Posts Tagged ‘South Korea FTA’

KORUS FTA and You–Next Steps?

Saturday, June 16th, 2012
KORUS FTA and You Next Steps?

By Don Southerton, KoreaLegal.org Editor

I’m working with several clients to better understand and benefit from KORUS FTA.

Country of Origin is one areas that often needs to be addressed.

Working through the paperwork is also challenging.  I can assist and facilitate.

I was recently asked for a copy of the Treaty. Here’s the LINK.

http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text

 

 

KORUS FTA and You Next Steps?

Tags: , , , , , ,
Posted in Commentary | No Comments »

How to Benefit from the US Korea FTA

Friday, May 11th, 2012
How to Benefit from the US Korea FTA

By Don Southerton, KoreaLegal.org Editor
I recently spoke at the World Trade Center San Diego Asia Desk: Korea workshop. The session centered on business benefits for American companies under the new U.S. Korea Free Trade Agreement. Guest speakers also included KOTRA LA Director- General Yun and Korea University’s Moonsung Kang. Both gave specific details on the new treaty, which was implemented on March 15.

A complex document, the KORUS FTA immediately eliminates some tariffs, with others removed over time.

For example, the tariffs on auto parts manufactured in Korea are removed. With regard to cars, the tariff on US cars shipped to Korea is immediately reduced from 8% to 4%–the remaining 4% to be eliminated in 2 year. For Korean cars shipped to the US, the current 2.5% tariff remains in full effect, but will be eliminated in 2 years.

An aspect of the KORUS FTA is its impact on law and accounting services. In particular, the new FTA allows for US firms to begin consulting Korean firms with regard to foreign law and accounting issues. Over time they will be allowed to hire Korean lawyers and accountants to expand their Korea-based practice.

Finally, perhaps an often overlooked benefit, and outside the business incentives provided by the KORUS FTA, is that free trade agreements strengthen political and security ties between countries. In other words, the treaty should better relations between US and Korea and for business partnerships, I see this as encouraging and positive.

Next Steps
Interested in Korea-facing business? Looking at entering the Korean market?  Need assistance with your current Korean business venture?

The Definitive Authority
When Fortune 500 companies, top Korean Groups, leading international law firms, and elite consultancies, such as Bain and Monitor, look for Korean-facing business strategy, coaching, and advice—they turn to Bridging Culture Worldwide and Don Southerton.

With over 35 years’ experience, Don Southerton is the definitive authority on Korean-facing global business–from automotive, golf, and QSR sectors to New Urbanism and Green technology.  When problems and challenges surface in development, launch, or fulfillment, we provide sound solutions and comprehensive strategies.

Initial Consultation
Dsoutherton@ bridgingculture.com
+1-310-866-3777
BCW is a Fee-based Consultancy

How to Benefit from the US Korea FTA

Tags: , , , , ,
Posted in Announcement | No Comments »

KORUS FTA–What’s the delay?

Saturday, February 11th, 2012
KORUS FTA Whats the delay?

By Don Southerton, KoreaLegal.org Editor

This past week we saw the current Korean administration’s opposition seeking to “axe” KORUS FTA. In response supporters seek to get the FTA enacted ASAP. As reported in Yonhap News Agency, “We believe that the U.S.-Korea free trade agreement is in the interest of the United States, of the Republic of Korea, and of the relationship between our two countries,” A State Department official further noted. “The U.S.-Korea free trade agreement represents a historic opportunity to increase exports, support job creation, bolster both our economies, and strengthen a vital strategic alliance in the Asia-Pacific.”

So what’s the delay? Here’s my update…

On a positive note following the 2011 amended agreement for the Korea-U.S. Free Trade Agreement (KORUS FTA) and ratification both by the U.S. Congress and Korean Assembly expectations are that the treaty will be implemented in the first quarter of 2012. Advocates and many critics alike see the FTA boosting annual commerce between the two nations into the billions of Dollars.

That said, although the treaty has been signed, both the U.S and South Korean government require a final legal review, then a period of public review and discussion prior to implementation.

More specifically,

1. The original plan was for KORUS FTA to take effect on January 1, 2012.

2. However, end-of-year holiday time restraints slowed U.S. government legal review of the final KORUS FTA wording and translation. This has resulted in a January implementation delay.

3. Once this U.S. review has been finalized (probably in February), the agreement documents will be reviewed by Korea. Then, as in the terms of the agreement the KORUS FTA must take effect within 60 days of finalized documents.

4. The 60-day period also serves as a public review of the treaty by citizens from both countries.

5. According to my sources, we can expect KORUS FTA to take full effect in March or early April.

To conclude, the final review process can be time consuming. For example, even though the treaty is signed, U.S. legal review teams have asked for additional documents and clarifications regarding the FTA wording and translations. Once the Korean teams respond to the U.S. side’s questions, the documents will be then sent to Korea for their final review. The Korean team then may have questions for the U.S. team, who in turn will need to reply, and so forth.

Look for updated as the unfold.

KORUS FTA Whats the delay?

Tags: , , , , , , ,
Posted in News | No Comments »

Time for a KORUS FTA Update

Friday, July 15th, 2011
Time for a KORUS FTA Update

By Don Southerton, KoreaLegal.org Editor

Mid summer and the anticipated  early July target for signing the KORUS FTA has come and gone.  That said, it’s time for an update on both South Korea’s Assembly and the US Congress’ review of the treaty.

South Korea Update:  Senior lawmakers of the ruling party reiterated Monday that they would push for the ratification of the Korea-U.S. free trade agreement (KORUS FTA) during the August session of the National Assembly. 
“We are aiming to pass the FTA bill by the end of next month,” Rep. Hwang Woo-yeo, floor leader of the Grand National Party (GNP), said.

The four-term lawmaker dispelled growing concerns that the conservative party may use its majority status to ram through the contentious bill without proper deliberations with the opposition. 

The GNP, which controls 169 seats in the 299-member unicameral legislature, has unilaterally endorsed a number of major bills after physical clashes with rival parties, including budget proposals and an FTA with the European Union. 

When asked what his party would do if opposition parties forcibly block the passage of the trade pact, Hwang replied that his party will likely stick with the democratic process while it also remains pending in the U.S. Congress. 

“So long as Washington does not ram the trade deal through the Congress, the GNP will handle the matter through dialogue and negotiations with opposition parties,” he said. 

GNP spokeswoman Rep. Bae Eun-hee also noted that the GNP reaffirmed its position that it will push for the passage of the KORUS FTA at a joint workshop of the party’s Supreme Council and policy committee on Sunday. 

Last Wednesday, Hwang and the GNP’s new Chairman Hong Joon-pyo expressed their support for a prompt ratification of the much-delayed trade deal at a meeting with presidential chief of staff Yim Tae-hee. 

The FTA was signed in 2007, but the government’s move to get the bill ratified has been blocked partly because of strong objections from the main opposition Democratic Party (DP) and the country’s farming industry.

However, Chairman Hong, who is known as a strong advocator of the FTA, hinted that the GNP may have to risk a physical showdown with rival parties, suggesting a division within the ruling block. 

Hong reportedly said the GNP has no reason to hesitate in using its majority status to approve the bill as recent polls show some 65 percent of the public support the deal. 

Business experts forecast that once implemented, the KORUS FTA may increase the country’s gross domestic product (GDP) by 6 percent over the next decade. 

They claim that the bilateral deal could create as many as 34,000 jobs a year.

The fate of the deal, however, remains uncertain as the DP insists on renegotiations with Washington. 

Meanwhile, the GNP has announced that it will push the passage of a bill that calls for stricter aid distribution monitoring in North Korea and financial aid to non-governmental organizations that keep records of human rights abuses in the communist country.

Source: Korea Times

U.S. Update: President Barack Obama will soon send a free trade pact with South Korea to Congress for approval despite Republican threats to vote against it because of a retraining program for workers displaced by trade, White House Chief of Staff Bill Daley said on Thursday.

“There is no time to waste fighting politics as usual,” Daley said in a speech at the U.S. Chamber of Commerce to the U.S.-Korea Business Council. “If we do not act before the August recess, American business will suffer.”

Obama faces a showdown with Republicans over his insistence that an extension of the nearly 50-year-old Trade Adjustment Assistance (TAA) retraining program be passed along with the Korea pact and two other pending free trade agreements with Colombia and Panama.

Republicans have objected to Obama’s plan to insert the TAA program into the implementing bill for the South Korea agreement, insisting that lawmakers be allowed to vote separately on the TAA and the trade pact.

The White House believes both could pass separately.

However, Daley said Republicans have yet to offer a “credible” plan that would prevent TAA opponents from blocking a vote on the program, which Democrats see as a vital safety net and many Republicans view as ineffective.

“We can no longer wait. If there’s no agreement on an alternative approach in the very near future, we will move forward to seek passage of the FTA (Free Trade Agreement) with TAA” included, Daley told the audience of U.S. and Korean business officials.

Daley said the White House expects the Korea agreement “to create or support 70,000 American jobs” through tariff cuts that will open the South Korean market to more U.S. exports.

Congress must act soon because a rival deal struck by the European Union with South Korea went into force on July 1, threatening U.S. market share in the longtime ally, he said.

Senate Republican Leader Mitch McConnell has said he would vote against the Korean agreement if TAA is included in the implementing legislation for the deal.

AMERICAN JOBS ON THE LINE

But most business leaders recognize an extension of TAA has to be part of the mix, and don’t believe it is worth holding the agreement up over the issue.

“We can’t let differences over processes and procedures hold back these agreements any longer. American jobs and American standing in the world are on the line,” said U.S. Chamber of Commerce President Thomas Donohue.

The deal was originally negotiated during the administration of former President George W. Bush and business groups have been waiting four years for it to become law.

“We’ve seen first hand what these free trade agreements do after implementation,” said Mike Ducker, chief operating officer of FedEx Express, a division of FedEx.

“Not only does it create new commercial opportunities for our customers and greater demand for our services, it allows us to continue growing our operations and our work force around the world,” Ducker told Reuters in an interview.

Critics, including the AFL-CIO labor federation and Public Citizen’s Global Trade Watch, say tradedeals endanger U.S. jobs by cutting U.S. tariffs and encouraging companies to move their operations overseas.

A study by the left-leaning Economic Policy Institute says the Korean trade agreement could displace about 159,000 American jobs over seven years.

But Harrison Cook, vice president of international government affairs for Eli Lilly and Company, said the rival EU-South Korea agreement puts U.S. pharmaceutical companies at a disadvantage in a major market.

“All those tariff preferences are going to go to our Europeans competitors, not to us. That’s a significant consideration in this sector, where you do long-term contracting,” Cook told Reuters in an interview.

Source: Reuters

Time for a KORUS FTA Update

Tags: , , , ,
Posted in News | No Comments »

KORUS FTA Stalled, Again?

Saturday, May 28th, 2011
KORUS FTA Stalled, Again?

By Don Southerton, KoreaLegal.org Editor

Readers of KoreaLegal.org might be wondering what’s stalling the long in coming KORUS FTA. The free trade agreement between Korea and the U.S. seems stalled, again. Hopes were it would be approved before Congress’ July recess. Plans also called for the KORUS FTA not being tied to other pending FTAs. Both efforts appear to have failed.

WSJ notes:

WASHINGTON—The centerpiece of the American trade agenda—a trio of international trade pacts worth $13 billion in new U.S. exports—is in peril as Democrats and Republicans battle over a program that provides aid to U.S. workers.

The dispute over the future of the 50-year-old Trade Adjustment Assistance program, which provides benefits to American workers displaced by foreign competition, is putting pending free-trade pacts with South Korea, Colombia and Panama in jeopardy by pulling them into the contentious debate over federal spending.

The Obama administration and Democrats in Congress want the TAA program renewed. Some Republicans question its value and say it should be scaled back to narrow the deficit.

The delay caused by the congressional sparring means it is now virtually impossible to pass the South Korea agreement before a trade pact between Korea and the European Union takes effect July 1. That will put a wide range of U.S. industries at a competitive disadvantage.

Just a few weeks ago, the administration saw the TAA battle as surmountable. Now, unless lawmakers reach consensus soon, the trade pacts won’t pass before the August recess, congressional aides say. After that, chances of passage grow slimmer as the 2012 election nears and lawmakers avoid controversial votes.

“We’re fighting like hell because if the vote doesn’t happen by the recess, we risk it not happening in the fall,” said Christopher Wenk, senior director for international policy at the U.S. Chamber of Commerce. On Thursday, scores of business leaders visited all 100 senators to lobby for the agreements, and they plan to call on each House member in coming days.

Republicans say the administration should move forward on the trade deals and set the TAA dispute aside for later. “Why hold up three agreements that are going to create all kinds of jobs?” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.

“We have a duty to help American workers meet the challenge of global competition,” said the panel’s chairman, Sen. Max Baucus (D. Mont.), during a Thursday hearing on the U.S.-Korea Free Trade Agreement.

The standoff comes as other nations race to forge trade pacts with nations that are the U.S.’s chief commercial rivals.

In addition to the EU’s impending pact with Korea, a Colombia-Canada pact will enter force before the U.S.’s agreement with Bogota.In Senate testimony last week, Deputy U.S. Trade Representative Demetrios Marantis told the Finance Committee that delays in passing the agreements meant U.S. exporters would lose market share to rival nations.

The three pending trade pacts are the backbone of President Barack Obama’s plan to help businesses double U.S. exports by the end of 2015. Demand from markets abroad has helped support the U.S. economy—and employment—as consumers remain cautious. Exports contributed 1.16 percentage points to growth in the first quarter, when the economy expanded at a 1.8% annual rate.

The Korea deal, worth $11 billion in new U.S. exports, would immediately eliminate Korean tariffs on nearly two-thirds of U.S. farm products, from corn to wheat. U.S. beef exports to Korea would more than double, from to $1.8 billion from $600 million. It would eliminate a 15% Korean tariff on U.S. wine and afford U.S. financial services firms the same legal status as Korean firms.

The TAA program has been backed by both parties since the Kennedy administration, justified as a necessary price to induce lawmakers from industrial regions to support trade-opening legislation.

It provides training, extended unemployment benefits and health-care subsidies for workers idled when trade pacts shift jobs overseas.

But this year, TAA came up for renewal in the teeth of a polarized budget fight. It expired in February after a proposal to renew it failed in the House.

Two weeks ago, White House trade officials took a tough line, saying the president will not submit the finalized trade agreements to a vote until Republicans strike a deal on renewing TAA.

Republicans say the TAA is a sop to organized labor, and its merits don’t justify its inclusion in an already-bloated budget. GOP lawmakers say the program’s budget was swollen by the stimulus and point to past Government Accountability Office studies that question its implementation.

The program, they say, should be scaled back, although as an entitlement, by law it can’t be eliminated altogether.

“Politicians used to use TAA to buy votes for trade agreements, and now they’re holding the trade agreements hostage so they can get the expanded welfare program,” said Sallie James, trade policy analyst at the conservative Cato Institute.

Democrats say the program has grown increasingly important as more companies move jobs overseas, and point to Labor Department figures showing that the program’s size hasn’t changed substantially since before the 2009 stimulus.

In 2002, the program was expanded to include workers whose jobs were lost due to outsourcing in addition to those affected by increased imports. In that year, TAA went to 50,000 people at a cost of $500 million. In 2008, the year before the stimulus, the program cost $916 million. Last year, TAA cost $975 million and 234,000 workers participated.

Leaders of both parties say they’re confident they’ll reach a compromise, but a deal has yet to take shape.

Sarah Thorn, senior director of government relations for Wal-Mart Stores, Inc., said business leaders’ efforts to push the two parties together have so far led to frustration.

“Trade agreements have always moved in tandem with TAA—it’s part of the bargain on trade,” she said.

The Korea, Colombia and Panama agreements have been stalled for four years. The repeated delays underscore the difficulty experienced by every administration in overcoming the public skepticism and political roadblocks that have made the U.S. a global laggard on trade. Of the 202 regional trade agreements ever registered with the World Trade Organization, the U.S. accounts for only 11.

Meanwhile, rival nations are moving faster to forge global partnerships that open fast-growing markets for their exporters, and offer subsidies and rules that give their national champions an edge.

Source : The Wall Street Journal

KORUS FTA Stalled, Again?

Tags: , , , , , ,
Posted in News | No Comments »

International Law Firms Plan South Korea Launch

Sunday, March 27th, 2011
International Law Firms Plan South Korea Launch

By Don Southerton, KoreaLegal.org

A few weeks ago a lawyer from a top Washington, DC law firm contacted me about the KORUS FTA and the opening of Korea to global legal firms.  I  feel many international law firms are looking at the Korean market.  It will be smart for them to get lots of local support, and more important develop a sound strategy for market entry. I can help.

Here as recent PR announcing law firm Clifford Chance’s plans of entering the Korean market.

Clifford Chance (CC) looks set to become the first leading City firm to open an office in South Korea, with the firm planning to launch after the country’s legal market is opened up to foreign law firms this summer.

The firm is one of a number of the UK top 10 looking at the region in the wake of a free trade agreement (FTA) between Europe and South Korea that was approved by the European Parliament last month (17 February).

The long-awaited agreement, initially signed at the EU-South Korea summit in Brussels in October last year, sets out a timescale for foreign law firms to open in the market, with international firms to be able to open representative offices from July, once the agreement is ratified.

CC confirmed that it is planning to open in the country, Asia’s fourth-largest economy, once the market is liberalised, with other firms including DLA Piper and Allen & Overy (A&O) in earlier stages of evaluating the market.

CC Asia head Peter Charlton (pictured) said: “We have ambitious plans for growth in Asia and Korea is an important part of that strategy. We welcome the recent legal liberalisation and are working towards having a suitable presence in the country at the first available opportunity.”

Under the terms of the FTA and legislation set out by the South Korean Government, liberalisation is set to happen over three stages.

From July, EU-based law firms will be able to open representative offices in South Korea to advise on non-Korean law. By July 2013 firms will have the right to enter into co-operative agreements with Korean firms and advise on legal issues involving a mixture of domestic and foreign law. By July 2016, EU firms will be able to invest in local firms and hire Korean lawyers.

A&O Asia managing partner Thomas Brown said: “Korea is a very important market in Asia and we are looking at it very seriously, but we haven’t made a decision either way as yet.

“We already have a very healthy South Korea practice and any presence on the ground would help us build on what we already do – especially as we won’t be able to practise local law. So our focus would remain on the international law elements of deals involving South Korea.”

Other firms exploring the market include DLA Piper, where Asia managing director Alastair Da Costa said: “We are very interested in the market, having a thriving Korea practice with lawyers in Tokyo, Hong Kong, London and the US. Korea fits as a geography with our strategic framework and we are keen to explore what we can do to strengthen our position in that market.”

Firms ruling out entering the market in the near-term include Ashurst, Eversheds, Linklaters and Freshfields Bruckhaus Deringer.

Freshfields Asia managing partner Robert Ashworth said: “There are increasing signs of cross-border activity and a renewed confidence of Korean corporates to pursue overseas projects work and acquisitions. The long-awaited liberalisation of the legal market will facilitate this process and I would not be surprised to see law firms from the EU taking advantage of the FTA to open offices. We are continuing to develop our successful offshore Korean practice but I do not anticipate our having a formal presence in Korea in the near term.”

