.7% of Asian investment in Columb ia was Korean, mainly in automobiles, electrical 
and electronic goods. 
41. The representative of Thailand, speaking on behalf of ASEAN countries
, highlighted the joint 
FTA feasibility study launched in 2003 between ASEAN and Korea;  the final report had just been 
endorsed at the AEM-Korea consultations in Jakar ta.  ASEAN also welcomed Korea’s efforts to 
promote regional integration in East Asia, incl uding initiatives for the East Asian Free Trade Area 
(EAFTA) among "ASEAN+3" countries.  Korea, an ITA member, had ratified the Fourth and Fifth 
Protocols to the GATS and signed the plurilatera l Agreement on Government  Procurement.  Its 
reforms had accelerated growth in 2001 and 2002, an d GDP was to recover to over 5% in 2004.  The 
general thrust of Korea’s policies favoured greater  liberalization.  Korea may need to address 
domestic consumption by boosting consumer confidence in light of recent falls in spending.  Like 
other oil-importing economies, Korea was vulnerable to  oil price hikes, which could have an impact 
on industrial output, particularly of cars and heavy machinery.  It had successfully instituted 
initiatives aimed at deregulation and privatization in  the finance, telecommunications, and transport 
sectors. 
42. While Korea had a generally liberal trade a nd FDI regime, pockets of measures unnecessarily 
hindered trade and efficient resource allocation.  ASEAN welcomed Korea's reduced tariff rates since its previous Review, through implementation of WT O commitments.  Korea eliminated tariffs on 
98 tariff lines from 1 January 2003 and abolishe d remaining duties under the ITA.  Its average 
industrial tariffs were relatively low at 6.7%, while  average agricultural tariffs were relatively high.  
The tariff structure was complex, particularly  for agricultural products, which enjoyed high 
protection, including price support and stabilizati on schemes.  While politically sensitive, ASEAN 
believed that the on-going multilateral negotiations  could enable Korea to narrow the dualism in 
protection between the agriculture and manufacturing sectors.  Korea used anti-dumping measures.  
Two ASEAN products were currently affected, and another was subject to an undertaking.  ASEAN 
encouraged Korea to exercise maximum restraint in using anti-dumping and other trade remedies.  
There had been a shift in tax-related support me asures, such as income tax holidays, towards 
investment incentives, including negotiable cash re bates. Korea was asked to elaborate on such 
features in light of WTO commitments. 
43. The representative of Japan
 believed that the FTA being negotiated with Korea would 
promote bilateral trade and investment, enhance th e two countries' competitiveness, and contribute to 
economic growth and trade liberalization.  Both co untries aimed to conclude the negotiations by end-
2005, and Japan hoped the FTA woul d complement the multilateral tr ade system.  Korea’s economic 
growth of 7.0% in 2002 and 3.1% in 2003 was supported by increased exports.  Japan welcomed WT/TPR/M/137 
Page 12  
 
regulatory reform of Korea’s foreign direct invest ment regime, and the conclusion of the Agreement 
concerning Liberalization, Promotion and Protec tion of Investment.  The Korean economy faced 
some risks, such as the increased household credit and the instability of labour-management relations.  
Such factors had caused foreign direct investment to fall despite Korea’s endeavours to improve the 
investment environment.  Japan welcomed its effo rts to modernize customs procedures, including the 
introduction of "e-customs" and a "one-stop" servi ce, and hoped coverage w ould be extended.  It 
hoped Korea would not expand the list of fisheries a nd other items subject to adjustment duties, and 
would reduce the rate to the general duty rate.  Japan believed Korea should cautiously examine 
evidence before initiating an anti-dumping investiga tion because they imposed costs on exporters, and 
also had a chilling effect on imports. 
44. Japan appreciated Kor ea’s efforts to promote uniform st andards among ministries, and hoped 
it would continue harmonizing local standards and requirements with international ones.  It was 
concerned whether the proposed additional regul ations on automobiles would burden foreign, 
including Japanese, manufacturers, and hoped Korea would restrict the regulation to the minimum 
needed and allow appropriate procedures to ensu re transparency and sufficient input.  Japan 
appreciated Korea’s protection of intellectua l property rights, and hoped it would strengthen 
implementation and fully adjust laws and regul ations to conform to WIPO treaties.   
45. The representative of the United States
 noted that Korea, a substantial beneficiary of the 
global trading system, had amended its trade and investment regimes.  Korea was committed to 
corporate and government sector deregulation and st ructural reform and to creating sustainable 
balanced growth.  It planned to enhance transparency, introduce innovative technologies, and to 
attract foreign investment so as to become a North-East Asian hub.  Tariffs had been reduced or 
eliminated in many industrial sectors, and bound ta riffs would be lowered to zero on most paper and 
steel products, semiconductors and fa rm equipment by end of 2004.  Items subject to adjustment 
tariffs had been reduced from 27 in 2000 to 20 in 20 04, and their rates lowered.  Korea had joined the 
Global Agreement to harmonize international auto motive standards, moved to a self-certification 
system and agreed to accept certain foreign side -impact standards.  After extensive bilateral 
discussions, it agreed to implement its Wireless Internet Platform for Interoperability (WIPI) 
standards so as not to exclude competitive fore ign technologies.  Korea had acceded to the WIPO 
Copyright Treaty in 2004, strengthened and stream lined the patent application process, and passed 
legislation to strengthen copyright prot ection of computer programs and books. 
46. The foreign investment regulatory framework ha d been liberalized.  Several fully closed 
sectors to foreign investment had been partially opened, and only two services subsectors and two 
agricultural activities remain ed fully closed.  Administrative pr ocedures for foreign investment had 
been simplified, an office established to help fore ign investors, and investment incentives expanded to 
cover foreign investor infrastructure like schools and hospitals.  The Gove rnment openly supported 
foreign investment and mergers and acquisitions.  There had been several highly visible foreign 
acquisitions of Korean firms, especially in financia l services and manufacturing.  Korea seemed to see 
continued trade and investment liberalization not merely as a response to foreign pressure but as something that would enhance competitiveness and welfare. 
47. Despite progress, much work remained.  Kor ea was an export and technology leader, with 
booming automobile, telecom and semiconductor indust ries, and the world's highest rate of broadband 
penetration;  it was also a leader in economic restru cturing, as demonstrated by the recovery from the 
1997 crisis, however, it had not yet shown its full pote ntial as a trade policy leader.  Its efforts to open 
markets to foreign goods and services remained in consistent and incomplete.  Agricultural tariffs 
remained high, and import clearance procedures, food-related standards and specification issues, 
inspection and testing regimes, and labelling re quirements further impeded market access.  
Automobile tariffs were high relative to Korea's e xport markets and their impact was magnified by a 
tax system that fell disproportionately on imported cars.  Korea's auto trade patterns were among the 
world’s most imbalanced, but it had resisted taki ng measures to address the concerns of foreign  WT/TPR/M/137 
 Page 13 
 
