Poisonous clauses cast dark cloud over FTA
Korea Times
Poisonous Clauses Cast Dark Cloud Over FTA
By Cho Jin-seo, Staff Reporter
4 April 2007
Concerns and worries are arising about overlooked clauses of the free trade agreement as the initial elation on the successful settlement wanes over time.
Politicians and trade experts scrutinizing the draft began to voice that the pact will leave Korean industries and the government untenable to attacks from mighty and well-experienced U.S. traders and lawyers. They also worry that the situation can become less favorable to Korea in the future as it promised to grant all trade advantages to the United States that other nations get, and not to reverse the market opening process in any case.
The worst of all possible negative effects is to allow the investor-to-state dispute (ISD) cases, says Rep. Shim Sang-jung of the opposition Democratic Labor Party. She insists that the pact will effectively restrain the government’s sovereignty in making and executing domestic policies, as American firms and investors will be allowed to file lawsuits at international tribunes for direct or indirect financial damages caused by domestic policies on law, trade, industry and real estate.
The introduction of the ISD is the most poisonous element,'' she said.There is a big risk because in Korea, there was no such conception of compensating investors for `indirect expropriation’ by the government.’’
Rep. Shim says the ISD clause will hinder the government from coming up with active real estate policies because of the worries about possible lawsuits from U.S. investors. The two countries agreed to exclude appropriate'' state policies such as public health, environment, security and housing price stabilization, but the rest of the real-estate policies are still subject to the ISD, she said.The U.S. government controls the real estate market with interest rates, whereas our government controls it with regulations. As they ignored such differences and included real estate regulations into the ISD, there will be catastrophic damage to low-income citizens who do not own houses,’’ she said, insisting that the National Assembly should not ratify the pact.
Responding to the criticism, the Ministry of Justice yesterday denied that the ISD clause is not a toxic'' element, and said it would form a task force to make up for its weak points.
Other negative effects are expected to come from the so-called most-favored-nation (MFN) clause and theratchet’’ effects. Under the MFN principle, the two countries will not be treated worse than anyone else’s nation, and that can hinder Korea from making strategic trade alliances with other nations such as Japan and China, Shim insists.
The ``ratchet’’ clause states that the two countries cannot make backward policies once they open a certain market to each other, meaning that Korea cannot levy tariffs on U.S. goods and services once it opens the relevant markets, even if too much damage is inflicted on Korean goods and services from the free competition. For example, Korea cannot revive its screen quota policy on foreign and domestic films once the rule is abolished, even if the local movie industry is razed by the massive Hollywood capital, civil organizations say.
They also worry that the FTA can kill fledgling or unborn service industries as the agreement automatically covers all commodities and services that are not specified in the accord.
