1. Négociations
2. États-Unis-Corée

The real understanding of the KorUS FTA

KoA | 6 September 2006

Korean Alliance against the KorUS FTA (KoA) published a brief on the KorUS FTA. It offers a real understanding of the KorUS FTA.

download "The Real Understanding of the KorUS FTA" in PDF (445K)

Contents ...

– Development of the KorUS FTA

– The United States’ FTA Strategy

– Why the US wants an FTA with South Korea

– Impacts of the KorUS FTA By Sectors

• 1) Labor
• 2) Agriculture
• 3) Public Services
• 4) Education
• 5) Healthcare
• 6) Cultural Diversity
• 7) US Beef

– Conclusions and Suggestions

The Real Understanding of the KorUS FTA

Introduction

Development of KorUS FTA

On 3 February 2006, the South Korean government suddenly announced that it would open negotiations for an FTA (Free Trade Agreement) with the United States. A public hearing on the proposed KorUS FTA was held, but dismissed before it could reach any conclusions. Despite this fact, the government has accelerated the negotiation process with the US to the point of actual beginning talks as if the hearings on the FTA were carried out.

Like the South Korean government, the former USTR ambassador, Rob Portman, welcomed the opening of the KorUS FTA talks saying "this will be the most commercially significant free trade negotiation we have embarked on in 15 years." This statement was followed by broad support from American business. This demonstrates that the KorUS FTA will offer another chance to transnational corporations to maximize their profits while sacrificing peoples’ rights and livelihoods, just as NAFTA did.

So-called Four Preliminaries
For the FTA negotiations to even begin, the South Korean government had to implement a set of neoliberal policies to show that it was "serious" about the agreement to the United States. These included agreeing to the “four preliminary steps” required by the US. These steps are : (1) “suspending regulation on pharmaceutical product prices," in other words, "undermining people’s rights to health" (Oct. 2005) ; (2) "easing government regulation of gas emissions from imported US cars" which means "undermining environmental standards" (Nov. 2005) ; (3) "resuming importation of US beef" which has not been proved to be free of mad cow disease thus “undermines public health and food safety" (Jan. 2006) ; and (4) "reducing the compulsory quota which requires South Korean cinemas to screen South Korean films from 146 days per year to 73 days" which amounts to "undermining cultural diversity".

These four preliminaries publicly disclosed as demanded by the US as prerequisites for the opening of FTA negotiations are merely preludes to the destructive consequences of the proposed KorUS FTA.

KorUS FTA is Another NAFTA
Korean people and social movement organizations are worried about the destructive nature of the proposed FTA. We are keenly aware of the devastating results of NAFTA on the people of Canada, Mexico, and the United States even though the three governments promised many times that NAFTA would improve the lives of the people in all three countries. The proposed KorUS FTA points in the same direction. Similar to the promises made related to NAFTA, the Korean government has been promoting the idea that the KorUS FTA will create more jobs and reduce the gap between the poor and the rich. In reality, the United States government is using the FTA to demands nothing less than a 100% open-door policy from South Korea.

The First and Second Round of Talks on the KorUS FTA
Through the first round of talks early last June, the two governments reached agreement on 11 out of 15 sectors. The remaining 4 are the most contentious points : agriculture, SPS, textile, and trade remedy. As many feared, throughout the negotiations the US maintained the upper hand ; Korea’s concerns related to sensitive issues such as the rules of origin for products made in the Gaesung Industrial Complex, tariff concessions on textiles and garments, early tariff elimination, protection against abuse in levying anti-dumping and countervailing duties, etc., were brushed aside.

It was also disclosed that agreements on ‘investor-state claims’ and ‘prohibition of performance requirements,’ which pave the way for foreign investors to intervene in government policies and decisions as well as undermining the government and people’s rights’ to sovereignty, were reached in the first round as well.