 
 
 vehicle makers.  Intellectual property protection, partic ularly in digital media, was flawed, a particular 
problem given Korea’s advanced broadband networks.  Without further refinement of copyright laws, 
for example, to explicitly provide complete tran smission rights for sound recordings or to provide 
rights of temporary copies for computer software, Korea may soon become a leader in unauthorized 
copying.  This would hurt foreign content prov iders and also Korea's growing film and studio 
recording industries. 
48. Recent problems had emerged regarding t echnology standards, particularly for 
telecommunications, which favoured domestic supplie rs and shut out foreign providers.  The United 
States urged Korea to ensure that its technology policy did not serve as a trade barrier or as disguised protection.  Further work was necessary to improve regulatory transparency in  Korea.  Its laws and 
regulations were often drafted broa dly, giving officials substantial discretion in their application or 
interpretation.  Greater notification of planned ch anges to laws and regulations, more complete and 
timely opportunity for all stakeholders to comment  on proposals, and guarant ees to apply regulations 
consistently would make the regulatory framework mo re transparent and predictable.  Korea wanted 
to become a North-East Asia hub, partly through attracting foreign investment, but this had fallen 
since 1999-2000.  While partially due to trends in the global economy, foreign investors also 
remained unconvinced that they faced a fully liber alized and transparent environment in Korea.  
Completing the mammoth task of trade and investme nt liberalization would benefit mainly Koreans. 
49. The representative of Argentina
 was encouraged by Korea’s economic reforms since the 1997 
Asian financial crisis.  The fall in domestic consumption and inv estment in 2003 raised concerns.  
Korea had shown that trade could be an engine for economic growth and development.  Further 
structural and other economic reforms could help  restore balance between external and domestic 
demand, and ensure that private consumption and investment underpinned growth.  Korea had made 
great efforts to liberalize trade.  However, agricultu re was most affected by trade distorting measures, 
which forced Korean consumers to pay higher prices fo r food, often twice the world levels in 2002, or 
three times for rice.  While negotiation of free-trad e agreements was one of the major pillars for 
Korean trade liberalization, they could complicat e the trade regime by applying different tariffs 
according to source, and associated rules of origin could also be distorting.   Korea had only one free-
trade agreement, and Argentina asked how it intende d to avoid these problems.  Argentina hoped that 
Korean restrictions on some goods it exported would be reduced.   
50. The representative of th e European Communities  referred to Korea’s transformation over the 
past three decades from a poor agrarian economy into the world’s 11th largest economy.  With limited 
natural resources and a restricted domestic market , Korea had set out to establish a stable and 
independent economy based on export-oriented econom ic development as the engine for growth, a 
possible source of vulnerability.  While liberaliza tion of products and servi ces would enhance growth 
and prosperity, deriving the full benefits require d strengthened trade rules.  Korea’s experience 
highlighted the importance of strengthened administ rative capacity and ability to conduct trade policy, 
and of ensuring a healthy relationship between the pr ivate sector and the state.  It had made wide-
ranging corporate and financial sector reforms to create a more market-oriented economy.  The EC 
encouraged Korea to continue these, including in  difficult areas.  Since its last Review, it had 
increasingly sought opportunities through bilatera l free-trade agreements, and the EC sought 
improved understanding of its pursuit of deepen ed regional integration and recently concluded 
agreements.    
51. The representative of Hong Kong, China  appreciated Korea’s continued trade and investment 
liberalization and structural reforms.  He enc ouraged Korea to narrow the significant gap between 
bound and applied rates, to reduce or eliminate hi gh tariffs on some industrial products, like textiles 
and clothing, and to simplify the tariff regime, whic h was complicated by the multiplicity of tariff rate 
bands, various "flexible" tariffs, and other measure s that selectively reduced tariffs.  Hong Kong, WT/TPR/M/137 
Page 14  
 
China noted that Korea's agricultural policy was based on self-sufficiency, food security and other 
"non-trade" concerns, but that high protection undermined its economic efficiency and penalized 
consumers.  The representative noted favourably the ten-year agricultural reform programme finalized 
in late 2003 aimed at making the sector more  market-oriented and responsive to multilateral 
liberalization through reduced price support.  Wh ile Hong Kong, China fully understood the political 
sensitivity of agricultural liberalization, it hoped Korea would undertake further reform.  Korea had 
relatively stringent SPS measures.  Imports of certain  plants and agricultural products, including rice, 
fresh fruits, and vegetables, were either prohibited or restricted to a few countries while some other 
imports were only allowed upon fulfilment of sp ecific SPS requirements.  While Hong Kong, China 
recognized the need to protect human, animal, and pl ant life and health, it encouraged Korea to review 
its stringent SPS controls to avoid, where possi ble, unnecessary trade restrictions.  It commended 
Korea for unilaterally opening telecommunications and the foreign ownership regime beyond its 
WTO obligations, and encouraged Korea to addres s certain weaknesses by further improving its 
regulatory regime.  Korea was commended for computerizing government procurement system, and was encouraged to consider providing versions of the electronic procurement website in WTO official 
languages. 
52. The representative of the Separate Customs Te rritory of Taiwan, Penghu, Kinmen and Matsu
 
