logo logo

After KORUS FTA, new pressures on the horizon

The Hankyoreh, Seoul

After KORUS FTA, new pressures on the horizon

Beef and pharmaceutical industries expected to be contentious issues

By Jung Eun-joo, staff writer

15 March 2012

As the South Korea-United States Free Trade Agreement (KORUS FTA) takes effects Thursday, some are expecting new trade pressures from the US, including moves to open the beef market. In particular, South Korea will be forced to sit down at the negotiating table if the US requests negotiations on beef.

In an October 2011 interview with the US congressional newspaper The Hill, Senate Committee on Finance chairman Max Baucus, Chairman of US Senate Finance Committee, Montana (D), predicted renegotiations toward opening the South Korean beef market would take place within six months of the KORUS FTA taking effect.

Last May, US Trade Representative Ambassador Ron Kirk sent a letter to the US Congress indicating that he would be requesting that Seoul participate in discussions on South Korean beef import hygiene conditions after the KORUS FTA took effect.

Item 25 of the beef import hygiene conditions agreed upon by the two countries in April 2008 states that either party is required to respond within seven days to a request for discussions from the other.

Choi Seok-young, Deputy Minister of Foreign Trade and chief FTA negotiator, said the government “has set a Maginot Line and will not accept any US requests beyond it.”

But the US is currently preparing to introduce beef from cattle aged over 30 months to the South Korean market, and is showing signs of intentions to push this through. A March 2011 report by the US Congressional Research Service included specific steps for amending a currently operative announcement by the Korean Ministry for Food, Agriculture, Forestry and Fisheries restricting US beef imports to cattle aged under 30 months “until such time as South Korean consumer trust has been restored.” For example, it proposed changing the conditions to allow the import of beef from older cattle if no additional cases of mad cow disease were discovered in the US for three to five years, or to regard South Korean consumer trust as restored once US beef had reached a certain share of the South Korean import market. In such cases, the South Korean beef market could be opened completely.

Observers are predicting the agreement’s taking effect will prompt heavier pressures to further open the Korean market to American beef that had previously been put off.

Some analysts are predicting US pressure on South Korean drug price determination methods as well. In a letter last month to US Senator Orrin Hatch, Utah (R), Ron Kirk wrote that the USTR planned to demand the extension of independent drug price review procedures by the medicines and medical devices committee, with dispute resolution procedures initiated according to the agreement if necessary.

The independent review procedures referred to here are a system based on the KORUS FTA in which an independent body examines the appropriateness of drug prices if an objection is filed by a US pharmaceutical company. The South Korean government restricted such examinations to economic assessments for new medications by the Health Insurance Review and Assessment Service (HIRAS), but the US wants this expanded to price decisions by the National Health Insurance Corporation (NHIC).

Previously, the South Korean government explanation was that the independent review procedures would not result in higher drug prices because pharmaceutical companies were only empowered to object in cases of cost-effectiveness assessments by HIRAS, the stage prior to negotiations with the NHIC. The pressures here could match those on the beef issue, since the interests of US multinational pharmaceutical companies are at stake.

Service and investment committee discussions on the investor-state dispute system (ISD) provisions are to begin within 90 days of the agreement taking effect. The opposition is currently calling for the removal of these provisions, but chief negotiator Choi Seok-young stated that the removal option is not currently being considered.

The government said a task force is to be established with the agreement’s effective date of Mar. 15 to examine whether the ISD system is indeed problematic. The task force is to consist of 15 members, six of them government officials and nine private experts such as international and administrative law professors, trade and investment experts and judges. Observers said there is a strong chance the result will be procedural measures such as a change from a single-trial system to a multiple-trial system or steps to improve transparency, rather than actual removal of the provisions.

It remains to be seen if the US will even accept South Korean demands for removal of the ISD provisions and amend the agreement accordingly. Not only has the US executive made no indication that it would agree to this, but trade negotiation authority lies with the US Congress, which means it would have to grant approval for the KORUS FTA to be amended even if the executive expressed its agreement.

Also, of the FTAs it has made with 17 other countries to date, the US has never amended one in a way disadvantageous to itself.