The second round of FTA talks between Korea and United States ended on 14 July 2006 with the cancellation of the final day’s entire schedule. In the second round, the Korean government’s drug pricing policy became the central issue. The Korean government announced that it would reform the national healthcare system’s drug pricing policy by adopting measures to positively list reimbursable prescription drugs rather than using the current "negative list", which only lists excluded items. This positive list system was planned in May 2006 and is expected to take effect in September 2006 when the third round of the KORUS FTA talks will be held in Seattle. The US negotiators refused to attend the Pharmaceutical and Medical Device Working Group meeting on July 11 and expressed their strong opposition to the positive list system. Wendy Cutler, Assistant USTR and chief American negotiator, claimed that the positive list system could “be used to discriminate against innovative drugs," which are generally supplied by the US, and thereby "limit the access of Korean patients and doctors to the most innovative drugs in the world." Subsequently, the US negotiating team boycotted the sessions for trade protection and the service sector and the Korean side followed suit on Friday by canceling the meetings for commodity trade and the environment.

However, the two sides reached an agreement to set a framework for opening markets including those for agricultural products, and exchanged negative lists of services.

The United States’ FTA Strategy

What lie behind the move of the US toward FTAs, set in motion in the 1990s, are the flaws of WTO multilateralism. With the collapse of the 3rd Ministerial in Seattle, the US changed its strategy to the "triple track approach," which calls for pursuing bilateral, regional, and multilateral trade negotiations at the same time in order to force

The US driven FTAs go beyond the elimination of tariffs to neo-liberal globalization. include agreements concerning investment, services, and IPR, and the scope and extent are more extensive and continue to intensify. In other words, the current FTA is not simply a "trade" agreement ; rather it encompasses the whole range of the economy, putting the trade in services and investments before the trade of goods. It is also significant that the scope of FTA negotiations goes beyond the WTO standard, the so called “WTO plus way.”

Competitive Liberalism
Recently, the US has been pushing for "competitive liberalism" through the FTA. It induced neighboring countries to conclude an FTA with it, thus creating a model for other countries and stimulating competition. It aims to create a sense in other countries that they lag behind the globalized present, thus forcing them to conclude FTAs and open their markets.

Complex Strategy
The US does not only use the FTA as an economic tool. It is also using the FTA as a way to obtain political supremacy throughout the world. The US has demonstrated that it has the intention to conclude FTAs with the politically and militarily important countries in every continent. Until now, the US has had concluded FTAs with Jordan, Panama, Singapore, Morroco, Mexico, Canada, Chile, Australia, Bahrain, Israel, and five CAFTA countries.

Comprehensive Approach
The worse problem of concluding an FTA with the US is that it will bring about a far-reaching, neo-liberal restructuring of the nation’s political economy. More specifically, the US will demand massive deregulation in important and delicate public policy areas such as finance, pharmaceuticals, education, and broadcasting. In the case of Singapore, the US called for market opening, privatization of key public companies, and abolition of capital control measures by financial authorities. In the case of Australia, such critical national systems as the Pharmaceutical Benefits Scheme and the quarantine system collapsed. When it came to the government procurement system Australia ended up complying significantly with US demands, thus giving up its industrial policies for Australian companies.

Why the US wants an FTA with the South Korea

New Markets for Multinational Corporations’ Profit

"We want to emphasize the importance of concluding a comprehensive FTA with Korea that excludes no product, service, or sector."
— US-Korea Free Trade Agreement Position Paper, American Chamber of Commerce in Korea

"It would be the largest US FTA in terms of mutual trade and investment, since the Northern American Free Trade Agreement (NAFTA) went into effect in 1994. It would also respond to criticisms of the Bush Administration’s trade policy that the FTAs that the United States has entered into since NAFTA account for very little trade and yield little in commercial benefits."
— CRS Report for Congress,24 May 2006

One US officer said the US aims to make an ‘FTA Gold Standard’ through the KorUS FTA. Thus means that it wants make an FTA with no exceptions, one that includes rice, health care, and public services as a model for other countries. Again, this means that every corner of Korean peoples’ lives will be commercialized and privatized for transnational corporations’ profit.