noted the Korean economy's strong export performan ce and ongoing widespread structural reforms, 
which suggested further growth possibilities.  Korea had faithfully implemented its Uruguay Round 
commitments and other WTO obligations for the past  ten years, and had successfully brought most 
laws and regulations into conformity.  The two ec onomies were complimentary,  especially in trade.  
Korea’s foreign investment regime was perhaps of greatest concern to the Separate Customs Territory 
of TPKM.  Its bilateral investment link with th e Separate Customs Territory of TPKM remained 
weak, thus limiting the potential fo r greater economic cooperation.  New investment in Korea in 2000 
was a mere US$250 million and US$313 million in 2001.   Total cumulative the Separate Customs 
Territory of TPKM investment in Korea was onl y US$700 million and Korean investment in the 
Separate Customs Territory of TPKM barely US$300 million.  Both economies would benefit 
enormously from improved foreign direct investment.  Korea's total FDI inflows reached an historical peak of US$15.5 billion in 1999, but had since d eclined to US$6.5 billion in 2003.  Most foreign 
investors indicated that the main  contributing factors were the unstable situation between South and 
North Korea and Korea’s less than attractive in vestment environment.  The Separate Customs 
Territory of TPKM asked about Korea's stra tegies and plans for attracting greater FDI. 
53. The representative of Brazil
 noted that Korea had improved the domestic economic 
environment and developed a more competitive econom y, which had helped restore confidence.  Its 
trade and investment policies were directed toward s greater liberalization and further opening of the 
economy.  Protectionist agricultural measures conti nued, however, to shield domestic producers from 
foreign competition.  High agricultural protecti on contrasted with relatively low manufacturing 
protection in general.  Brazil was concerned th at Korea’s net agricultural support exceeded the 
sector’s value of production.  This affected its trading partners, but also undermined its economic 
efficiency and penalized consumers and exporters.  Korea’s tariff structure was relatively complex, 
distorting competition and hindering efficient resource allocation.   Its future economic performance 
depended greatly on efforts to implement struct ural and other economic reforms to strengthen 
competition and increase productivity, especially in ag riculture and services.  Korea had a major stake 
in ensuring a credible and effective rules-based mu ltilateral trading system.  This required reducing 
differences in rules and in the level of liberalizati on that applied to different categories of goods. 
54. The representative of Venezuela  congratulated Korea for the policy reforms implemented 
after the Asian crisis, which had promoted  greater competitiveness and efficiency. 
55. The representative of India  complimented Korea on its wide-ranging economic reforms 
undertaken in response to the 1997 financial crisis.  Ongoing efforts to further improve the economic 
environment would intensify these positive trends.  Ho wever, while Korea had achieved greater tariff  WT/TPR/M/137 
 Page 15 
 
 
 
 liberalization, its tariff structure, especially in ag riculture, remained complex.  Alternative specific 
rates on out-of-quota imports also concealed high ad valorem duties and undermined transparency.  
Indian businessmen faced difficulties in obtaining  multi-entry business and/or long-term visas.  
56. The representative of Bulgaria  welcomed Korea’s adequate and timely structural reforms and 
financial sector liberalization over the last four y ears.  Since its last Review, it had conducted a trade 
policy oriented towards further liberalization.  Bu lgaria’s bilateral trade and economic relationship 
with Korea had grown steadily after diplomatic ti es were established in 1990 and a trade agreement 
concluded in 1994.  The Korean Agency for Prom otion of Trade and Investments (KOTRA) opened 
an office in Sofia and cooperation agreements were concluded between the Bulgarian Trade 
Promotion Agency, KOTRA and the Korean Intern ational Trade Association in 2002.  In 2003, 
further cooperation agreements were signed for machine building, information and communication 
technology, and export insurance.  Bulgaria re lied on investment in high technology and other 
traditionally strong Korean sectors like infrastructur e, automobiles, and electronics.  Korea was 
Bulgaria’s largest Asian investor and 17th largest foreign investor overall, with FDI totalling nearly 
US$55 million from 1996 to 2003.  Since 1999, Korean tourists to Bulgaria had increased, growing by 
46% in 2003.  Bulgaria appreciated the technical cooperation provided through the Korean Agency 
for International Cooperation. 
57. The representative of Mauritius  noted that Korea had become a newly industrialized country 
by evolving into a highly efficient economy by promoting a business friendly environment and strengthening R&D capacity to encourage a more innovative science and technology base.  This was 
mainly due to policies taken to stabilize the economy,  including structural reforms in the financial and 
corporate sectors, as well as trade and investment liberalization.  Korea was a net beneficiary of 
liberalization and by supporting a rules-based mu ltilateral trading system had attracted foreign 
investment, which was an important source of ex ports and jobs.  It had ambitious objectives of 
becoming a North-East Asia business and financia l hub through its "global leadership" trade and 
investment strategy in key sectors, such as motor vehicles, steel, and IT industries, which had proved 
to be efficient engines of growth.  Global agricult ural liberalization needed to be progressive to 
achieve a balance of interests between exporti ng and importing countries, taking into account non-
trade concerns such as food security, rural develo pment and environmental protection.  Mauritius 
commended Korea for its recent ten-year agricultura l reform programme aimed at making agriculture 
more market-oriented and responsive to global liberali zation.  Reform could be painful, especially for 
countries without a competitive agriculture sector but  where it played a vital role in the socio-
economic fabric and sustainability of rural areas.  Tr ade reforms had to be fostered at a socially and 
economically acceptable pace to make transition as smooth as possible. 
58. The representative of Pakistan
 referred to Korea’s achievements since its last Review, 
especially in the restructuring of banks and the corporate sector, labour and public sector reforms, achieving a small but efficient government, and in trad e facilitation.  Korea should try to simplify its 
tariff structure, which had 90 different rates.  Its average agricultural tariff of 54.8%, which was even 
higher for out-of-quota goods - more than 200% - wa s rather excessive.  Korea was seeking to extend 
the ten-year transition period for rice extending sp ecial treatment in the form of quantitative import 
restrictions.  Pakistan urged Korea to liberalize rice trade as it had done in other areas.  Textiles and leather also suffered from high tariffs and escalation.   While other tariffs had declined over recent 
years, these had possibly increased slightly.   
59. The representative of Norway
 commended Korea for its structural reforms and for by-and-
large resisting protectionist actions to achieve great er trade and investment liberalization.  This had 
been an important tool in promoting significan t economic growth and development, and Korea’s 
fuller integration into the world economy.  It had undertaken agricultural reforms and opened markets 
in accordance with Uruguay Round commitments.  Korea had launched a comprehensive ten-year WT/TPR/M/137 
Page 16  
 
