Update II: In case you have not been keeping track, a fourth round of FTA talks started yesterday in Jeju. A perfect way to lure Dram Man out of his hibernation. Below are some of the recent changes, but not all. If anybody has heard different, by all means comment below.
Updates: As a service to Hole readers, I have resurrected this post in order to keep a running list of the twists and turns of the negotiations. See the topic, and the date of the last update beside it.
Original: The third round is now over, and depending who you talk to little or no progress was made. However due to all the press reports, we can now construct a scorecard on what was wanted, and how much progress was made. Let’s look at things by sector. Please excuse the lack of links.
Negotiation Tactics and General Mood
Last Update: October 24, 2006
Before the details, I want to give my thoughts on the negotiation tactics being used by the both sides. I think part of the reason for the significant impasses in part have to do with the fact that both sides seem to have different styles. The Korean side seems to want to keep negotiations compartmentalized. Korea says “we talk about agriculture now, that’s it”, so compromises are to be very narrow in their view. The US side meanwhile seems to want to make compromises on a broad level, e.g. “We accept your position on Textiles, and you accept our position on Automobiles.”
Update: If you thought this was going to be easy, consider Canada. The ROK and Canada announced entering FTA talks in November 2004, they are currently (September 27, 2006) holding their seventh round of FTA talks in Ottawa.
UPDATE: In what may be the strongest sign that the US has given up on the prospects of a FTA, USTR rep Karen Bhatia is reported to have said that it is more important to work out an FTA agreeable to everyone than to rush through the process. This obviously ignores the fact that the clock is ticking on an “fast track” signing authority. Could it be the US is saying lets wait until we can renew “fast track”, which lets face it is a long long time away. On the other hand given how the aforementiond Canadian talks are going it just might take that long to get an agreement.
Update: Now lead USTR rep for the Korean talks as well said that these talks should not be subject to a deadline (despite the very real deadline of TPA expiration). (Korea Times October 23, 2006)
Update: The NK nuke test has changed things in some regards, not others. On one hand it seems to have renewed the push for an FTA among some in Korea as a way to “strengthen” or “solidify” the US/ROK alliance. Likewise comes arguments to conclude an FTA to soothe “investors”.
On the other hand, the US State Department (which runs the talks for the US side) has to be under extreme internal pressure on this. Already their trade negotiators in general are scattered to all four corners negotiating a multitude of deals, and meanwhile Korean experts in general at the State Dept. are likely more busy generating NK Nuke paperwork than economic papers. All this, along with the “no deadline” talk of the US side, makes me wonder how much emphasis the US side is putting on this. Is the US simply going through the motions out of the sake of relations with an erstwhile ally?
A final observation on my part, the Nuke issue has destroyed one of SK biggest cards, the Gaesong Industrial Complex. Oh sure, it never was going to happen however it was good for the South to keep it around so as to have a concession to yield at some time. Now though, its as empty as Gaesong worker’s pay envelope it seems.
Agriculture
Last Update: October 24, 2006
Little progress was made, and I do mean little. The little progress is mainly due to both are still talking about it and the Korean government seems to agree that their list of agricultural goods could be revised by mid-September. It is a ray of light, but who knows if it’s light at the end of the tunnel, or an on rushing train.
To clarify, the current status is the US wants every agricultural good to be imported freely by opening up the market in stages lasting 10 years. Korean meanwhile wants to protect 280+ items (284 says Joongang, 288 says Chosun) and lift what is not included in stages of 15 years.
Of those items not on the 280+ list, little of it makes sense that will take 15 years to be tariff free; there is not much sanity in my opinion. According to the Dong-A, two items in debate in this area are corn and beans for animal feed. What makes Korea’s resistance a little odd is that Korea produces negligible amounts anyway. So eliminating this tariff right away will not impact farmers one iota.
Update: The KT reports on October 23, 2006 that the US and Korea want a “safegaurd” for excess imports of textiles and argicultural products respectively. Your guess is as good as mine what they mean by “safeguard”.
Update: An October 24, 2006 JoongAng Ilbo report mentions that the Korean side is linking concessions in Textiles and the amorphous catagory “manufactured goods” to Agriculture. The US in responce as said that it has already agreed to speeding up the tariff phase out on these two products, and basicaly the ball is in SK’s court.