A Bridgehead for Curbing China and Expanding US Hegemony in East Asia

"Some experts have suggested that a KorUS FTA could curb the rising tide of China’s economic and political influence in East Asia. China has surpassed the United States as the most important export market for South Korea and the second most important source of imports into Korea (behind the Japan). China is also forging ties with the 10-member Association of Southeast Asian Nations (ASEAN) in an ASEAN+3 arrangement (China, Japan, and South Korea), an arrangement from which the United States is excluded. An FTA with Korea would ensure that the United States had an institutional presence in East Asia. In addition, trade expert Claude Barfield of the American Enterprise Institute suggests that a KorUS FTA could generate a "domino effect" that leads to other countries, such as Japan, entering into similar arrangements with the United States. All of this would come at a time when the discussions within the Asian-Pacific Economic Cooperation (APEC) Forum have stalemated."
— CRS Report for Congress, May 24, 2006

The KorUS FTA is significant not only for Korea but for all East Asia countries. Through the FTA, the US wants to curb China’s growing power and expand its hegemony in the region.

KorUS FTA and the Strategic Flexibility of the American Forces

"An FTA may also be view by some as a means to reassert the importance of a critical foreign policy and national security alliance by rising above differences that have caused the US-South Korean alliance to fray recently. For example, the Bush Administration and South Korean leaders have differed over how to manage relations with North Korea. Specifically, South Korea’s "sunshine policy" of emphasizing bilateral reconciliation with North Korea generally has meant that Seoul has not supported US diplomatic and rhetorical efforts to pressure North Korea, especially on North Korea’s nuclear weapons programs. The re-positioning of US troops in South Korea has also generated some friction between the two allies"
— CRS Report for Congress, May 24, 2006

The South Korean government accepted the Strategic Flexibility of the American Forces in January 2006. With the FTA, the military alliance between the two countries will be strengthened. This will be a form of justification for the US’s "pre-emptive doctrine against terror." South Korea will play a role as an outpost for the US to secure its political and military supremacy in East Asia. We must pay attention to the fact that the US has tried to contract an FTA in politically and militarily significant areas on every continent.

Impacts of the KorUS FTA by sectors

1. KorUS FTA and Labor

— Working Conditions Threatened

On the surface, the chapter of the FTA is in accordance with internationally recognized workers’ rights (rights of assembly, association and collective bargaining, prohibition of forceful or mandatory labor and child labor, insurance of minimum wages, labor hours and occupational safety and health) such that labor standards should not be compromised in order to attract and promote trade and investment. Washington and Seoul based this chapter on the argument that workers’ rights will not be harmed in any way. This is definitely false.

At issue here is investment liberalization.

In the first round of talks the two sides reportedly reached consensus on an investment agenda, giving investment money a ’sanctified’ status. This consensus secured the place of mechanisms meant to maximize investors’ interests such as the treatment of nationals, prohibition of expropriation, and enforcement of duties and procedures of dispute settlement. In the name of reducing harm to investors’ interests, so-called ’barriers to investment’ such as public interest, environmental protection, and people’s rights to survive are abandoned.

In late February, before the negotiations, the head of USTR gave notice to the U.S Congress that "we will come up with investment protection mechanisms in Korea equivalent to US laws." This clearly demonstrates Washington’s intention to implant ’the American business environment’ in Korea.

The ’American business environment’ means the principles of neo-liberalism based on the ‘order of the market.’ In its “trade barrier report,” the head of USTR defines ’hiring workers and inflexibility in lay-offs’ as investment barriers. This report evaluates the establishment of economic free zones where labor conditions are poor. It praises the removal of pay for menstrual leave, the abolition of monthly leave, and the expansion of dispatched labor as ’significant progress’. As a result of such measures the lives of workers will be seriously worsened. Once the Korea-USFTA is signed, the above-mentioned poisonous provisions will be used as leverage by investors enjoying the freedom to exploit while workers’ suffering becomes more and more severe. What is more, in its “trade barrier report” the head of USTR defines ’labor disputes’ as a barrier to investment.

These issues will not only impact Korean workers. As the NAFTA experience shows, American workers will also have to pay the price of the free trade deal. The will share the pain inflicted upon Korean workers.

2. KorUS FTA and Agriculture

— FTA is “Farmer Terror Act” !

