[Column] After revealing the FTA text: how much did Korea give up?

Posted on : 2007-05-28 15:06 KST Modified on : 2007-05-28 15:06 KST

By Lee Hae-yeong, professor of International Relations at Hanshin University

The full text of the free trade agreement with the United States has been released. To the masses who have grown weary of the almost two months of the government’s self-congratulatory propaganda about how well it did in the negotiations that ended in April, the news is like welcome rain after a long drought. Did not someone say the trade deal was "like a second founding of the nation," in order to say the economic negotiations are the biggest news since Dangun’s founding of the Korean nation in 2333 B.C.E.?

The so-called "balance of interests" the government makes so many claims about is illuminated best by looking at the automobile sector. Let us take a look at the actual agreement. The U.S. is going to immediately get rid of its 2.5 percent import tariffs on automobiles and Korea in exchange will give privileges in non-tariff areas such as taxation, the environment, safety, and technology standards. By promising that Korea is not going to implement taxes based on automobile emissions, we gave up our sovereignty in the area of taxation. Korea agreed to go along with the Automotive Working Group, something one might as well call a U.S. industry lobbying body that will deal with all sorts of issues relating to automobiles (Annex 9-B). The worst of it is seen in the "alternative procedures for disputes concerning automotive products," particularly the so-called "snapback provision" (Annex 22-B). In this, Korea agreed to something unprecedented in the history of world trade agreements, that when there is "nullification or infringement" of "expected profit," the condition for "non-violation complaints," or when there are actual violations, the U.S. can re-impose its 2.5 percent tariff. Given how all of Korea’s car ‘exports’ to the U.S. will actually be produced in factories in that country by two years’ time, the economic effect of having the 2.5 percent tariff gone is going to be nothing or next to it. In exchange, Korea has handed over its domestic automobile market. Just which country is the Korean government working for when it calls this a "balance of interests"?

The problem with the part about "Outward Processing Zones on the Korean Peninsula," which relates to the Gaeseong Industrial Park in North Korea, is similar (Annex 22-C). The problem here is a matter of how conditions are to be met, namely the denuclearization of the peninsula, inter-Korean relations, and "related international norms," essentially labor standards based on those of the International Labour Organisation. The U.S. can add additional conditions however it so desires. This means that Gaeseong, at its essence an internal issue for the Korean people, has been excessively politicized and in the process Seoul’s North Korea policy has been made subordinate to the U.S., as this stipulation requires the approval of the U.S. Congress.

"Annex 11-B: Expropriation" is also problematic. This annex was included at the demand of the U.S. Korea had requested discussion of indirect expropriation as it relates to real estate and taxation in part 3.B of Annex 11-B, but all it got was mention of "real estate price stabilization" and even that is limited to "measures to improve the housing conditions for low-income households." Previously, the government claimed that real estate policy would be excluded from indirect expropriation. However, looking at the actual document, who could possibly claim that key parts of Korean real estate policies - like the designation of certain areas as "speculative investment zones," the permit system for land transactions, claiming development profits, and various "reconstruction" allotments - are not going to be part of the sections on indirect expropriation and investor-state disputes?

The government boasts that it got "A-7 pricing" on so-called "innovative pharmaceuticals" excluded from the negotiations, that being something that could render irrelevant Korea’s procedures for determining appropriate pharmaceutical prices. However, in Article 5.2, which is about "Access to Innovation," however, there is no mention of that. Instead, under the name "competitive market-derived prices," you have the "A-7 pricing" still there under a different name. The new commerce policy agreed upon by the Bush administration and the U.S. Democratic Party wants key parts of the document Korea yielded on about pharmaceuticals - such as data exclusivity, extending patent periods, and approval-patent linkage - changed because they excessively restrict the general public’s access to pharmaceuticals. The government calls this an "improvement" in how things work. Just what kind of government says, "This is how they do it in fully advanced and industrialized nations," when in fact even the other nation party to the trade deal thinks this section is a problem?

Agricultural safeguards are so insignificant it hardly matters whether they are in place or not, and when it comes to intellectual property rights you find yourself embarrassed to call the process a "negotiation." The whole host of committees, ten in all, can be "expected" to play the role of a whole separate government. They will be commissioned with a considerable portion of public policy. The government still seems dissatisfied and wants "technical consultation" - the U.S. is calling it "renegotiation". Why would that be?

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

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