Textiles
Last Update: October 24, 2006
This is something the US is being hard on (perhaps to mirror Korea’s stonewalling on agriculture). Korea wants the US to eliminate all tariffs on textiles. The US basically agrees, but wants them to be phased out in 10 years (similar to their agricultural proposal, reinforcing my mirror idea). Korea finds this unacceptable and wants them phased out much faster.
For some reason the Textile issue has seemed to fixate the media. This is somewhat puzzling to me since China, India, and others are (or are set) to become booming textile importers to the US in their own right. Granted it is a big industry for Korea, but they face a very competitive market in the future in the US.
Update; The KT reports on October 23, 2006 that the US and Korea want a “safegaurd” for excess imports of textiles and argicultural products respectively. Your guess is as good as mine what they mean by “safeguard”.
Update: An October 24, 2006 JoongAng Ilbo report mentions that the Korean side is linking concessions in Textiles and the amorphous catagory “manufactured goods” to Agriculture. The US in responce as said that it has already agreed to speeding up the tariff phase out on these two products, and basicaly the ball is in SK’s court.
Automobiles
Last Update: September 13, 2006
Basically, no change. The US wants cars to be subject to a lower tariff and a revision to the engine displacement taxes. Korea is holding firm. Korea though seems to be offering a compromise on the initial tariff and giving a two-year grace period on emissions. What this last part means is not described, however clearly Korea is holding firm in my opinion.
Despite initial word that foreign nameplate cars will be excluded from the talks, some news reports says this issue is still up in the air. Out of curiosity, I wonder how a Hyundai made at their new factory in Alabama will be taxed if brought back to Korea.
Anti-Dumping
Last Update: September 13, 2006
One of Korea’s more interesting issues is their worries about US Anti-dumping and other trade protection measures. The US is firm this is not to be discussed. I wonder if again this is firmness to mirror Korean firmness in other areas.
Backing up this theory is I wonder if some of these measures can actually be placed from the executive to judicial branch of the US government. Currently once a firm is found by the Executive branch as dumping product, companies involved can sue to get compensation. Why not in turn just leave the determining and compensation to the court system? Also it the companies could conceivably be protected by anti-trust statues (granted though after Matsushita v. Zenith this can be dicey). Anyway, there is a fallback position to this for the US which can be a good compromise.
On the other hand, the US may be linking this issue to the use of government owned banks to subsidize Korean companies. Recently government subsidies given to Hynix Semiconductor were found to violate WTO rules. Part of the Hynix case was the company was allowed to dump (sell below cost to gain market share) memory chips on the US market because of these subsidies. Perhaps if Korea would agree to change its banking sector, including the somewhat controversial Korea Development Bank, a compromise can be found here.
Finally, the time difference may make this negotiation moot. The Dong-A reports that the US side has to make reports to Congress about changes in anti-dumping policy six month before signing. Keeping in mind the March to June deadline for signing (I forget the exact date), this means that an agreement on this area must be reached in the next couple months. If no progress is made the next round in Jeju, this may be a dead issue.
Pharmaceuticals
Last Update: September 13, 2006
As you may recall, some progress was made in a special session in Singapore regarding Korea’s “positive list” system. In short the US was willing to accept it if other concessions were made in areas such as intellectual property rights, testing and access in relation to pharmaceuticals. This seemed to get a positive reaction initially from the Korean side.
The US likely came into Seattle ready to put this to rest. Unfortunately this was not to be so. As further details came out from both sides, negotiations seemed to have stalled. Or perhaps somebody added more restrictions. It is unclear from the media what exactly happened, but this can was kicked down the road.
Something left out of this reporting that concerns me is there is no talk of medical devices and such being included in this. Many of the complaints about barriers, such as regulation, testing, and even the positive list system (as I recall) also applies to medical devices. Is the lack of discussion simply an omission and press shorthand or does it show a quiet compromise on the issue?
Television Market
Last Update: September 13, 2006
It seems some progress was made in the TV market. The US has seemed to have won some concession on laws limiting foreigners to a minority share of cable TV channels.