"The US-Korea Business Council and AMCHAM Korea believe that a US-Korea FTA should cover trade in all agricultural commodities comprehensively, with no exception. Significantly, studies indicate that the potential benefits of a US-Korea FTA would be reduced by half if agricultural is not included in the agreement. The FTA should reflect and build upon multilateral commitments made under the WTO agricultural negotiation in order to provide enhanced opportunities for both American and Korean companies, farmers and ranchers."
— US-Korea Free Trade Agreement Position Paper, American Chamber of Commerce in Korea

"US rice producers have expressed support for the US-South Korean FTA negotiations. However, they want the FTA to include completely free trade in rice, which requires Korea to remove its quotas completely. Furthermore, they want the quotas and tariffs to be phased out faster than the United States agreed to in the DR-CAFTA, and in FTAs with Peru and Colombia. US rice producers also oppose emergency safeguard measures for Korean rice imports beyond the phase-out period."
— CRS Report for Congress, 24 May 2006

It is well known that transnational agricultural business, such as Cargill, Monsanto, and Tyson Food, is a principal leading power of neoliberal globalization. This is why many farmers and peasants who have become victims of neoliberal globalization have risen up against it.

Korean farmers and peasants call the FTA "Farmer Terror Act" (terrorism against farmers) because the FTA will eliminate protection for South Korean producers of rice, the country’s most important agricultural product. The director of the Ministry of Finance and Economics has promised that "given the sensitivity of the full liberalization of the rice market and the significant impact the rice market has on South Korea, and as it is directly linked to the nation’s food security and the livelihood of South Korea’s farming community, we will endeavor to protect the local rice market to the end". However, Richard Crowder, head of agricultural negotiations at the office of the US Trade Representative, stated bluntly that the FTA MUST be COMPREHENSIVE WITHOUT EXCEPTIONS.

According to statistics given by the US side, Korean agricultural production will be decreased by 45% after the KorUS FTA has been implemented. This means that half of Korean farmers will lose jobs and become part of the urban poor.

3. KorUS FTA and Public Services

— Liberalization and Privatization Strengthened only for the Sake of Profits :

Public services including electricity, gas and water in Korea have been under attack by private capital, especially since the government adopted the IMF Structural Adjustment Program as a "cure" for the economic crisis that hit the country in 1997. Major public entities such as Korea Telecom and Korail were privatized. Moreover, at that time the Korean government was looking into beginning negotiations for a bilateral investment treaty (BIT) with the US. One of the major demands of the US government and capital was for the privatization of core public enterprises such as electricity and gas, and the elimination of the ceiling on foreign ownership. In addition, amendments were made to the water supply law to make it possible for water supply services, which are run by local governments, to be commissioned to private capital. Although the actual BIT negotiations did not take place (a broad range of investment-related clauses are now inserted into the FTA), the pressure from the US eventually led to privatization of public utilities for the benefit of both national and transnational capital, the impact of which can be seen in the historic general strike of power plant utility workers in 2003. In short, US transnational capital has been showing immense interest in Korean public services, ever since the IMF restructuring.

Although both the Korean and US governments are stating that they are ’not interested in public services’ and that ’public services are not tied to the FTA negotiations’, in fact, the two governments are following a strategy in which the Korean government would first privatize public services through national laws, automatically binding them to investment liberalization clauses in the FTA. It is no coincidence that the Korean government is pushing hard for the privatizations of water supply, gas, Korea Tobacco & Ginseng (KT&G), postal services etc. at the same time as it is negotiating an FTA with the US.

4. KorUS FTA and Education

— public education system collapsed and growing polarization in education

The other areas into which American and transnational capital seek to venture are educational. On one hand, the Korean government has been privatizing and commercializing education through so-called ’autonomous liberalization measures’ under the WTO, in part for the sake of developing (expensive) elite education at the expense of public education. On the other hand, the US government, during the presently ongoing KorUS FTA negotiations, is demanding the adoption of US testing service such as the SAT, which is expected to hugely diminish the effect of public education in that it will demand that students receive extra education from private after-school programs or education in the United States. As such students from low-income families will be greatly disadvantaged in the college admission process.

