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KORUS FTA Update June 2012
Korea Legal
By Don Southerton, KoreaLegal.org Editor
As KORUS FTA unfolds the treaty will continue to be looked at as to its fairness. So far, I find US firms with interests in Korea still hoping it will improve their margins and boost sales. Meanwhile as Yonhap and UPI note…..
Working groups cover S. Korean trade pact
WASHINGTON, June 9 (UPI) — A South Korean envoy in Washington said two days of talks on the free trade agreement would continue when each side digests the latest negotiations.
The latest talks covered ways moderate-sized and small businesses could use the free trade pact. Working groups on goods, service and investment also got together to discuss the bilateral agreement that went into effect March 15.
South Korea’s Yonhap News Agency reported Saturday that both sides would meet to discuss the investor-state dispute clause in the treaty, which is the process for one side to bring legal complaints against the other.
Opposition parties in South Korea are concerned that U.S. firms with powerful legal teams have the advantage in the current agreement.
They have also complained that the agreement allows U.S. companies to use the process to change South Korean laws, effectively giving away the country’s autonomy to U.S. interests.
Source– United Press International, Inc
KORUS FTA and Twitter
Several years ago as ROK President entered the early months of his administration the opposition using social media (Text) orchestrated huge protests. Lots of this centered on American beef and Mad Cow disease.
Looks like the opposition party has resorted to similar tactics ( Twitter) to force the GNP in final KORUS FTA talks…
Korea Times notes:
Unfounded and absurd rumors about the ill effects of the Korea-U.S. free trade agreement (KORUS FTA) are spreading rapidly through social networking services (SNS).One rumor argues that the FTA will wipe out Korean rice farmers and Korea will fall victim to big grain producers, although the rice market has already been opened in accordance with the multilateral agreement made under the supervision of the World Trade Organization.
Another claims that the FTA will push mad cow disease to immediate epidemic proportions; while firearm controls will be lifted, turning Korean streets into scenes of gun battles.
There appear to be a couple of different twists to the “mad cow protests” over Seoul’s decision to resume American beef imports that peaked with candlelit protests two and a half years ago. One of them is the medium. It was then Internet blogs but now SNSs such as Twitters are taking over.
But there are common threads pushing the two rumor machines ― a high level of discontent among young people, hit by dark prospects of unemployment, and deep distrust of the incumbent government.
The rumor mills are expected to go on at full tilt during the deadlock over the ratification of the KORUS FTA in the National Assembly.
At the center of the rumor is the investor-state dispute (ISD) clause as part of the FTA, which would allow foreign investors to bring suits against the government of the co-signatory before an international panel of arbitrators.
Protestors demanded that the ISD be removed from the accord, arguing the provision would limit Seoul’s policies on American investors.
The increasing argument on the ISD is churning out wild rumors.
According to the messages on the KORUS FTA circulating on the Internet and SNS, Koreans will suffer from expensive medical bills, caused by privatization of medical services. Protests say, for example, patients will have to pay 9 million won for an appendectomy, up from currently 300,000 won, after the FTA takes effect.
In addition, they say that the FTA deal will raise public utility charges, as Bolivia faced after the FTA with the United States.
However, both rumors turned out to be false, as the medical sector is not included in the FTA, while Bolivia did not reach an agreement with the United States, according to the government.
The rumor-spreading campaign has reached political parties.
The Democratic Labor Party came up with 12 poisonous articles on the FTA, while an opposition lawmaker cited the message that 15 Mexican delegates of the North American Free Trade Agreement (NAFTA) were shot to death after the nation’s economic downfall following the FTA.
The escalating rumors come as the Lee administration has failed to regain popularity.
In the Seoul mayoral election last month, opposition-backed civic activist Park Won-soon won with 53.3 percent of the vote compared to his Grand National Party rival Na Kyung-won’s 46.3 percent.
President Lee Myung-bak is rapidly becoming a lame duck ahead of his final year in office as a series of corruption scandals involving presidential aides has erupted.
KORUS FTA Stalled, Again?