Newspapers
Last Uptdate: October 24, 2006
The Korea Times reported on October 22, 2006 that the US side asked the Korea to open up its newspaper market at the last (3rd) round in Seattle, and will likely press again in Jeju (4th round).
In case you wonder, the KT explains current Korean regulations thusly, “The law on newspapers stipulates that foreigners or foreign media branches are banned from publishing or directly selling periodicals here. The distribution of foreign newspapers is only possible via imports by Korean agents. The law also bars foreigners from holding more than a 30 percent stake in a newspaper company and a 50 percent stake in other periodicals, including magazines.”
Something tells me that, ownership aside, these could be rather minor changes in reality. I doubt any news organization really wants to start a full blown reporting, printing, sales, and distribution operation given the size of the Korean market. The current system of agents works well for most publications
Intellectual Property
Last Update: September 13, 2006
Both countries have made the obligatory pledge to respect and enforce IPR rights. Meanwhile the US has requested Korea to extend the time of copyright protection from 50 to 70 years. It is expected this will be a big issue the US will raise in the future.
Gaesong Industrial Complex
Last Update: October 24, 2006
It stands as it always did, the US saying “Over my cold dead body!”
Update: After the recent North Korean nuke test, I think even supporters of Gaesong can say “bye-bye” to this fantasy (unless of course you are a member of the Uri Party leadership). This can really impact the South’s negotiation postion however. The Nuke test destroyed a good “concesion card” the South had (ie “We will forget about Gaesong if you forget…”)
Gaming
Last Update: September 27, 2006
The Hani reports that the US side has also requested the Korean Gaming market to be opened (remember its more polite to remove the “bl”). While the Hani does not mention it in the article, I think the US is more concerned about allowing US companies bid for gaming licenses in Korea, buying existing hotel/casino complexes, and finally operating some of the back office functions of betting systems (e.g. lotto computer systems). Currently all these types are limited to Korean companies only. There will be no change in the legality of gambling in Korea as part of the FTA (watch this spun that way though)
Government Procurement
Last Update: September 27, 2006
I was waiting for this to come up. It is one of the constant complaints of US businesses, the restriction, both opaque and transparent, on contracting with the Korean government, national and local, and their alleged favoritism shown to domestic companies. Among the specific issues covered is a US request to allow companies to build and operate infrastructure to be later transferred to the local authorities (so called BOT projects, Build, Operate, Transfer).
Financial Services
Update: October 24, 2006
This is mentioned lots, but not enough details are mentioned in order to rate an inclusion on the scorecard. However there may be an explination. The Korean side has no idea what to do. The Joongang Reports the Korean side is contracting out reserach on what Financial Services are best excluded from FTA talks.
If the report is to be turned in by the end of the year, how the hell can the Korean side keep on saying that FTA talks will be concluded by the end of the year when a report to base a postion on will not even be finished by the end of the year? Figure Jan. for the report, a postion formulated by Feb., and simply initial talks to be concluded by March. CAN ANYONE SEE THE PROBLEM? “Fast Track” ends in March, or shortly after. This does not bode well.
Update: The Korea Times reports on October 23, 2006 that US regulators are likely to ask for greater freedom for transfering personal information of Korean customers overseas. The KT article referrences that Citibank was busted a couple years ago for doing the same. As I recall it was a move by Citi to consoldate back office operations in Asia. No matter the reason for the US request, this may meet some pretty good resitance if the bank unions start yelling about this.
18 Comments
Minor correction here: This should read “from life of the creator plus fifty years to life of the creator plus 70 years.” The former term is the default term under the Berne Convention, while the latter is the term the United States has. Somehow, I don’t envision the 20 year difference here becoming too contentious, although I could see where protection for collaborative works (like movies) could prove a bit of a stumbling block, seeing as how if SK follows the default rule in Berne, the term of protection for those works is roughly half of what it is in the US. Of course, I have no idea what’s on the table and what’s off of it here…
Zonath> Very right there. Sorry, got a little sloppy in my rush to get this post out before it got too stale (it’s been a few days since talks closed).
My reading of the copyright issue in this case is simply the US had brought up the subject, no specific talks are to be had of yet. However, as you point out, you never know.