agricultural reform programme to make agriculture  more market-oriented and responsive to global 
trade liberalization.  The multilateral trading system needed to find the right balance between ambition and flexibility in agriculture, especially  in safeguarding sensitive products, to provide 
governments room to manoeuvre in designing polici es to take into account non-trade concerns.  While 
aware of Korea’s concern over its depleted fish stocks and recogni zing the importance of proper and 
sustainable resource management, Norway believe d this challenge was best handled in other 
international fora, such as the FAO, rather than through trade measures.  It did not believe tariffs were 
appropriate tools to reach sustainable development goa ls for Korean fisheries.  Norway subscribed to 
Korea’s view that FTAs could supplement the multilat eral trading system and contribute to market 
opening by accelerating bilateral and regional trade liberalization.  It appreciated that Korea and 
EFTA countries had agreed to establish a Joint Study Group to evaluate FTA feasibility. 
60. The representative of Turkey
 believed that Korea was one of the most open economies with a 
high trade/GDP ratio.  Since its previous Revi ew, Korea had maintained sound macroeconomic 
policies, having suffered the effects of the Asian financial crisis in 1997 and the 1998 recession.  
Annual economic growth had averaged 7.2% from 1999 to 2002, exports had increased by 12%, 
inflation had been kept under control, foreign exch ange rates were stable, and the overall employment 
rate had improved.  Turkey appreciated the wide ranging structural and economic reforms undertaken 
by Korea, including in the financial, corporate, labour and public sectors, and its aim to further 
liberalize the economy to transform Korea into a North-East Asian business hub and an advanced 
economy.  WT/TPR/M/137 
 Page 17 
 
 
 
 V. REPLIES BY THE REPRESENTATIVE OF KOREA AND ADDITIONAL 
COMMENTS 
61. The replies by the representative of Korea  were divided into three main themes:  (i) economic 
environment;  (ii) trade policy by measure;  (iii) and sectoral issues.  They were based on written responses circulated to Members.  Korea undertook to  provide supplementary written replies at a later 
date. 
62. The representative of Korea stated that while hi s country had been caught in the trap of per 
capita income of around US$10,000 for eight years, Korea believed its goal of US$20,000 GDP per head by 2010 was achievable with continued refo rm and liberalization.  The Government pursued 
institutional reform in the corporate, financial a nd trade sectors to establish an advanced economic 
system based on global standards.  It pursued an industrial strategy to transform Korea into the 
business hub of North-East Asia.  It had been mentioned that Korea’s net agricultural support 
exceeded the sector’s GDP contribution, and referen ce had been made in the Secretariat Report that 
"Korea’s total agricultural support (net of specific sectoral budget receipts) of W 24.3 trillion in 2003 
as a share of GDP (3.9%) was among the highest of OECD members" (paragraph 12 on page 85);  this 
could create a misunderstanding.  Firstly, the TSE (T otal Support Estimate) was different from the 
AMS (Aggregate Measurement of Support).  The TSE was, roughly, the sum of the price differential 
between domestic and international prices and government subsidies.  The price differential was high 
if the tariff was high, and this resulted in doubli ng up.  The TSE was controversial in the OECD, and 
any comparison of TSE as a percentage of GDP n eeded to be addressed cautiously.  A simple 
comparison between this figure and the agriculture sector’s GDP contribution, which was raised by 
the discussant and the Brazilian representative, was a mismatch and had no legitimate analytical 
foundation.  The Secretariat Report should have provided a clear explanation of the difference 
between the TSE and AMS. 
(i) Economic environment 
63. Korea would continue the comprehensive structural reforms that made possible its rapid 
recovery and growth after the Asian financial cris is.  The economy’s genera l trend of recovery and 
growth had continued over the past four years in th e wake of the Asian financial crisis, backed by 
structural reforms.  That per capita GDP in 2003 ha d recovered to its pre-crisis level bore witness to 
the success of structural reforms in the financia l, corporate, labour, and public sectors.  Korea’s 
economic performance was not without volatility, an d many Members had raised concerns over the 
mismatch between domestic and external demand and the potential over-reliance on exports as the 
main source of growth since 2003.  Some economic analysts believed that the household debt problem 
had turned around during the first half of 2004 as th e rising debt levels had stabilized, and domestic 
consumption was beginning to recove r.  As domestic consumption was expected to pick up in the near 
future, the risk to sustainability of the r ecovery would be substantially alleviated. 
64. The two main challenges facing the economy were high export dependence and sluggish 
domestic demand.  Korea felt that the solution did not lie in reducing exports but rather in boosting 
domestic demand.  To revitalize domestic consump tion, Korea would strengthen the role of fiscal 
policy, focus on job creation, and put in place mechan isms to help households have a soft landing for 
their soon-to-mature household liabilities.  It was adopting comprehensive measures to support small 
and medium-sized enterprises and to promote co mpetitiveness in services.  Through these measures, 
Korea expected sustainable growth in domestic consumption.  External factors beyond Korea’s 
control, such as high oil prices or the continua tion of strong growth in China, also impacted 
significantly on the stability of Korea’s growth.  Howe ver, it remained confident given that oil prices 
had begun to fall and China was intelligen tly steering her economy for the long term. WT/TPR/M/137 
Page 18  
 