Readers of KoreaLegal.org might be wondering what’s stalling the long in coming KORUS FTA. The free trade agreement between Korea and the U.S. seems stalled, again. Hopes were it would be approved before Congress’ July recess. Plans also called for the KORUS FTA not being tied to other pending FTAs. Both efforts appear to have failed.
WSJ notes:
WASHINGTON—The centerpiece of the American trade agenda—a trio of international trade pacts worth $13 billion in new U.S. exports—is in peril as Democrats and Republicans battle over a program that provides aid to U.S. workers.
The dispute over the future of the 50-year-old Trade Adjustment Assistance program, which provides benefits to American workers displaced by foreign competition, is putting pending free-trade pacts with South Korea, Colombia and Panama in jeopardy by pulling them into the contentious debate over federal spending.
The Obama administration and Democrats in Congress want the TAA program renewed. Some Republicans question its value and say it should be scaled back to narrow the deficit.
The delay caused by the congressional sparring means it is now virtually impossible to pass the South Korea agreement before a trade pact between Korea and the European Union takes effect July 1. That will put a wide range of U.S. industries at a competitive disadvantage.
Just a few weeks ago, the administration saw the TAA battle as surmountable. Now, unless lawmakers reach consensus soon, the trade pacts won’t pass before the August recess, congressional aides say. After that, chances of passage grow slimmer as the 2012 election nears and lawmakers avoid controversial votes.
“We’re fighting like hell because if the vote doesn’t happen by the recess, we risk it not happening in the fall,” said Christopher Wenk, senior director for international policy at the U.S. Chamber of Commerce. On Thursday, scores of business leaders visited all 100 senators to lobby for the agreements, and they plan to call on each House member in coming days.
Republicans say the administration should move forward on the trade deals and set the TAA dispute aside for later. “Why hold up three agreements that are going to create all kinds of jobs?” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.
“We have a duty to help American workers meet the challenge of global competition,” said the panel’s chairman, Sen. Max Baucus (D. Mont.), during a Thursday hearing on the U.S.-Korea Free Trade Agreement.
The standoff comes as other nations race to forge trade pacts with nations that are the U.S.’s chief commercial rivals.
In addition to the EU’s impending pact with Korea, a Colombia-Canada pact will enter force before the U.S.’s agreement with Bogota.In Senate testimony last week, Deputy U.S. Trade Representative Demetrios Marantis told the Finance Committee that delays in passing the agreements meant U.S. exporters would lose market share to rival nations.
The three pending trade pacts are the backbone of President Barack Obama’s plan to help businesses double U.S. exports by the end of 2015. Demand from markets abroad has helped support the U.S. economy—and employment—as consumers remain cautious. Exports contributed 1.16 percentage points to growth in the first quarter, when the economy expanded at a 1.8% annual rate.
The Korea deal, worth $11 billion in new U.S. exports, would immediately eliminate Korean tariffs on nearly two-thirds of U.S. farm products, from corn to wheat. U.S. beef exports to Korea would more than double, from to $1.8 billion from $600 million. It would eliminate a 15% Korean tariff on U.S. wine and afford U.S. financial services firms the same legal status as Korean firms.
The TAA program has been backed by both parties since the Kennedy administration, justified as a necessary price to induce lawmakers from industrial regions to support trade-opening legislation.
It provides training, extended unemployment benefits and health-care subsidies for workers idled when trade pacts shift jobs overseas.
But this year, TAA came up for renewal in the teeth of a polarized budget fight. It expired in February after a proposal to renew it failed in the House.
Two weeks ago, White House trade officials took a tough line, saying the president will not submit the finalized trade agreements to a vote until Republicans strike a deal on renewing TAA.
Republicans say the TAA is a sop to organized labor, and its merits don’t justify its inclusion in an already-bloated budget. GOP lawmakers say the program’s budget was swollen by the stimulus and point to past Government Accountability Office studies that question its implementation.
The program, they say, should be scaled back, although as an entitlement, by law it can’t be eliminated altogether.
“Politicians used to use TAA to buy votes for trade agreements, and now they’re holding the trade agreements hostage so they can get the expanded welfare program,” said Sallie James, trade policy analyst at the conservative Cato Institute.
Democrats say the program has grown increasingly important as more companies move jobs overseas, and point to Labor Department figures showing that the program’s size hasn’t changed substantially since before the 2009 stimulus.
In 2002, the program was expanded to include workers whose jobs were lost due to outsourcing in addition to those affected by increased imports. In that year, TAA went to 50,000 people at a cost of $500 million. In 2008, the year before the stimulus, the program cost $916 million. Last year, TAA cost $975 million and 234,000 workers participated.
Leaders of both parties say they’re confident they’ll reach a compromise, but a deal has yet to take shape.
Sarah Thorn, senior director of government relations for Wal-Mart Stores, Inc., said business leaders’ efforts to push the two parties together have so far led to frustration.
“Trade agreements have always moved in tandem with TAA—it’s part of the bargain on trade,” she said.
The Korea, Colombia and Panama agreements have been stalled for four years. The repeated delays underscore the difficulty experienced by every administration in overcoming the public skepticism and political roadblocks that have made the U.S. a global laggard on trade. Of the 202 regional trade agreements ever registered with the World Trade Organization, the U.S. accounts for only 11.
Meanwhile, rival nations are moving faster to forge global partnerships that open fast-growing markets for their exporters, and offer subsidies and rules that give their national champions an edge.
Source : The Wall Street Journal
KORUS FTA Update: Auto Sector Documents Exchanged
By Don Southerton, Editor KoreaLegal.org
We seen more progress this week on the KORUS FTA. Along with US Trade Representative Ron Kirk testifying before the Senate’s Ways and Mean Committee, but documents were exchanged between both governments.
DATE: Thursday, February 10, 2011
On February 10, 2011, the United States and Korea exchanged the legal texts – signed by U.S. TradeRepresentative Ron Kirk and Korean Trade Minister Kim Jong-Hoon – reflecting the agreement they concluded on December 3, 2010 to set the stage for Congressional consideration of KORUS.
The signed texts consist of three documents: (1) an exchange of letters between Ambassador Kirk and Minister Kim containing new commitments for the automotive sector, (2) agreed minutes on regulations pertaining to automotive fuel economy and greenhouse gas emissions, and (3) agreed minutes on intracompany transferee (L-1) visas. USTR has posted the texts on its web site at the following links:
- Exchange of Letters between U.S. Trade Representative Ron Kirk and Korean Trade Minister Kim Jong-Hoon (includes English translation)
- Agreed Minutes on regulations pertaining to automotive fuel economy and greenhouse gas emissions
- Agreed Minutes on intracompany transferee (L-1) visas
Source: U.S.-Korea FTA Business Coalition
Special Report KORUS FTA–An Auto Sector Update
By Don Southerton, Editor
Since 2006, BCW has been following the KORUS FTA discussions. As strong supporters of free trade, globalization, and the Hyundai Kia Motor Group and its US operations, we have provided research, numerous updates, and insights to US and Korean leadership. We have maintained an active role in supporting the treaty and US-Korea relations along with maintaining close ties with Koreans and Americans officials and scholars highly involved in KORUS.
Last week, after months of talks, an agreement was reached ( it still needs to be ratified by the U.S.). We provide the following key points. Part 1 includes general terms of the agreement. Part 2 is related to the auto sector, with Part 3 focuses on auto parts.
Part 1. Pending Congressional Approval
The United States and the Republic of Korea signed the United States-Korea Free Trade Agreement (KORUS FTA) on June 30, 2007. If approved, the Agreement would be the United States’ most commercially significant free trade agreement in more than 16 years.
The U.S. International Trade Commission estimates that the reduction of Korean tariffs and tariff-rate quotas on goods alone would add $10 billion to $12 billion to annual U.S. Gross Domestic Product and around $10 billion to annual merchandise exports to Korea.