I’m not going to try to defend the actions of some foreigners I don’t know, but what I can see from the video, I think the entire matter is simply comical. However, if someone were willing to take a video camera with them and film “normal” behavior of Koreans around Seoul on a typical night, perhaps the Korean media would stop sensationalizing foreign behavior so harshly and put things into perspective. My personal favorite is girl on girl action, particularly when it goes beyond just words, and actually comes down to head blows. The most disgusting thing I’ve seen in Korea is a man beating on his woman in broad daylight, everyone just ignored the situation… women in Korea are apparently considered to be less than human without any civil rights.
–Remort
R U ranting in the correct topic, Remort…?
The more I hear about this FTA, the more I think that if a deal is signed, Korea will be getting the better end of the stick. And the more barriers and exceptions Korea throws in the way, the more I think the US should walk away from it.
Walk away indeed. Pull the USFK first; let them sweat that one out as the Japanese get more hawkish.
One of the English rags published a report today of a poll saying that more than 50% of Koreans beleive that the FTA should be “postponed”. If true — it’s superficially at odds with another recent poll reported to have found that a more substantial majority “favored” an FTA — that pretty much indicates that the PR effort leadership of which recently was assumed by Han is failing and, more importantly, that the the current negotiations have exceeded their sell by date, since Korean politicians aren;t exactly known for getting out in front of the voters on issues.
Here’s an idea - unilaterally declare American markets open. Let Korea and other protectionist markets wallow in their subsidised industries wasteful excess and allow American consumers and industry to funnel our resources and energies into ever more efficient and productive uses. Everyone at these talks seems to have their priorities reversed.
Here’s a great article from the most recent Atlantic which I’ll reproduce for the benefit of all you nonsubscribers. Oh yeah, and how about considering forking out some cash for a great publication like the Atlantic while you read.
The Fruitful Lie
Trade agreements have always been greased by deception about who benefits. Now they’re failing because leaders have come to believe their own lies
by Clive Crook
…..
Apparently, it was everybody else’s fault. After almost five years of grinding negotiations, the Doha Round of global trade talks was suspended this summer, amid a flurry of reciprocal finger-pointing by many of the world’s leaders. Almost certainly, this round—which once promised to significantly reduce barriers to trade in agriculture, manufactured goods, and services—is dead.
It shouldn’t have played out like this. When the talks were launched, in November 2001, the world’s governments called them a response to 9/11—the Doha Round would demonstrate a new ambition to work together for the common good. This time, the developing countries, especially, would benefit. Indeed, this was to be the “Development Round.” Economic gains alone had been enough to ensure the success of prior rounds. This round was buttressed by geopolitical concerns as well, and by humanitarian purpose. Why, then, did it all go wrong?
The United States mainly blamed the European Union, for its reluctance to cut tariffs on farm imports. The European Union mainly blamed the United States, for its reluctance to cut farm subsidies. America and Europe wanted developing countries to lower their barriers to imports of manufactured goods. Many of those countries, led by Brazil and India, said they wouldn’t unless Europe and America conceded more on farm trade.
Whichever side you take, this kind of explanation only makes the impasse more mysterious. The United States would, after all, be better off if it cut its farm subsidies. Those subsidies cause waste, and it is Americans, not foreigners, who pay for them. Ditto for the European Union and its farm-import tariffs. Citizens of the EU would be better off if they could buy cheap imported food; the main victims of Europe’s farm policies are Europeans. And the same goes for Brazil and India, and their tariffs on manufactured imports. If they lowered these fees, both countries would enjoy a higher standard of living, and their economies would eventually grow faster because their producers would be forced to greater efficiency by foreign competition.
There are short-term adjustment costs to consider, but the case for free trade that you read about in economics textbooks is the case for unilateral free trade. The real mystery is why complex rounds of reciprocal trade-policy promises—“We’ll concede this if you concede that”—should ever have been necessary in the first place.