65. To enforce administrative transp arency, Korea was pushing forward with amendments to the 
administrative procedural law, which included ad ministration notices, and complemented related 
procedures with public notifications and the collec tion of opinions when drafting a government policy 
or plan.  While labour disputes ha d hindered economic rec overy and foreign investment in Korea, 
labour-management relations were currently bei ng harmonized.  The Government had repeatedly 
emphasized the importance of voluntary resolution of issues between labour and management based 
on dialogue and compromise, while ensuring that all parties adhered strictly to relevant rules and 
regulations.  Furthermore, Korea was striving to  create an environment that prevented labour-
management disputes by facilitating and promo ting dialogue among lab our, management, and 
government in the form of a Tripartite Commission.   As the public’s dema nd for rational industrial 
relations grew, labour movements were gradually being absorbed into formal politics.  The 
Government would continue efforts to improve la bour regulations and to support further cooperation 
and flexibility. 
66. The Government had actively pursued FDI sin ce the financial crisis to bolster economic 
growth and to enhance global competitiveness.  This had led to historic peaks of FDI inflows in 1999 
and 2000, recording over US$9 billion in each year .  Although FDI inflows had decreased over the 
past three years due to the global recession and the unstable domestic economy, they increased considerably in 2004.  To improve the investment  environment, Korea would continuously expand its 
openness and endeavour to create an FDI-friendly econom y.  In particular, it would strengthen efforts 
to induce strategic investment, est ablish a more effective support regime including the "one-stop" 
service through project managers and the Office of  the Investment Ombudsman, and improve the 
living environment for foreigners. 
67. Since the 1997 financial crisis, the Govern ment had made great efforts to enhance 
transparency in corporate management and improve corporate governance by introducing the 
non-standing director system and strengthening th e rights of small shareholders.  As a result, 
considerable advances had been made regarding institutional infrastructure, and the market was 
increasingly aware of the importance of corporate governance.  The Government would continue 
efforts to enhance the overall economic system and en sure that transparency in corporate management 
met global standards.  It planned to strengthen the market’s monitoring functions so that newly 
introduced systems might become firmly rooted in the market, and also to improve economic 
institutions by introducing the collective action lawsuit system. 
68. In the case of competition policy, law enforcemen t had been steadily strengthened in the past 
four years.  The KFTC, Korea’s competition authorit y, had invested more of its resources into rooting 
out both domestic and international cartels.  Chaebols, a key policy issue, were being subjected to 
greater market disciplines, including a more market-conforming regulatory regime.  The Government’s resolution in relation to competition po licy, including chaebol issues, was reflected in 
the "Three-Year Market Reform Roadmap," which was drafted by the Civilian-Government Task 
Force in 2003.  The roadmap was a blueprint for fu ture competition policy.  Korean competition law 
containing the contents of the roadmap was under revi ew to be passed by the National Assembly.  The 
Korean Government would continue to strengthen competition law enforcement.  
69. The discussant
 agreed with most of the replies by the representative of Korea.  He noted that 
while his remarks about Korean agricultural subsid ies were in his original notes shared with the 
Korean delegation, they were not mentioned in his statement.  Nevertheless, his figures had come 
from the Secretariat.  On Korea’s dependence on tr ade and the Government’s attempt to stimulate 
domestic demand rather than reduce involvement in in ternational trade, the current concern was that 
high oil prices might increase inflation and limit Korea’s policy options in trying to stimulate domestic demand.  While the Korean Government  would undoubtedly monitor these developments 
closely, it was a challenge that  needed to be looked at.  WT/TPR/M/137 
 Page 19 
 
 
 
 (ii) Trade policy by measure 
(a) Tariffs 
70. Several Members stated that the complexity of  Korea’s tariff structure was a problem.  The 
tariff structure was complicated because of the implementation of a yearly tariff-reduction schedule and the tariffication of agricultural import restric tions as a result of the UR negotiations.  Concerns 
also related to high tariffs in some areas, incl uding agriculture and textiles.  High tariff rates on 
agricultural products were the direct result of the UR  negotiations.  High tariffs would be dealt with in 
the on-going multilateral market-acc ess negotiations.  Korea had bound 91% of its tariff lines as a 
result of the Uruguay Round.  This was a relatively high level considering Korea’s development at the 
time of the UR negotiations.  Korea was one of th e strongest proponents of comprehensive coverage 
without a priori exception in non-agricultural market -access (NAMA) negotiati ons.  It would address 
this issue further after the completion of the D oha Development Agenda.  Most of the non-bound 
items related to fishery and forestry goods.  Ho wever, there was not much difference between bound 
and non-bound goods.  For example, the average applied tariff for 175 bound fishery products was 17%, while that for 231 non-bound products was only 2 percentage points higher at 19%.  Regardless 
of whether a particular tariff line was bound, Ko rea would continuously reduce relevant tariffs. 
71. Korea’s adjustment duty system was designed to respond effectively to import surges for a 
certain limited number of products.  The regime wa s fully WTO consistent as these rates were within 
the bindings.  At the same time, in the interest of enhanced predictability, the Korean Government had 
continuously reduced the number of items subject to  adjustment duties from 27 in 2000 to 20 in 2004.  
Korea fully understood concerns about adjustment tari ffs.  Originally, the adju stment tariff system 
was introduced to accelerate voluntary liberalizati on.  Korea hoped Members understood that the 
adjustment tariff system contributed to keep ing applied tariffs lower than bound tariffs. 
(b) TBT/SPS 72. Some Members raised concerns  about Korea’s TBT and SPS regul ations being too stringent.  
Korea had provided responses to specific questions in the text distributed.  Korea had made 
significant strides in this area since 1998 by bringing  its standards into line with international rules 
and norms.  It had harmonized 99.3% of the nearly 10,000 standards subject to harmonization, and sought to harmonize an additional 1,800 by the en d of 2004.  While more had to be done, Korea 
would continue to bring its regime into line with international norms. 
73. Concerning food safety, Korea had introduced th e "system of prior-confirmed registration of 
imported foods" in August 2002 in an effort to si mplify customs clearance while still ensuring food 
safety.  Korea’s Internet reporting system contribut ed to increased promptness and transparency, and 
it was actively harmonizing regulations with interna tional food standards, such as CODEX, OIE, and 
IPPC.  This was evidenced by amendments to the Food Code, the Food Activities Code, and the 
Foods Labelling Standards since 2000 to bring them into  further conformity with international norms. 
(c) FTAs 
74. Many Members recognized Korea’s recent invol vement in seeking out and concluding FTAs 
as a means of facilitating further opening at the mu ltilateral level.  Its pursuit of FTAs was well 
grounded in a firm belief in the primacy of th e multilateral trading system, and was aimed at 
complementing its multilateral efforts.  The underlyi ng hope was that such FTAs could be stepping 
stones for greater bilateral, regiona l and global economic integration. WT/TPR/M/137 
Page 20  
 
