Korea-U.S. FTA

What's the Right U.S. Policy Towards the Kaesong Industrial Complex?

Dick Nanto and Mark Manyin of the Congressional Research Service (CRS) have prepared a report on The Kaesong North-South Korean Industrial Complex (February 14, 2008).  The Complex is an industrial park for South Korean firms located in the north, and using North Korea labor.  Korea tried unsuccessfully to get the U.S. to agree to treat products from the complex as if they were originating in South Korea.  Nanto and Manyin provide an overview of the issue, and discuss U.S. Policy options.  The abstract:

So. Korea's Shifting Stance Towards the Regime in the North

Evan Ramstad reports from Seoul that the likely winner in this month's So. Korean Presidential elections, Seoul's former Mayor Lee Myung-bak, is likely to take a harder line with North Korea than his predecessors: Why South Korean Vote May Fray Ties With North. Front-Runner Promises Tougher Stance on Aid; Public's Priorities Shift (Wall Street Journal, Dec 17).

Probably not a selling point in the U.S.

The Korean Prime Minister traveled to the Kaesong industrial park and said, "The planned ratification of the South Korea-U.S. free trade agreement will pave the way for the export of products built in Kaesong to the U.S. market..." (Yoo Cheong-mo, Prime Minister Han visits N. Korean industrial park, Yonhap News,  Dec 12):

Labor Rights in the Export Processing Zones

The export processing zone in North Korea at Kaesong is an important part of South Korea's efforts to improve relations with the North.  South Korean companies make products there for domestic use and export using North Korean workers.  New zones may be added in the future.

The South Koreans wanted the FTA to cover goods from these zones.  The final agreement didn't allow this, but created a framework - including a joint U.S.-Korean committee - for deciding whether or not to do so in the future.  These provisions are in Annex 22-B.

Human Rights Watch objects to these provisions.  In fact, it thinks the whole agreement should be abandoned because of this one section.  It feels the agreement misses an opportunity to push North Korea even harder towards improvements in the treatment of workers.

These are the key provisions of the annex:

The CRS Kaesong Report

 

The South Korean's had hoped that the FTA would provide access to the U.S. for goods made in the Kaesong industrial zone it is helping to develop in North Korea.  The agreement didn't.  The Congressional Research Service (CRS) released a report on the issue in July: The Kaesong North-South Korean Industrial Complex (Dick Nanto and Mark Manyin, July 19, 2007; hat tip to John Feffer, Japan Focus, Oct 24, 2007).  Here's the executive summary:

Export-processing zones in N. Korea: Annex 22-C

The export-processing zone at Kaeseong or Gaeseong in North Korea has been an important part of So. Korea's outreach to the north.   On the other hand, the U.S. is extremely sensitive to the political implications of these goods, and is concerned that the workers producing them are being exploited.

The export-processing zone at Kaeseong or Gaeseong in North Korea has been an important part of So. Korea's outreach to the north.   On the other hand, the U.S. is extremely sensitive to the political implications of these goods, and is concerned that the workers producing them are being exploited.

Kaesong

The U.S. and So. Korea are working on a Free Trade Agreement (FTA).  The first round of negotiations was held in Washington in early June; the next begins July 10 in Seoul.  The potential economic and political benefits are attractive for both countries (Are there large potential benefits from a U.S.-S. Korea FTA? , June 18). 

Jeffrey J. Schott, Scott C. Bradford, and Thomas Moll  provide a useful overview of the issues in their recent report: Negotiating the Korea–United States Free Trade Agreement (Institute of International Economics, June 2006).

They point out that one of the key issues is a So.Korea joint venture with No. Korea in an industrial park at Kaesong in No. Korea.  This is an important project for the So. Koreans: