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China to Recognize Kaesong Goods as Made in S.Korea

Chosun Ilbo, Korea

China to Recognize Kaesong Goods as Made in S.Korea

3 July 2006

China will recognize products from the joint-Korean Kaesong Industrial Complex in the North as made in South Korea, a high-ranking government official in Seoul said Monday.

According to the official, negotiations are underway but China has signaled willingness and will make a formal announcement in a joint statement with South Korea at the ASEAN + 3 meeting next month.

The government made the request in a bid to pressure the U.S. to do likewise under a planned Korea-U.S. free trade agreement, a concession Washington has refused to make. A Foreign Ministry official said China’s decision is unlikely to sway the U.S., “but we try every possible means.”

Since China has no FTA with Korea, the recognition of Kaesong goods could amount to preferential treatment in violation of WTO principles. But the government expects Beijing to accept the request taking its friendly relations with Pyongyang into account. In view of possible opposition from other countries, Seoul and Beijing will put a clause in the joint statement saying any countries will receive the same preferential treatment if they conduct business in the industrial complex.

Since the Kaesong complex went into operation in 2004, the government has asked every partner in free-trade talks to consider goods made there South Korean merchandise if more than 60 percent of the raw materials come from the South.

Singapore, EFTA and ASEAN have partly agreed, but the U.S. and Canada refuse. Washington maintains that its arch-enemy North Korea is irrelevant to any FTA with South Korea.