75. On Korea’s FTA with Chile, th e Secretariat Report had pointed out that three products were 
excluded from the FTA, and that this was distorting.  Korea felt that the Secretariat had overstated the 
distorting effect of merely three products, which accounted for only 0.2% of total tariff lines.  It was quite common for FTAs to exclude coverage of some products, and given the insignificant trade 
volume involved, Korea did not feel these exceptions were particularly noteworthy.  Furthermore, 
GATT Article XXIV called for only tariff elimination on substantially all trade and did not require 
complete free trade for all goods. 
76. Korea hoped to conclude an FTA with Singapor e by the end of 2004 and with Japan by the 
end of 2005.  It was negotiati ng with Singapore and Japan in bi -monthly meetings on key areas of 
mutual interest.  Negotiations thus  far had proceeded on the mutua lly shared goal of comprehensive 
liberalization in goods and services trade, in an effo rt to achieve substantial economic integration and 
to maximize the benefits of the FTA.  Korea hoped that an FTA with Japan would be an effective 
means for promoting free trade, enhancing econo mic transparency, strengthening the partnership 
between the two countries, and catalyzing regional cooperation in East Asia.  Korea would pursue a 
high level of comprehensive liberalization with Japan, not limited to indus trial goods, which would 
also include non-tariff measures. 
77. In 2003, Korea and ASEAN launched a joint stu dy on the possibility of an FTA.  The final 
report was adopted in September 2004 at the ASEAN Economic Ministers’ Meeting in Jakarta, which 
would submit its recommendations to the Korea- ASEAN Summit later in 2004 for a decision on the 
commencement of FTA negotiations.  Similarly, Ko rea and EFTA agreed in May 2004 to establish a 
Joint Study Group to evaluate the feasibility of an FTA.  The first meeting of this Group was held in 
mid-August, and it was expected to present its final report by the end of 2004.  Contrary to some 
suggestions, Korea had not begun actively studyi ng the possibility of an FTA with China.  
Nevertheless, it would eventually cons ider forming an FTA with China. 
78. The discussant
 noted that his concern with the Korean tariff structure related not so much to 
the level of bindings but more to its higher average tariffs because of the relatively high agricultural 
rates.  This reflected Korea's agricultural policy.   Korea also frequently used anti-dumping or trade 
defense measures.  It had initiated more than 30 anti-dumping investigations since 1999, and imposed 
definitive duties on 14 products with seven cases of price undertakings.  While making some 
criticisms on the Korean trade regime, he felt it w as fair and open.  Transparency had improved. 
79. The representative of Korea  referred to concerns raised by ASEAN and other Members on 
Korea’s use of contingency measures.  Korea used  only anti-dumping measures and currently had no 
countervailing measures.   It was the second most affected count ry from anti-dumping measures, while 
around the eleventh or twelve major user.  Ko rea strongly believed that although anti-dumping 
measures were legitimate under the WTO, they shou ld not be misused or abused.  Simply initiating 
anti-dumping measures could have a chilling effect on trade.  Korea had a strict rules-based system on anti-dumping measures and would not initiate inves tigations based on private-sector requests unless 
considered justified by Korea’s semi-independent trad e commission.  Korea thus tried its best not to 
misuse or abuse contingency measures. 
80. The representative of th e European Communities
 noted Korea’s intention to further liberalize 
technical barriers to trade.  He asked whether Ko rea accepted certificates of origin issued from the 
European Communities to meet non- preferential origin needs.   
81. The representative of Australia  sought elaboration on Korea’s hi gh agriculture tariffs, and the 
statement that these were a result of the Uruguay Round Negotiations, and w ould be addressed during 
the Doha Development Round.  As most Members we re undertaking some internal reform to prepare 
for the prospect of further tariff reductions and liber alization, he requested further details on what 
steps Korea was taking in agriculture in advance of the conclusion of the Round.  Korea’s written 
response circulated at the meeting seemed to set  out objectives and a vision for reform without  WT/TPR/M/137 
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 indicating any concrete steps taken.  Of interest to  Australia, for example, was that Korea’s tariff on 
sheep meat was 22.5% when it had no such production, and hence no industry to protect.  While Korea had indicated that the import of sheep meat had an indirect effect on goat  meat, it was unclear 
how such imports affected goat meat consump tion.  Korea rightly mentioned that the GATT 
Article XXIV requirement for substantially all tr ade to be covered by FTAs did not necessarily mean 
100% of all tariff lines be included, and that mo st FTAs excluded a small number of tariff lines.  
However, in Australia's experience one reason why th ere was no trade in certain tariff lines that were 
exempt from FTAs was because of high tariffs.  It was concerned therefore that countries with high agricultural tariffs embarking on FTAs were strongl y tempted to justify the exclusion of significant 
numbers of tariff lines because no trade existe d, when this reflected high tariffs.   
82. The representative of the United States
 asked for more details on the Consultative Committee 
on IPR protection, including its priorities, how these  would be achieved, and on its composition of 
officials and non-governmental experts. 
83. The representative of Korea  commented on the use of certificates of origin and indicated that 
such issues could be best handled bilaterally with  the EC.  Korea was making internal agricultural 
reforms in preparation for the DDA,  such as the recent ten-year agri cultural plan to make the sector 
more market-oriented.  Regarding FTAs, only three items (rice, apples and pears) were excluded from 
the bilateral FTA with Chile.  They covered only 0.2%  of all tariff lines.  The FTA covered more than 
77% of tariff lines from the outset and this would rise to 96% in ten years.  This degree of coverage 
was one of the best, and Korea would try to ensu re future FTAs would be comprehensive and not 
exclude any specific sectors as a whole. 
(iii) Sectoral policies 
(a) Agriculture 
84. Significant structural adjustment was occurri ng within the Korean economy, resulting in 
currently only 3.6% of the GDP being derived from agriculture.  Agricultural imports had grown 
twice as fast as overall imports and Korea’s self-suffi ciency ratio and total employment in agriculture 
were steadily declining.  In line with these trends , the Government had just launched a comprehensive 
ten-year agricultural reform programme that would make the agriculture sect or more market-oriented 
and responsive to global trade liberalization.  Kore a shared the long-term goal of market opening in 
agriculture and was taking steps to smooth and f acilitate this transition while minimizing economic 
and social disruption.  Towards this end, it would continue to participate actively in the agricultural 
negotiations of the DDA with a view to achieving a balanced outcome. 
85. Korea’s current food self-sufficiency ratio was only 27%.  At present, Korea imported 73% of 
its food consumption.  This meant that Korea’s food consumption was highl y dependent on imports.  
Korea’s self-sufficiency policies we re simply to help prevent a precipitous decline in its food 
production, to achieve social protection, ma intain rural communities, food security, and 
multi-functional characteristics of agriculture.  Th us it was an overstatement to say that self-
sufficiency policies undermined Korea’s economic efficiency and penalized efficient exporters. 
(b) Services 86. Korea had fully and faithfully implemented its specific commitments made during the 
Uruguay Round and in the extended negotiations.  As  Korea shifted to a more services-oriented 
economy, its growth would become increasingly dependent on the free flow of trade in services.  Since its last Review, Korea had consistently lib eralized the services sector through the Regulatory 
Reform Committee, amended the Ba nking Act, opened Korea Telecom to  greater foreign ownership, WT/TPR/M/137 
Page 22  
 