The standard answer is politics. The gains from freer trade—cheaper imports, mainly—are big, but they’re thinly spread and hard for individual consumers to see. The losses are smaller than the gains, but they’re concentrated in particular industries and thus more keenly felt. The losers—people who own or work for companies facing foreign competition—get organized and resist. To face them down, governments have to build opposing coalitions of winners—classically, exporters seeking lower trade barriers overseas. Starting in the 1940s, this is how successive rounds of trade talks worked. And they really did work. Again and again, the export interest defeated the protectionist interest, and trade surged. Few would deny that every participating nation benefited greatly.
It was a fruitful lie, this idea that the gains from trade come mainly from the exports you sell, not the imports you buy. But it was still a lie; the textbook case for free trade really is correct.
The interesting question is, Why has the lie stopped working? It may be that governments have just become more stupid about trade. Perhaps they’ve forgotten that the whole process—the General Agreement on Tariffs and Trade, the World Trade Organization, all that stuff—was just a ruse. They have come to believe their own mercantilist propaganda, and have embraced the misconception that their countries’ interests are served only if they can get the other guy to make concessions bigger than their own. Look at the way they walked away from the Doha Round—regretful, but with comical pride, heads held high. (India’s commerce minister said, “We don’t mind competing with American farmers, but we cannot take on the U.S. Treasury”—which subsidizes them.) All sides stood firm. Well, of course they did: they had forgotten why they were there.
And the Doha Round failed for another reason. Global trade talks are extremely complex, and a single government can veto the whole deal. So the proceedings need to be firmly led. They used to be—by America—but for a variety of reasons the task has become more difficult, and Washington no longer brings as much energy to it. Recent administrations developed an alternative: hub-and-spoke trade pacts like the North American Free Trade Agreement. Again, the thinking behind this strategy is purely mercantilist: maximize exports for any given increase in imports. Regional trade deals serve that purpose because they let the United States use the bargaining power of its huge domestic market more effectively, and thereby wring bigger concessions from its trading partners.
This local activity drains commitment from the wider global process. Worse, it creates new interests opposed to global liberalization. Mexico extracted hard-won privileges to sell goods on favorable terms in the United States as part of the NAFTA talks (at the “cost,” remember, of opening its own markets to American exports). Universal trade liberalization would diminish the value of those privileges by sharing them more widely—America would turn to other developing countries for some of the imports it currently buys from Mexico under those special arrangements. In effect, NAFTA has given Mexican exporters an interest in resisting a generalized lowering of trade barriers. And NAFTA is only one of many regional free-trade agreements that have the United States at the center.
How much does it matter that the Doha Round has failed? It depends on what happens next. The failure to liberalize is certainly expensive: estimates of the worldwide losses stemming from trade barriers vary, but over time the cost will surely run into the trillions of dollars. And the biggest losers will be developing countries, including Brazil and India. That is the saddest aspect of this breakdown. The United States and other rich countries have already opened most of their markets to trade; their remaining protection, costly as it is, is mostly confined to particular industries, like farming and textiles. For the most part, that’s not true of developing countries. Their tariffs and other import barriers are still relatively comprehensive and high, keeping imports expensive and sheltering manufacturers from the foreign competition that would raise productivity and growth.
The global cost of the Doha Round’s collapse will be even greater if previous commitments to liberal trade start to unwind. Up to now, the World Trade Organization has acted as an obstacle to backsliding, by policing the promises made by members and arbitrating frequent disputes. Its ability to do that is not yet in question, but it soon might be. At a minimum, the use of global treaties to spur further liberalization looks unlikely at the moment.
So are we at an impasse, or even a breaking point? We need not be. The end of the Doha Round doesn’t force any country to maintain its trade barriers. There is no law against lowering barriers unilaterally. That would be a great idea, and now would be a good time for it to catch on. But it would also require political courage of a sort we’ve not seen lately—from any country—and greater honesty about the true nature of trade’s benefits.
As for government procurement, a subject I know quite well, having been in more government tenders than I care to remember, I was told once, point blank, by a 조달청 employee, in charge of the tenders we were bidding for: “My duty, as a civil servant, is to help and protect Korean companies”. From this point on, the conversation – which was actually a formal complaint – went south very fast…
Good article, Corpy Carly. Look at free trade bastions like Singapore and Hong Kong–there’s a reason their per capita GDP rocks–free trade. They let other misguided wankers put up barriers. I was thinking the same thing after DOHA–the poor bastards in India and Brazil got the shaft from their “leaders.”