5. KorUS FTA and Healthcare

— privatizing peoples lives

Healthcare is another area from which US capital is seeking to profit. US insurance companies have been lobbying the Korean government to liberalize the insurance market, and in response, the Korean government has consistently attempted to ’reform’ the existing health insurance plan to conform to capital’s demands. At the same time, the Korean government is also attempting to legislate a bill that will allow the transformation of hospitals from non-profit organizations to profit-oriented entities, so as to open the way for both national and transnational capital to invest and profit. In addition, medicine is one of the most contentious areas in the KorUS FTA. US pharmaceutical companies are lobbying both governments to prohibit the Korean government from introducing plans to lower the price of medicines, seriously deteriorating the right to access to affordable medicines and healthcare.

Through the annual publication of "National Trade Estimate Report on Foreign Trade Barriers", the US Government has been asking and coercing the South Korean government to amend health-related regulations such as the level of Korean Intellectual Property protection, pharmaceutical policies and the protection of information regarding pharmaceutical R&D. The US Government claims for differential acknowledgement for pharmaceutical products from the US drug companies. It also insists that South Korean government change its pharmaceutical pricing policy in accordance to that of the US. In addition, simplification of required clinical trial and safety test procedures and increase protection of intellectual property right and exclusive rights to R&D information were demanded so that US pharmaceutical companies can access the South Korean market readily.

As the result, korean pharmaceutical price will soar, and health insurance budget could go bankrupt. What is more important is that the Korean people would not have any rights over the decision making process over the drug pricing.

One representative case is the one in1999 when US called for the change in regulation regarding the pricing of innovative drugs. According to the US government’s opinion, price of these drugs should be in accordance with average factory price in 7 wealthiest countries (A-7 : US UK Germany France Italy Japan Switzerland). As a result, the US government succeeded and the SKG accepted theproposal.

Korean Leukemia patients suffered directly from this policy. They had to pay about 2,500-6,300 thousand wons ($2,500-6,300) per month to Norvatis to take the anti-leukemic drug called "Glivec". Since this price was too high, they struggled against Norvatis for 2 years insisting for the disclosure of actual manufacturing price and the reduction of the retail price. Despite the struggle, the patients, and the SKG which reimbursed part of the drug cost, still had to pay much money to costly the drug due to formerly mentioned A-7 pricing system. All that was left to the leukemia patients was the reality of death due not to lack of treatments, but of lack of money. Korean health policy and system should be decided neither by US government nor by pharmaceutical companies, but by people of Korea.

We can expect what the US would claim to Korea, based on previous US’s agreements with Central America, Singapore, Australia, and Thailand. Through the "Glivec struggle" Korean people now know that the TRIPS(Trade-Related aspects of Intellectual Property rights) Agreement threaten public’s right to healthy lives. However, the US tried to extend the protection period granted through the patentsystem, limit the conditions under which compulsory licenses (CL) can be granted and to intercept market entrance of generic products by putting forward the exclusive rights on information. On November 4th, 2001, 4th WTO Ministerial Conference adopted the "Declaration on the TRIPS Agreement and Public Health". The Doha Declaration stated, "The TRIPS Agreement does not and should not prevent Members from taking measures to protect public health". What is proclaimed in the Doha Declaration is against current US government’s practice in Korea. The Doha Declaration made it clear that right to (healthy) lives should be valued over (intellectual) property rightswhen they crash.

The reason why Thai HIV/AIDS patients are opposing US-Thailand FTA is because this would destory access to medicine. The US is demanding the Thai government to stop supplying cheaper and affordable HIV/AIDS drugs that are domestically produced including the Government Pharmaceutical Organization (GPO).

Last year in Korea, we pushed for the amendment of patent law which would allow ’compulsory licensing for public interset’ and ’compulsory licensing for exportation’. We will persistently look for various methods in order for everyone to enjoy the right to their health. The US must not interfere with the effort to improve people’s health all around the world by being selfish and by putting the US pharmaceutical manufacturer and insurance company’s profits in priority. The right to health and lives belong to people, not to pharmaceutical companies.