eliminated and relaxed over 1,200 service regulations, and so forth.  Through these reforms, Korea’s 
trade in services had grown by approximately 50% since 1998, and the share of FDI in services had doubled over the same period to 64% in 2003.  Ko rea aimed to liberalize further, and remained 
engaged in the services negotiations, show ing great flexibility in initial offers. 
(c) IPR 
87. Korea was aggressively putting in place a robust IPR regime.  It had fully implemented its 
TRIPS obligations, had become party to over te n major WIPO treaties, and had sought accession to 
several others, including the WCT and the WPPT.  Korea had established a Consultative Committee 
on IPR to coordinate and facilita te IPR protection among various ministries.  This Committee had 
made 15 specific recommendations to create a fully  integrated and comprehensive IPR regime, and 
the Government was implementing them.  Korea di d not pursue IPR protection simply because of 
international obligations, but because it viewed r obust IPR protection as a pillar of good economic 
policy in the information age.   
(d) DDA negotiations 
88. The DDA negotiations had been launched since the last Review of Korea.  Korea firmly 
believed that higher levels of trade liberalization a nd strengthened rules would substantially benefit all 
economies.  Based on this belief, it had strongly advocated the launch of the DDA negotiations and 
had taken an active role, submitti ng about 70 written proposals to date.  Korea remained fully 
committed to the negotiations and would strive tirelessly for their successful conclusion.  The discussant, while praising Korea’s active particip ation in the DDA negotiations, had expressed the 
view that its position was not always consistent w ith liberalization in the various negotiating areas.  
However, Korea believed its position was fully consiste nt.  In all areas, Kor ea’s strong preference was 
to strengthen the multilateral trading system, and it activ ely participated in all areas to this end.  The 
appearance of inconsistency stemmed from looking at  all sectors as equal, and exclusively at 
economic questions.  Korea took a broader view, esp ecially when it came to agriculture.  It had no 
disagreement with the economic rationale for agricultu ral liberalization, and agreed with this logic 
and shared the same long-term goal.  Korea’s issue,  as expressed also by Norway and Mauritius, was 
that agriculture was not a uniquely economic quest ion but also had unique non-trade concerns and 
issues of multifunctionality, which likewise needed to be considered. 
89. The discussant
 referred to the high protection levels en joyed by Korean agriculture, especially 
rice cultivation.  It was on this basis that the Secretariat Report had described Korea as a dualistic 
economy as regards protection.  Korea had launched a new ten-year agricultural reform programme to 
make the sector more market-oriented and responsiv e to global trade liberalization.  The discussant 
hoped this programme would be implemented vigor ously.  Korea should be congratulated on its 
accelerated services liberalization following the Asian crisis.  There had been substantial 
consolidation in the banking industry, and fo reign participation, and the financial and 
telecommunication sectors had been liberalized.  The energy and electricity sectors were also being 
privatized gradually.  Services was the fastes t growing sector.  In manufacturing, Korea's 
achievements were envied.  Even in recent years when  the sector's GDP share had been declining, real 
value added had grown at an average rate of 7% per annum.  Korea planned to be among the world’s 
top industrial super-powers based on industries su ch as semi-conductors, petro-chemicals, steel, 
machinery, and shipbuilding. 
90. The representative of Australia  asked Korea to comment further on fisheries' subsidies, and 
the Doha mandate to clarify and improve the Ag reement on Subsidies and Countervailing Measures in 
its application to fisheries.  Korea had suffered se rious resource depletion in fish stocks.  Korean 
fishing subsidies amounted to W 674 billion in 20 02.  Australia sought Korea’s views on the causal 
link between the nature and scale of such subsidies and the depleted fish stocks, any measures being  WT/TPR/M/137 
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 taken to address this problem, and on whether and to what extent the Doha negotiations on fish 
subsidies could be used as an opportunity to strengthen such disciplines. 
91. The representative of Korea  agreed that fish depletion was a world problem, but should be 
dealt with in other institutions that had relevant expertise, such as the OECD or FAO.   Fisheries 
subsidies should be classified into those that do and do not contribute to res ource depletion and should 
fall under the umbrella of the current subsidy agreemen t.  There seemed to be some inconsistencies by 
Members in how such subsidies were to be handled under the Doha negotiations. 
92. The Secretariat (Director, Trade Policy Review Division ) indicated that the Korean 
authorities had not raised concerns regarding the Secretariat’s use of the TSE for agriculture during 
discussions on the Report’s preparation.  The Secret ariat had used the TSE instead of the AMS, which 
is geared to the negotiation of Member’s obliga tions under the agreement on agriculture, because the 
Trade Policy Review is mandated specifically not to  use the review process for the enforcement of 
obligations.  It is to be an economic transparen cy exercise against the background of the principles 
underlying the multilateral trading system.  The Secretariat therefore reviewed trade policy 
instruments using economic indicators and measur es.  The TSE was a more comprehensive measure 
of total agricultural support than the AMS.  Wh ile there were difficulties with the TSE and with 
comparing it to GDP, such comparisons neverthel ess provided a guide on the importance of protection 
to the sector compared to its economic significance.  The Secretariat would discuss this issue with the 
Korean delegation to ensure that its publishe d report appropriately reflected its position. 
93. The representative of the People’s Republic of China  requested clarification on whether the 
Secretariat simply duplicated Members’ advance written questions when circulating them for the 
meeting. 
