Korea Times

Time Running Short for FTA, Says US Biz Lobby

By Choi Kyong-ae, Staff Reporter

2 February 2006

Seoul-based American business leaders Wednesday called for more predictability, consistency and transparency in government policies, saying there is an extra mile to go for a business climate that offers global standards.

In order to help with Korea's ambition to become the hub of Northeast Asia, Korea has no choice but to be more predictable, consistent and transparent in its policies,'' Wayne Chumley, chairman of the American Chamber of Commerce in Korea (AmCham), said. U.S. businesses in Korea asked regulators to continue to move towards global standards and away from Korea's unique regulations that often would effectively shut imports out of the Korean market.For example in the automobile industry, regulators often develop Korea specific regulations that are a barrier for small volume auto imports in Korea. This is because a disproportionate amount of resources have to be allocated to certifying models to the new Korea-unique standard, making the import cars commercially unviable,’’ the chairman said.

Statistics show imported cars usually account for 10 percent of an advanced countries’ markets but as at 2005 the ratio here is 3 percent.

He also pointed out, in the area of pharmaceuticals, many doctors still get rebates for prescribing certain drugs and hospitals still ask for donations while companies who try to maintain high ethical standards are disadvantaged.

AmCham president Tami Overby suggests as, far as she knows, the pharmaceuticals sector is one of the most corrupt business areas in Korea.

US Most Logical FTA Partner

The United States has emerged as Korea’s most logical candidate for an FTA with the Korea-Japan FTA negotiation stalled and China not yet ready as they focus their efforts on meeting their WTO commitments.

The U.S. is one of Korea's major trading partners, along with China and Japan. The Korea-U.S. FTA will be the biggest and most substantive single country economic trade negotiation for the U.S.,'' Overby said. Most of the other countries the U.S. has free-trade pacts with, including Chile, Singapore, Jordan, Israel, Australia and Oman, are much smaller economies than Korea. Only NAFTA between the U.S., Canada, and Mexico would be larger. What gains will Korea take from the trade pact? First, the benefits from an economic view will be significant. Many Koreans seem concerned about increased competition from fully opening Korea's markets and the anticipated increase in imports will consume Korea's economy.But when you look back at 1996 when Korea first opened its distribution service sector. There were similar concerns that foreign distributors would force the Korean distributors out of business. But it was not the case,’’ Overby said.

For example, she noted, Korea’s home-grown E-Mart is now the largest distributor in Korea and competing with the best in the world for a share of China’s vast consumer market. It’s safe to say the fear of foreign domination is usually much more emotional than based on real facts.

The natural increase in imports will serve as a catalyst in further strengthening the competitiveness of Korean goods and lowering consumer prices, allowing Korean shoppers to purchase more with less,'' she said. Second, an FTA agreement with the U.S. would give Korea a competitive advantage over other nations in Northeast Asia in terms of tariffs.We believe the fact that the U.S. is willing to consider launching an FTA with Korea is more evidence of the strength and economic vitality of our relationship,’’ She said.

In other economic benefits, an FTA with a major trading partner like the U.S. will increase the credibility of the Korean market in terms of global standards, creating a more attractive investment destination.

In non-economic benefits, the increased in-flow of capital will raise the stakes for countries with investments in Korea to maintain peace and stability on the peninsula, further reducing security risks and not to mention further strengthening our military and political alliances.

By signing an FTA with the U.S. before Japan and China, Korea can use this opportunity to establish a stronger leadership role in the region and use it as leverage in promoting economic cooperation within Asia,'' the AmCham president said. Time really matters in this negotiation because the U.S. President's Trade Promotion Authority, which authorizes the president to negotiate a trade agreement and then bring it before U.S. Congress for an up or down (yes or no) vote without amendments, expires in June 2007 and its renewal is far from certain given that 2008 is a presidential election year in the U.S. Visa Waiver The long-standing visa waiver program now has the attention of the presidents of Korea and the United States and they are working on a Visa Roadmap to help Korea meet the criteria for entry into the Visa Waiver Program.As you probably know, Korea’s visa rejection rate must be under 3 percent for two consecutive years, must show increased passport security, and added biometrics in the Korean passport to qualify for application to the Visa Waiver Program,’’ AmCham chairman said.