February 1, 2005

FTA with Seoul hindered by goods made in North

The Asahi Shimbun, Tokyo

Products made by South Korean companies in an industrial park north of the demilitarized zone are likely to form the latest kink in sputtering free trade talks between Tokyo and Seoul.

South Korean firms began operating in the Kaesong Industrial Zone in December. The establishment of the zone on North Korean soil was one of the pillars outlined by South Korean President Roh Moo Hyun in his policy for mutual peace and prosperity between the two Koreas.

A senior South Korean government official said Seoul will demand that Tokyo treat products made in the zone as goods produced in the South, thereby entitling them to lower tariffs.

Subscribing to the "rules of origin," Singapore agreed to such an arrangement with South Korea in November during talks to finalize their bilateral free trade pact.

Tokyo is expected to find the demand too difficult to accept, however, as it is considering imposing economic sanctions on Pyongyang due to a lack of progress on the abduction issue.

The Kaesong Industrial Zone, a 66-square-kilometer stretch of land rented from North Korea for 50 years, is being developed by South Korean companies and a government-affiliated land corporation.

Household products made in the zone have already gone on sale in the South. When the zone is completed in 2012, more than 1,000 South Korean companies are expected to have settled there, providing employment to over 100,000 North Korean workers.

South Korean Unification Ministry officials stress that they want the products to be given the same treatment in international trade as those made in South Korea.

"We will make the same claim in FTA negotiations with Japan," a senior official from South Korea’s Foreign Affairs and Trade Ministry said.

An official at Japan’s Foreign Ministry declined to comment on the issue because Seoul has yet to table a formal proposal.

Analysts predict the latest stumbling block will be affected by public perception on the abduction issue in Japan and may take months to overcome.