94. The Secretariat (Director, Trade Policy Review Division ) confirmed that it simply circulated 
to Members all advanced written questions received. 
95. The representative of the People’s Republic of China  stated that his country had a problem 
with the documents circulated for the Korean Revi ew.  The advance written questions circulated to 
Members contained questions submitted by Chinese Taip ei in which the name Chinese Taipei used in 
the heading was inconsistent with the relevant  understanding reached among Members.  This was a 
serious political mistake on an issue highly sensitive to China, and a systemic mistake by the WTO, 
which had been reproduced by the Secretariat in th e circulated document.  More regrettably, the 
mistake was further developed by the Korean delega tion, a neighbouring country with full diplomatic 
relations with China, in its Preliminary Respon ses to Advance Written Questions circulated at the 
meeting.  Taking into account the serious nature of this matter of principle to China and the WTO, the 
Chinese representative requested that these mistakes be corrected by at least issuing a corrigendum to 
the relevant documents and ensuring that they do not occur again. 
96. The representative of Korea  reiterated his country’s goal to  make the economy more open, 
flexible, and productive.  Korea should have been mo re attentive to avoid the problem mentioned by 
the Chinese representative, which would be addressed in the final version of the Korean responses. WT/TPR/M/137 
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
97. This fourth Trade Policy Review of the Republic  of Korea has contributed significantly to an 
improved, informed understanding of recent developments in Korean tr ade and related policies.  Our 
discussion has greatly benefited from the comprehensiv e engagement of the Korean delegation, led by 
Ambassador Choi Hyuck, the insightful comments from our discussant, Ambassador Muhamad Noor 
Yacob, and many thoughtful interventions by Members. 
98. Members noted Korea's impressive economic performance, underpinned by generally prudent 
macro-stabilization policies, on-going trade liber alization, and corporate and financial sector 
restructuring.  Korea was encouraged to continue  these market-oriented reforms.  A major challenge 
is to ensure continued econom ic improvements, given the ec onomy's reliance on exports to 
compensate for weak domestic demand;  this  is a potential source of vulnerability. 
99. Members welcomed Korea's active participation in the multilateral trading system, including 
the Doha Development Agenda.  It is impor tant that Korea's increasing involvement in 
bilateral/regional trading arrangements is compatib le with the multilateral system, and that such 
agreements are sufficiently comprehensive to libera lize Korea's trade regime in difficult areas, such as 
agriculture, where most protection exists.  Whil e some Members noted that high agricultural 
protection reflected food security and other multifunc tional concerns, other Members urged Korea to 
reform its agricultural policies, commenting that co ntinued high levels of price support and tariffs as 
well as other forms of protecti on undermine economic efficiency a nd penalize Korean consumers.  
The contrast between low industrial and high agricultural tariffs was also noted. 
100. Many Members thought that the multiplicity of ra te bands, various flexible tariffs and other 
types of duties make the Korean tariff structure some what complex, and encouraged its simplification.  
Agricultural tariff quotas are of particular concer n, including the possible restrictive impact on 
imports of their administration.  Korea was urged to reduce high tariffs on some industrial products 
and to  raise the coverage of tariff bindings and na rrow the gap between bound and applied levels. 
101. Many members noted that Korea had made substa ntial efforts to further liberalize its foreign 
investment regime;  this was important at a tim e when FDI inflows had fallen.  Some Members 
enquired about the range of tax and other incentives provided to attract investment, including the use 
of various types of "zones". 
102. Members appreciated Korea's moves to harmonize standards and other technical barriers to 
trade with international norms, but also encouraged it to do more in this regard, especially in the areas 
of food-related standards, labe lling provisions as well as duplicative inspection and testing 
requirements, including for pharmaceuticals.  Some Members worried about the possible trade 
restrictiveness of some Korean SPS measur es and encouraged Korea to review them. 
103. Members welcomed efforts by Korea to im prove the transparency of its government 
procurement and to strengthen corporate governance and its competition legisl ation and enforcement, 
including on the operations of chaebols.  Steps to strengthen intellectual property rules and their 
enforcement were also recognized and complimented , including Korea's recent accession to the WIPO 
Copyright Treaty and the streamlining of patent appli cations.  Services liberalization, especially of the 
financial and telecommunication sectors, was welcom ed, although several Members noted that certain 
possible weaknesses remain in the regula tory regime for telecommunications. 
104. 
Members sought clarification on a range of ot her issues, including:  regulatory reform, 
particularly of customs procedures, and contingency measures, state trading, subsidies, privatization, 
services liberalization, future agricultural reforms, trade arrangements for rice, rules of origin, reforms 
in fisheries and labour markets.  WT/TPR/M/137 
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 105. Members appreciated the oral and written responses to their questions provided by the Korean 
delegation, and looked forward to receivi ng answers on any outstanding questions. 
106. This successfully concludes our Review of Kor ea.  The wide interest shown by Members, 
with many advance questions, interventions and high attendance, reflect the important role that Korea 
plays in the multilateral trading system.  We now ha ve a much better and current understanding of its 
trade-related policies and measures, and appreciate the challenges facing Korea, along with efforts to 
address them in a way that is consistent with the multilateral trading system. 
__________