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The road to an undesirable deal: A report to US Congress

The Road to an Undesirable Deal

Understanding the Korea-U.S. Free Trade Agreement

A Report to the U.S. Congress

February 9, 2007

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Prepared by the Korean Alliance Against KorUS FTA
150-982 Daeyoung Building 3F
139 Youngdeungpo-dong 2-ga
Youngdeungpo-gu, Seoul, Republic of Korea
Tel: 82-2-775-2501 Email:

The Korean Alliance against KorUS FTA (KoA) is made up of over 300 organizations, including trade unions, farmers’ groups, NGOs, and social movement groups. Formed on March 28, 2006, our goal is to bring awareness about the impact of FTAs on society, under the principle that all trade agreements must be democratic in process and respectful of both public interests and international standards on labor, environment, health, and safety.

Executive Summary

On February 2, 2006, South Korea and the U.S. announced that they would begin negotiations for a free trade agreement. However, the negotiation process and FTA content have shown troublesome signs from the start. Many labor, agriculture, and civil society sectors in both the U.S. and South Korea believe that, like NAFTA, the Korea-U.S. FTA will make living conditions more difficult for people living in both countries. This report covers seven main concerns and presents three individual cases. Our analysis shows that the proposed agreement will disproportionately hurt working families, widen the income gap, limit public services, and undermine culture and the environment in South Korea.

1. The Undemocratic Nature of the Negotiations Process
The South Korean government’s procedures have been inconsistent with democratic principles and Korean law before and while negotiating the Korea-U.S. FTA. It has withheld relevant information and documents from stakeholders, the National Assembly, and the general public. The government has also closed off public debate through insufficient hearings and media censorship. Furthermore it has stifled freedom of expression through a ban on protests and arrest of protest participants.

2. Limiting Access to Healthcare: Pharmaceuticals
The current FTA calls for a system that will reduce access to pharmaceuticals and place limitations on South Korea’s healthcare system. We have three main concerns: 1) A7 drug pricing on all innovative drugs will increase drug prices and raise insurance costs for the public, 2) application of expensive pricing on all innovative drugs on Korea’s positive list and installation of an independent review board will restrict the government authority to register and determine the price of drugs and 3) extension of patents will burden the insurance system and limit production of generics. The current trade deal is not in line with even the Doha Declaration on TRIPS Agreement and Public Health, which declares that the right to a healthy life is greater than intellectual property rights.

3. The Deterioration of Agricultural Life
The FTA requests the full opening of the South Korea’s agricultural market to American-grown products. This has wide social, cultural, and environmental implications: South Korean agricultural production will decrease by 45%, meaning that roughly half of South Korea’s farmers will lose their livelihoods. The destruction of rural communities will result in the break-up of rural traditions that are the basis of Korean culture, and the deterioration of the rural environment.

4. Public Services: Energy, Water, and Education
Implementation of the Korea-U.S. FTA will diminish the government’s capacity to ensure equitable access to public services. Our concern is that the FTA will decrease government regulation on energy and water supply as a result of how its provisions interact with the processes of liberalization already underway. Of particular concern is the opening of South Korea’s energy maintenance industry, which will undermine that current existing infrastructure and create dependence of the energy industry as a whole on the private sector. The Korea-U.S. FTA also stands to diminish the validity of public education through the introduction of private U.S.-based testing services which will increase the demand on students to seek private education programs.

5. Meeting International Standards on Cultural Diversity
The Korea-U.S. FTA does not meet international standards set by the UNESCO Convention on the Protection and Promotion of the Diversity Cultural Expressions. The Convention affirms the right of each member nation to formulate and implement regulations aimed at promoting domestic cultural expression, implying the right of members to exclude their cultural industries from international trade agreements. We believe that the reduction of Korea’s screen quota as a preliminary measure to the FTA and the inclusion of South Korea’s audio-visual industry in the agreement are inconsistent with the aforementioned provisions.

6. Meeting International Environmental Standards
Through such mechanisms as the investor-state claim clause, the Korea-U.S. FTA has the potential to lower environmental standards. In fact, the investor-state claim clause goes directly against the ‘precautionary principle’ of international environmental law. With the current FTA, we see the possibility of a tribunal intervention on South Korean environmental policies, particularly concerning genetically modified organisms (GMOs). Our position is that economic development should meet international standards on sustainable environment.

7. The Investor-State Claim (ISC) Clause and the Procurement Policy
The ISC clause in free trade agreements overburden governments and taxpayers with enormous monetary penalty and pressure nations to adopt lower environmental and labor standards. In order to diminish these negative consequences, South Korea has asked for certain revisions to this clause, such as the exclusion of claims on tax and real estate policies, but none have been accepted. The Korea-U.S. FTA also runs against public interests by requiring a reduction in procurement contracts. Procurement policies are necessary to the promotion of fair, domestic economic sustainability.

 source: KCTU