Corpy> While I can agree with a majority of the article (however part of me wonders if was written tongue in cheek), what I find is that it takes somewhat a simplistic view of trade policy. The lack of consideration of non-tariff barriers somewhat a flaw in the argument.
For example, lets consider the engine displacement tax under review as part of the USROK FTA. All rhetoric and history aside it is easy to argue that the tax is a non tariff barrier since it increases costs to consumers and their consumption patterns. On the other hand, all rhetoric aside, you can make a good case that the engine displacement tax encourages fuel efficiency and is better for the environment. A similar argument goes around the adoption of a “positive list” system for pharmaceuticals (barrier or healthcare cost containment).
Going back to the article, it would still be a long political debate whether or not to get rid of these issues (or for the US side things anti-dumping laws) due to the benefits not tied to protectionism. Er go, I think a trade agreement (no matter how many parties) is needed to provide the stimulus to discuss these types of changes because no politician wants to take up a problematic issue with out benefits accrued by such an agreement.
Last thought, I think one could make the case the US has pursued a very similar policy as outlined in the article since the repeal of the Smoot-Harley tariffs in the 30’s. Or even possibly since its beginnings as a country (the Revolutionary War was sparked in part by English Mercantilism). So if to act as outlined in the article, I think it would be more a redoubling of efforts than a new innovative policy line.
“US State Department (which runs the talks for the US side)”
It’s the USTR who runs that show.
Slim> As I understand it the USTR is under the Dept. of State with other departments consulting.
I believe all those civil servants in the ROK Ministry of Foreign Affairs and Trade(MOFAT) has missed the meaning of the word Free Trade Agreement.
A FTA means that ALL goods and services should flow from one country to another without tariffs and hindrance. But to the ROK MOFAT, I think they translated it as goods and services should flow from one country to another without tariffs and hindrance, BUT some goods should be protected for the sake of national interests.
To the guys in the Blue House and the MOFAT building at Sejong-ro, you asked for this FTA. My suggestion is that you work with the USTR and negotiate a TRUE FTA. If not, drop it, apologize to the US side and the Korean people for wasting eveyone’s time and taxpayer’s money and go back to being the pathetical little people you are.
Does anyone have any decent English-language resources that give a (somewhat) balanced view of the FTA?
I work with Koreans in China and enjoy “discussing” these kind of topics with them, but wouldn’t mind educating myself a bit more…
Repeat after me: There will not be a Korea/US FTA from these negotiations, and the Noh admin never intended for there to be one? Ask yourself, why would they, America-suspicious to the core of the party, ever propose this in the first place? Why has Noh, and GeunTae, and Finance Minister Han, and Foreign Minister Ban all said nothing or next-to-nothing in support of or public selling of this?
This FTA is meant, pre-election, to infuriate the Uri base of farmers, students, trade unionists and also win sympathy with the general population long propagandized to conviction that America is a bully and any dealings with America must surely be humiliating victimization.
This seems preposterously illogical, that by commencing free trade talks a party can ride a wave of anti-FTA sentiment. Then, you remember you are in Korea.
Notice the silence of the Uri leadership on this issue?
America should give some polite reason to back out, NOW. This is a colossal waste of the entire trade team’s time, and if played out to the end along Uri party calculations may actually contribute to these fools being re-elected.
Is there any good commentary available on the Canada-Korea FTA talks? Seems like a great deal for everyone - Canadians get cheap tangerines and cars, and Korea gets oatmeal and maple syrup! What’s keeping them from fast-tracking that?
To Sweet Lou,
this one for US/Korea FTA:
http://www.consejomexicano.org.....5374,841,7
This one for gov’t support for agricuture, by country:
http://www.oecd.org/dataoecd/63/54/32034202.pdf
Also, just Google “jeffrey schott” + korea
Happy reading!
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Give Me Prosperity, Or Give Me Death!…
No! No! No!
A ROK-US Free-Trade Agreement is not for the Bush administration, the Roh administration, or even for ROK or US, and definitely not the two countries’ militaries; it’s for South Korean and American consumers and businesses.
As negot…
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