hankyoreh

By Kim Jeong-pil, staff reporter

The US government regards Korea’s National Commission for Corporate Partnership (NCCP) as a de facto government body and believes that the commission’s designation of business sectors that are suitable for SMEs - blocking chaebols from entering and expanding into new markets - represents government policy, a recent report says. This is being read as a warning that the selection of SME-appropriate industries might be in violation of the United States-Korea Free Trade Agreement (KORUS FTA).

The 2014 National Trade Estimate Report on Foreign Trade Barriers, which was released on Mar. 31 by the Office of the US Trade Representative (USTR), states that the commission is slowing down the expansion of American restaurant chains into South Korea, leading related American industries to raise concerns last year. Noting that the commission partially relies on government funding and that the commission chair is also appointed by the government, the report suggested that it is more similar to a government agency than to a private-sector organization.

“Although NCCP claims to be an entirely independent body, its government funding and the fact that criminal and civil penalties can be assessed on firms and individual executives who fail to comply with its guidelines suggest that NCCP has a strong connection to the government,” the report said.

In 2013, the commission designated family restaurants as a suitable business area for SMEs in 2013 and limited the number of new branches that could be established, rules that also applied to American restaurant chain Outback Steakhouse. Citing this as an example, the report noted that the commission forced “US companies in the sector . . .to choose between significant geographic restrictions on where they could open new stores or a limit of only five new stores a year nationwide for the next three years, a major reduction in the expansion plans of at least one US firm.”

By declaring that the commission is acting like a government organization, the US Trade Representative seems to be taking preemptive steps to put it on the record that the commission’s designation of SME-suitable industries is restricting American companies’ access to the South Korean service industry and could be contested in the future. Article 12 of the KORUS FTA states that non-governmental bodies that exercise power entrusted by the government must also comply with the provisions of the agreement related to liberalizing the service sector.

“The United States has raised concerns about this organization’s activities, urging Korea to consider carefully the effect that NCCP has on Korea‘s business climate and on foreign investors. The United States will continue to monitor its activities closely in 2014,” the report said.

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