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Nontariff barriers and FTAs

Korea Herald, Seoul

Nontariff barriers and FTAs

By Lee Jae-min

29 April 2014

Frozen orange juice concentrate has been a thorny issue for almost a year. Washington has complained that the Korean Customs Service has been imposing unreasonable “country-of-origin” verification requirements on citrus growers from Florida. These are based on unsubstantiated suspicions that some orange juice concentrates from Florida may in fact originate from Brazil.

Ginseng chicken soup (samgyetang) exports have been on Korea’s to-do list since 2004. The necessary sanitary certification has not been provided by the U.S. Department of Agriculture and exports of the broiled poultry product to the U.S. market have been stalled.

It is indeed great to hear that the just-completed summit meeting between Presidents Park Geun-hye and Barack Obama was able to resolve these outstanding issues. The trade volumes of these two items are not that big, but their symbolic nature as persisting nontariff barriers (NTBs) in the post-KORUS era is making last week’s resolution all the more encouraging and laudable.

Perhaps a single term that characterizes President Obama’s two-day visit to Seoul in the economic sector is “full implementation” of the KORUS FTA. He used the term on different occasions in a subtle and nuanced manner given the somber mood in Korea after the recent ferry tragedy, but the message was loud and clear. His statement connotes that Korea’s implementation of the trade pact has proved less than satisfactory with the introduction of a series of stringent measures bordering on NTBs. Country-of-origin issues, as with orange juice, are one such example. So, the request for full implementation is another way of saying that NTBs should be eliminated at all costs.

The fact that such mundane items as orange juice and chicken soup were mentioned at a presidential summit meeting is quite telling. Obviously, these issues should have been resolved at the working level. In fact, there are numerous mechanisms in the FTA to address all the garden-variety issues. If all these issues are somehow forced into the agenda of presidential meetings, this means either that such mechanisms do not operate as they should or that these issues are too sensitive to be resolved at the working level. Either way, arguably situations like this bode ill for a scheme of full and prompt implementation of the obligation under the agreement.

The problem is, this may well be just the beginning of the whole laundry list of outstanding issues on the road to full implementation. Many issues are lined up waiting to receive (presidential) attention. Automobile sunroofs, carbon tax, chemicals, agricultural products, customs classification and sanitary regulations, to name a few. In the interim, the level of frustration will go up.

The cardinal rule is simple. All sorts of NTBs should be abolished no matter what. The difficult question, however, is where to draw a line between an NTB and aggressive enforcement of the provisions of the trade pact. Unless a workable guideline is somehow adopted, FTA meetings will be filled with mutual outcries about NTBs and broken promises. This would be the last thing any government would want from an FTA.

Which then leads to another aspect of the KORUS implementation ― a membership fee for the Trans-Pacific Partnership. President Obama described the full implementation of the KORUS FTA as a “precondition” for Korea’s prospective participation in the TPP. So, the TPP accession has now become Washington’s leverage to address outstanding issues in the bilateral FTA front. Assuming Korea desires to join the Pacific Rim deal, Washington may attempt to use the TPP pathway as a one-stop customer service center for a plethora of outstanding issues.

So, in a word, FTA negotiation is all about market opening. FTA implementation, on the other hand, is all about NTBs. How to manage them almost determines the success and failure of any free trade agreement.

Lastly, on a personal note, my heart goes out to the innocent victims and their families of the April 16 Sewol tragedy. They will be in our thoughts and prayers in this most trying moment.

Lee Jae-min is an associate professor of law at Seoul National University. ― Ed.