Under the FTA, nearly 95 percent of bilateral trade in consumer and industrial products would become duty free within three years of the date the FTA enters into force, and most remaining tariffs would be eliminated within 10 years.
For agricultural products, the FTA would immediately eliminate or phase out tariffs and quotas on a broad range of products, with almost two-thirds (by value) of Korea’s agriculture imports from the United States becoming duty free upon entry into force.
For services, the FTA would provide meaningful market access commitments that extend across virtually all major service sectors, including greater and more secure access for international delivery services and the opening up of the Korean market for foreign legal consulting services.
In the area of financial services, the FTA would increase access to the Korean market and ensure greater transparency and fair treatment for U.S. suppliers of financial services.
The FTA would address non-tariff barriers in a wide range of sectors and includes strong provisions on competition policy, labor and environment, and transparency and regulatory due process.
The KORUS FTA would also provide U.S. suppliers with greater access to the Korean government procurement market. In addition to strengthening our economic partnership, the KORUS FTA would help to solidify the two countries’ long-standing geo-strategic alliance.
As the first U.S. FTA with a North Asian partner, the KORUS FTA could be a model for trade agreements for the rest of the region, and underscore the U.S. commitment to, and engagement in, the Asia-Pacific region.
The Obama Administration will seek to promptly and effectively address the issues surrounding the KORUS FTA, including concerns that have been expressed regarding automotive trade.
Part 2 Auto Sector
The following are the major aspects of the supplementary alterations on auto trade and other issues in the South Korea-U.S. free trade agreement.
1. Automotive safety standards South Korea agreed to soften its auto safety standards for U.S.-made cars. In the previous deal, there was an automatic two-year grace period before U.S. auto manufacturers had to meet any new Korean regulations related to self-certification for safety standards. The supplemental agreement allows for 25,000 cars per U.S. automaker – or almost four times the number allowed in the 2007 agreement — to be imported into Korea if they meet U.S. safety standards.
2. Automotive emission standards South Korea will exempt low-volume importers from its ultra low emissions vehicle (ULEV) standard that is scheduled to take effect from 2015. Under the new standard, South Korea will apply tougher efficiency criteria for vehicles, requiring vehicles to reduce their greenhouse gas emissions to 140 grams per kilometer. Under the supplemental agreement, all U.S. autos will be considered compliant with new Korean environmental standards on fuel economy and greenhouse gas emissions, developed since the 2007 agreement, if they achieve 119 percent of the targets in these regulations.
3. Automotive tariffs elimination Under the 2007 agreement, all tariffs on automotives would have been immediately eliminated gradually within three years after the implementation of the accord. The new agreement allows the U.S. to keep its 2.5 percent tariff on autos in place until the fifth year. At the same time, South Korea will immediately cut its tariff on U.S. auto imports in half (from 8 percent to 4 percent), and fully eliminate the tariff in the fifth year.
4. Tariffs on pick-up trucks In 2007, the U.S. agreed to phase out its 25 percent tariff on South Korean trucks in 10 years. But the new agreement allows the U.S. to maintain its tariff until the eighth year and then phase it out by the tenth year.
5. Tariffs on electric cars Under the 2007 agreement, the U.S. and South Korea would have eliminated tariffs on electric cars and plug-in hybrids by 10 years after the implementation of the accord. The new agreement calls for South Korea to immediately reduce its electric car tariffs from 8 percent to 4 percent, and both countries will then phase out their respective tariffs by the fifth year.
6. Special safeguard for automotive industry The previous agreement had no provision on safeguard measures specific to the auto industry. Under the 2010 supplemental agreement, both sides agreed to introduce safeguard measures for motor vehicles.
Part 3, Regarding Auto Parts
BCW sees no changes from the 2007 agreement, “Tariffs would be immediately reduced to zero in each country for auto parts imported from the other.” That said, there are however a few exceptions regarding tires and some plastics. As soon, as a final agreement is ratified, BCW will provide an itemized list of those items still with tariff restrictions and a timeline for their reduction.
For additional questions, please contact Don Southerton, dsoutherton@bridgingculture.com 1-310-866-3777
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