Seoul gives much, takes little in FTA talks with Washington
Hankyoreh | Jun.12, 2006
Seoul gives much, takes little in FTA talks with Washington
U.S. dominates in first round of free-trade negotiations
South Korea and the United States ended their first round of formal five-day talks for a free trade agreement June 10, local time, but South Korean negotiators returned home empty-handed, most observers agree. South Korea was able to gain U.S. agreement on four of its demands, whereas the U.S. held its ground on 17 different issues. Without significant achievement during the first round of negotiations, Seoul may have difficulty in justifying additional free trade talks with Washington.
South Korean demands rejected
South Korea has asked that goods produced by both Koreas in North Korea’s Kaesong industrial Complex be recognized as South Korean products in the terms of the free trade agreement (FTA). However, the U.S. refused to do so at this round of talks, saying the FTA should cover goods made only in South Korea. The U.S. delegation also made reference to its diplomatic standoff with North Korea.
In a press briefing, South Korea’s chief negotiator Kim Jong-hoon said, “In my view, we have to think about timing and measures to cope with the Kaesong matter.” Mr. Kim’s remark hinted that the South Korean government may discuss the Kaesong matter after, rather than before, the signing of an FTA with the U.S.
In the textile sector, South Korea requested the U.S. ease rules on the designation of goods’ origin, in the case of products which use materials made outside of South Korea. Seoul also asked for certain tariffs to be eliminated. Washington, however, rejected both demands. If the two demands were to be accepted, South Korea predicts its textile exports to the U.S. would rise by about 20 percent. Washington is also resisting Seoul’s request that the U.S. not impose anti-dumping measures and countervailing tariffs, measures which Seoul is calling excessive.
One of few tangible South Korean gains during the talks was a concession by the U.S. that it would consider abolishing processing fees on import goods. These fees, however, are applicable to just 0.21 percent of South Korean exports to the U.S.
Talks favorable for U.S.
South Korea and the U.S. agreed in principle to allow financial companies to sell derivatives. In addition, companies in South Korea and the U.S. will be allowed to sell their financial products without opening physical offices on each other’s soil. Experts say such agreements favor the U.S., home to some of the world’s most powerful financial companies, and will be of no help in creating jobs in South Korea.
In the services sector, as well, South Korea said it would allow U.S. companies to do business in Korea without setting up physical or representative offices.
As for investment, the South Korean government agreed to give the U.S. companies equal status with local firms as well as to repeal requirements that a certain amount of local employees be hired and local parts be used. Korea said it would recognize intellectual property rights and speculative funds—so-called “hot money”—as investment, paving the way for these types of foreign funds to enter the South Korean investment market.
In the auto market, Mr. Kim said South Korea is considering changing its current taxation, based on engine displacement measurement, to one based on a car’s retail price, as requested by the U.S.
With both sides deeply divided over the pharmaceutical issue, South Korea is mulling U.S. demands to share patent information between the Korea Intellectual Property Office and the Korea Food and Drug Administration. Washington has requested that Seoul ban South Korean pharmaceutical companies from selling generic drugs as "new products" during the patent filing period by U.S. companies with similar drugs. Moreover, South Korea is considering allowing multinational pharmaceutical companies to advertise online, as a way to accept U.S. demands for “market access” without undermining the nation’s health insurance system.
In the areas of agriculture and intellectual property rights, South Korea said it would cede to U.S. demands. Besides these areas, the U.S. has been aggressive in holding its ground on issues of quarantine, business competition, labor, the environment, conflict settlement and transparency.
