Investor-state dispute system called “toxic provision” in KORUS FTA

Posted on : 2017-12-18 17:04 KST Modified on : 2019-10-19 20:29 KST
The South Korean government will demand its revision during upcoming negotiations
South Korean Trade Minister Kim Hyun-chong answers a question during a parliamentary audit by the National Assembly Committee for Trade
South Korean Trade Minister Kim Hyun-chong answers a question during a parliamentary audit by the National Assembly Committee for Trade

The South Korean government has formalized plans to demand a revision to the investor-state dispute system (ISDS) during KORUS FTA amendment negotiations with the US. The ISDS has been repeatedly cited among the “toxic provisions” in the current agreement.

An implementation plan for the renegotiations submitted to People’s Party lawmaker Son Kum-ju on Dec. 17 by the Office of the Minister for Trade states the administration’s plan to “reflect the ISDS and other areas of interest raised by South Korea.”

The ISDS is a system by which private businesses and investors in a country subject to an agreement may go to an international arbitration panel to demand compensation from that country’s government for damages as a result of its policies. Many have cited it as a toxic provision that potentially constrains the administration’s ability to formulate public policies and the National Assembly’s legislative authority.

An official in the Ministry of Trade said Seoul is “working on a negotiation strategy of narrowing the scope of amendments as much as possible and keeping them small and mild.” But the official also said the “inclusion of ISDS improvements means that area will be considered particularly important among agenda items.”

The source went on to say that the Ministry would “hold discussions with the Ministry of Justice and other relevant agencies to establish a concrete amendment plan for this provision to prevent future cases from emerging.”

In the implementation plan, the administration stated “promoting reciprocity and achieving a balance of interests” as its goals for the negotiations. Its strategy is to state its own corresponding demands in response to the US’s calls for amendment, while keeping amendments small in scope and mild in effects.

In the case of products, it plans to respond to US calls for faster abolition of residual tariffs and adjustments on major items with its own demands for faster residual tariff abolition, reduction of non-tariff barriers, and preventions of additional openness in farm and seafood products. In terms of place of origin provisions, it is anticipating US demands for stronger regulations on automobiles, including the mandatory use of US-made parts, and is planning its own calls for improved standards to address industry production structure and issues.

Following a National Assembly report on Dec. 18, the administration plans to finish domestic implementation procedures for the negotiations and begin discussions with the US on the date for beginning talks. The administration has said it plans to hold “a first round of negotiations in late 2017 or early 2018, with follow-up negotiations at three- to four-week intervals.”

By Cho Kye-wan, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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