The US signed an FTA with South Korea in June 2007 that so far has yet to be ratified by either government, with several US firms looking at the region in anticipation of the FTA’s ratification.

Source: LINK

International Law Firms Plan South Korea Launch

Tags: , , , , ,
Posted in News | No Comments »

G20, KORUS FTA, and Looted Books

Sunday, November 14th, 2010
G20, KORUS FTA, and Looted Books

By Don Southerton, Editor

I’m still pondering on results of the G-20 Summit in Korea. At some level, it showcases South Korea’s economic successes. No doubt many were be pleased at Seoul’s trendy and sophisticated global business, retail, and Green urban centers.

That said, we see few fruits from the side meetings. Most important, despite strong expectations little moved forward on the KORUS FTA. I do not see this as a lack of commitment by both nations and their leaders—but some powerful forces ( i.e. pressure from Ford and US Labor Unions) at work.

Some issues were resolved… like a longstanding demand by Korea for books looted by the French in the 1860s.

G20, KORUS FTA, and Looted Books
One of the Uigwe books that was stored at Gwanghwa Island’s royal library before the French invasion. (Yonhap)

Koreans welcome French decision to return looted books, some with bitterness

By Kim Hyun
SEOUL, Nov. 12 (Yonhap) — France’s agreement on Friday to essentially return looted Korean royal books was received as one of the highest diplomatic feats host South Korea achieved during the G-20 summit, although the deal fell short of satisfying everyone here.

Reactions varied as French President Nicolas Sarkozy announced a five-year renewable lease scheme for the 297 Uigwe books, taken during the 19th-century French invasion of Korea and now preserved at the National Library of France.

Coming after a long tug of war, the agreement means much to Korea. It clears the shameful historic legacy the waning Joseon Dynasty left in its first armed encounter with a western power in 1866, and above all, the decision by France sets a shining precedent to other countries holding hundreds of thousands of stolen Korean artifacts.

“It (the lease) means the virtual return of the books, of course we have to receive them,” Yi Tae-jin, head of the National Institute of Korean History, a state body that sets guidelines for Korean history education, said.

Yi, a long-time activist who made efforts to have the books returned, recalled a disappointing 1993 visit by then French President Francois Mitterrand. The French leader gave back one of the books when France was bidding to sell its high-speed train technology to South Korea. France won the bid, but there was no follow-up on the artifact.

“When President Mitterrand said the books would be returned, I was impressed and thought France was really a cultural powerhouse, but it was a real disappointment,” Yi said. “Now France deserves to be called a cultural powerhouse.”

Uigwe books are unique Korean heritage documents now listed on the UNESCO Memory of the World Register. The royal manuscripts recorded and illustrated all of the rituals, formalities and daily routines of the royal court during the Joseon Dynasty. Historians say that such thorough royal recordings do not exist in China, Japan, or any other Asian countries.

After decades-long wrangling, the Korean and French leaders settled on rather neutral terms. Bound by the domestic law against any permanent transfer of national properties, Sarkozy committed to the handover in the form of a “lease” and promised it will be rolled over every five years.

South Korean President Lee Myung-bak took the French decision as the permanent, “virtual return” of the books.

But the term “lease” was disappointing for those who have fought for an official, permanent return.

“It’s really sad,” Park Byeong-sen, a respected librarian, said.

It was Park who discovered the books that were mistakenly classified as Chinese at a Versailles annex of the French library in 1975. The 85-year-old scholar, now in Paris, believes Seoul should have insisted on its proprietorship of the manuscripts, although that could have further delayed their actual return.

“Does it make any sense to borrow properties from those who have stolen them?” she asked.

For a civic group, the deal dashed hopes for a legal solution. The Seoul-based Cultural Action was waiting for a ruling from a Paris appellate court on the Uigwe handover. In a December ruling last year, a French administrative court acknowledged for the first time that the Korean books were stolen but said they could not be returned as they were now French property.