7. KorUS FTA and Cultural Diversity

— Every Culture Has the Rights to Exist

Korean people view the KorUS FTA as an agreement that will damage the diversity and originality of Korean culture.

In addition to the request of the US to reduce the compulsory screen quota of Korea, the US is known to have requested the full opening of the broadcasting market, as well. In the annual report by the USTR, the US points to screen and TV content quotas as the main non-trade barriers. During the FTA negotiations, it is very likely that the US negotiators will win the removal of these barriers. In addition, the US will go further to request that foreigners be allowed to be the president or editors-in-chief, which is currently not allowed in Korea.

The KorUS FTA can be a fatal blow to the Korean culture, specifically to the audio-video industry in Korea.

7. KorUS FTA and US Beef

— forcing Korean government to import of the US beef as a preliminary of the KorUS FTA

The US forced Korea to import American beef as a preliminary of the opening of Korea-US FTA. No one should be exposed to the danger of eating beef that has the possibility of causing Creutzfeldt-Jakob disease. Many countries in Europe prohibit animal feed to their livestock and WHO is also suggesting the same. However, the US is permitting animals other than ruminants to eat animal feed. And the US is not prohibiting every type of animal feed to cow. As long as this problem continues, American beef are not free from the infection of mad cow disease. This fact is well proven by the discoveries of cows that were infected in the state of Texas, Washington, and also in Alabama.

The US inspection system is also a problem. Infected beef was found in Japan and it was revealed that the company which exported was from New York. Another problem was found in Hong Kong recently and the exporting company was from Colorado.

According to the report about the inspection of mad cow disease in the US which was announced in 1st Feb. 2006, the management of controlling the hazards was inappropriate. There were one out of every six companies that processed the meat even though the cows were suspicious of being infected, and it also revealed that only 5-10% of the visual inspection was done. According to the report from Government Accountability Office in 25th Feb. 2005, 2,800 out of the total of 14,800 stock farms were never even audited for the imperfect stock feed regulations. We are strongly against the Korea-US FTA which will sell out the public national health of Korea for the rapacity of American government.

Nevertheless, at the USTR hearing which was held on March 14th, Ranchers-Cattlemen Action Legal Fund complained about the fact that Korean government decided to reopen imports of boneless beef from cattle aged up to 30 months but left the door closed for bone-in beef on January, and they claimed that the first FTA negotiation shouldn’t be held unless Korean government decides to import whole beef including bone-in beef.

Conclusion & Suggestion

We have here outlined the serious problems related to Korea-US FTA.

We, Korean people, do not even know what the Korean government will do in the FTA talks. The Korean government has refused to make the negotiation process public.

More importantly, a comprehensive FTA with no exceptions would deal a serious blow to the Korean people. It is merely another NAFTA or even a NAFTA PLUS.

Farmers would be most seriously affected by the FTA. The KorUS FTA will also give momentum to the commercialization and privatization of public services in South Korea. Another target of the FTA would be the medical pricing system for the benefit of pharmaceutical businesses, especially those based in the United States. It would undermine the access of people to medicine. Jobs and working conditions will be threatened by the KorUS FTA just as they were by NAFTA. Cultural diversity will be thrown into crisis as well. The FTA would create a path through which the Hollywood and big broadcasting capital can dominate the South Korean market.

The FTA will not serve the people’s interests, but instead benefit transnational capital in both countries. This is because the FTA means merely the intensification of neoliberal policies and practices.

We, the Korean Alliance against the KorUS FTA, believe that the proposed FTA is a serious challenge for Korean people. We, however, also believe that it gives Korean people another chance to build strong solidarity with people in the United States.

We, the Korean Alliance against the KorUS FTA, request social justice and people’s movements in the US do the following :

1. to share information about the KorUS FTA ;
2. to send letters protesting against the KorUS FTA to the White House and congressmen in the US ;
3. to send letters protesting against the KorUS FTA to Korean governemt
4. to join rallies against the FTA in the US and Korea that will be held during the third, fourth and fifth round of talks over the FTA ;
5. to build a network against the KorUS FTA and develop joint action plans.