“The lease deal throws cold water on many campaigns to get Korean artifacts back,” Hwang Pyung-woo, a representative of the civic group, said. “We will nevertheless go ahead with our lawsuit.”

Still, many believe the French decision could help set off more returns of stolen artifacts. The Japanese government already pledged to return 1,205 Uigwe books it has been holding at the Imperial Household Agency in Tokyo. The commitment came in August on the 100th anniversary of Japanese annexation of Korea.

The Cultural Heritage Administration of Korea believes more than 61,400 Korean cultural artifacts were taken away during Japanese invasions or colonial rule. The figure may exceed 300,000, it says, if those that are privately owned are counted.

For most artifacts taken to countries other than Japan, there is no way of even locating them.

Park Sang-guk, a noted art historian and head of the non-governmental Korea Heritage Institute in Seoul, welcomed the French decision as a step toward more repatriation of Korean heritage.

“Regardless of the method of the return, we have to take it positively and receive them,” Park said. “It’s a long-awaited piece of news, a grateful one.”

G20, KORUS FTA, and Looted Books

Tags: , , , , , ,
Posted in Commentary | No Comments »

KORUS FTA Auto Hurdles

Saturday, August 7th, 2010
KORUS FTA Auto Hurdles

Korea Legal has been following the  Korea-U.S. (KORUS) Free Trade Agreement since its inception. In this Korea Economic Institute report, Troy Stangarone shares some recent insights. Troy is KEI’s specialist on the U.S.-Korea FTA.

Solving the Auto Riddle May be Key to KORUS FTA

by Troy Stangarone (ts@keia.org)

With an ambitious deadline of the Seoul G-20 Summit to resolve any remaining concerns regarding the KORUS FTA, the key to moving the agreement to a vote in early 2011 may be finding a way to solve the riddle of autos. While many of the concerns of the auto industry and its supporters predate the KORUS FTA, it has been largely unclear what measures would be needed to resolve this concern.

In recent remarks, Steve Biegun, Ford’s vice president for international governmental affairs, was quoted as saying that “We want to see complete elimination of Korean barriers to the market. We want to see a rapid increase in imports. We want to see it done in an enforceable way.” He also emphasized that a quota is not needed and that “It’s really going to be up to the Koreans, if they’re willing to make the steps necessary to open up the market.”

While Biegun’s remarks are designed to lay out expectations, they also raise a series of questions about his argument given the provisions already in the FTA and recent trends in car sales in Korea.

  • What are the barriers to the Korean market that are not addressed by the FTA and how can they be fixed in an enforceable manner? Members of Congress and the auto industry have previously expressed concerns that the provisions of the FTA do not go far enough to address the discriminatory nature of Korea’s engine displacement tax and issues related to Korea’s automotive safety and environmental regulations and certifications. However, most discussion of barriers in Korea has focused on a general concern about non-tariff barriers without specifics.
  • What would qualify as a “rapid” increase in imports in Korea. Since 2000, the sale of imports in Korea have risen from 4,414 vehicles, or 0.42 percent of the Korean auto market, to a high water mark of 61,648 in 2008 and 6.04 percent of the Korean auto market. Early 2010 date indicates these sales figures will easily be passed this year. Through June, 41,947 imports, representing 6.64 percent of the Korean auto market, have been sold in Korea. Since 2002, sales of BMWs, the leading foreign seller in Korea, have grown from 2,232 to 9,652 in 2009.

The greatest hurdle, however, may be the issue of trust. In the 1990s, the United States and Korea negotiated two memoranda of understanding in the hopes of opening the Korean market to U.S. autos to little success. Shortly before the KORUS FTA negotiations were concluded, members of the auto industry and its supporters in Congress put forward a proposal that would have utilized a non-traditional approach to this issue. It called for Korea to only gain additional access to the U.S. market after U.S. producers had gained meaningful and sustained access to the Korean market and placed the burden of proof on Korea to demonstrate that it does not have barriers to the sale of U.S. autos in its market. The industry and its supporters felt this non-traditional approach was justified because of the U.S. government’s long history of unsuccessful attempts to open Korea’s market to U.S. autos.

KORUS FTA Auto Hurdles

Tags: , , , , , , , ,
Posted in Commentary | No Comments »

South Korea–European Union FTA Talks

Saturday, July 11th, 2009
South Korea European Union FTA Talks

By Don Southerton, Korea Expert Witness Editor and Chief Blogger

Officially and privately, I have carefully followed and supported the FTA talks between the U.S. and South Korea. I’m a strong advocate. Sadly, little movement is occurring–bogged down by the global recession and politics. That said, President Lee Myung-bak strives to secure FTAs with other nations and markets.

Bloomberg notes — The European Union moved a step closer to approving a free-trade accord with South Korea after resolving two contentious issues that threatened to scuttle the multibillion-dollar agreement.

As the world wrestles with the worst economic slump in 60 years, EU national governments signaled backing for the bloc’s largest-ever free-trade agreement at a meeting of their trade experts today in Brussels. Final approval, which may come after German elections on Sept. 27, needs the support of governments at the ministerial level.

The trade experts, who were not asked to vote on the final compromise package, were “positive overall,” said Lutz Guellner, a spokesman for the European Commission. “Everybody recognized the value of the deal.”

South Korea and the EU began negotiations two years ago, seeking to expand their 76 billion-euro ($106 billion) trade relationship by scrapping import duties and other barriers in industries from pharmaceuticals to consumer electronics. Only in recent weeks did they manage to settle two outstanding issues: rules of origin and so-called duty drawback.

The trade experts’ backing comes a day before South Korean President Lee Myung-Bak starts a three-day visit to Sweden, which assumed the EU’s six-month rotating presidency at the beginning on July 1, for talks with Prime Minister Fredrik Reinfeldt. In a July 7 interview with European television network EuroNews, Lee said he hoped the trade deal would be signed by the end of August.

Duty-Free Trade
The agreement drafted in March by the commission, the EU’s executive arm, and Korea would make 97 percent of trade between the two governments duty-free within five years. It would phase out the bloc’s 10 percent tariff on Korean cars in three to five years and scrap Korea’s 8 percent duty on European autos over the same period.

The commission says the free-trade deal would eliminate duties worth 1.6 billion euros for European exporters. About 1.2 billion euros of these are levies on industrial goods, the commission says, adding that the accord would save EU auto exporters such as Volkswagen AG, Daimler AG and PSA Peugeot Citroen 2,000 euros on every car worth 25,000 euros.

Under the rules of origin that must be met for duty-free treatment, the EU restricts the level of permissible foreign content. The EU agreed to raise the level of allowable foreign content to 45 percent from 40 percent.

‘Competitive Disadvantage’
The accord also permits duty drawback — used in both the EU and Korea — but includes provisions to permanently cap refundable tariffs should there be a “notable increase” in foreign sourcing by Korean manufacturers. Under duty drawback, the levies paid on parts used to manufacture a product such as a car are refunded when the final product is exported.

The accord is a “very, very good deal” for the EU and “comes at a time of real economic stress,” European Trade Commissioner Catherine Ashton said on April 30. “That makes it more important to do the deal now, because this is one way in which our industries will benefit.”

European automobile association ACEA criticized the free- trade agreement, saying it would create a “severe competitive disadvantage” for European industries. The compromises made by the EU on duty drawback “effectively open the door for cheap imports from China and other Asian countries, without giving similar advantages to European industries,” ACEA said.

The EU was South Korea’s second-largest trading partner last year after China and has been the largest foreign investor in the country since 1962. South Korea is the EU’s eighth- biggest trading partner.

South Korea European Union FTA Talks

Tags: , ,
Posted in News | No Comments »