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October 29, 2006

October in Jeju: KORUS FTA - the 4th Session

Last week, from October 23 to 27, the U.S. and So. Korea held the 4th negotiating session on their proposed Free Trade Agreement. 

This post is a collection of links to, and "clippings" from, news coverage of the session.  Korean coverage of the negotiations was much more extensive and detailed than U.S. coverage, so the post may reflect Korean interests and perspectives disproportionately.   I'll update this post if I get new information.

The negotiations took place in the Korean city of Seogwipo on Cheju or Jeju Island.  This story from The Hankyoreh, "Jeju Island opposed to hosting FTA talks," explains that the Jeju government wanted to see the negotiations take place somewhere else, because they expect the FTA to hurt the local economy, particularly tangerine agriculture.   

As in earlier negotiating sessions, the round had a number of separate issue-oriented negotiating groups:  "The round will deal with 16 divisions, including commercial goods, agricultural products, and textiles, and working-level negotiations in automobile and pharmaceutical areas. Government procurement division negotiations were held separately in Geneva on October 16. " (4th Round of Free Trade Talks Begin , The Dong-A Ilbo, Oct. 23)  This Korean Embassy website lists all the different divisions of the negotiations, as they stood in the spring, and names the Korean and U.S. officials in charge of each: Free Trade Agreement .

My impression is that the negotiators were more upbeat after this round of talks than they had sometimes been, following earlier rounds.  The People's Daily Online (S.Korea says progress made in FTA talks with U.S.,  Oct. 28) quotes chief U.S. negotiator Wendy Cutler,

"In general, I think we moved forward the talks," said U.S. chief negotiator Wendy Cutler, who also works as assistant U.S. trade representative. "This is a big step forward from the previous rounds."

Cutler said considerable progress was made in customs, re- manufactured goods, administration of agricultural tariff rate quotas and anti-corruption provision during the talks. She acknowledged that wide gaps still remain in agriculture, industry and other sensitive sectors.

The chief Korean negotiator, Kim Jong-hoon, was also upbeat (Korea, U.S. Wrap up Fourth Round of FTA Negotiations with Practical Progress, Oct 27):

Kim Jong-hoon, chief negotiator for Korea to the bilateral trade negotiations, stressed at a new conference after the talks ended, “"During this round, Seoul and Washington have made practical headway," saying that the U.S. offered Korea an improved concession to cut tariffs on some 1,000 industrial goods, which include mobile phones and other high-tech products of great interest to Korea..

Cutler said that the U.S. delegation had about 100 members, drawn from almost 20 agencies.  Korea fielded a delegation of about 250 from 26 ministries, and 13 public institutions .... and 10,000 riot police (4th Round of Free Trade Talks Begin , The Dong-A Ilbo, Oct. 23); S. Korea-U.S. free trade talks resume, overshadowed by nuclear issue , The Hankyoreh, Oct. 22)

Recent background events

On October 9, North Korea tested  a nuclear device.  Marcus Noland, of the Institute for International Economics, had analyzed the potential impacts of a nuclear test on the Korea economy months before: The Economic Implications of a North Korean Nuclear Test (Asia Policy, July 2006).  The Hankyoreh carried a Yonhap News Agency story that discussed this issue, among others (S. Korea-U.S. free trade talks resume, overshadowed by nuclear issue, Oct 22):

The Seoul-Washington trade talks, which began in June, have so far made no big headway, as both sides have been trying to shield their respective weak industries. Korean farmers fear that an FTA with the U.S. would threaten their livelihoods.

This round of talks, slated to continue until Friday, comes against a backdrop of North Korea's Oct. 9 underground nuclear test. The U.S. is trying to rally stronger international support for arms and financial sanctions imposed by the U.N. Security Council on North Korea.

Government officials and independent analysts agree that the North's nuclear crisis would spoil the trade talks. Some said it would rather speed up the negotiations.

"While the nuclear test clearly increases tension within the region, it is not likely to have a negative impact on the FTA negotiations," said Troy Stangarone, director of congressional affairs and trade analysis at Washington-based Korea Economic Institute, in an e-mailed interview with Yonhap News Agency.

"Rather than casting a cloud over the negotiations, the test highlights the importance of both the U.S.-South Korea relationship and moving forward with the FTA," he said.

Stephen Norton, a spokesman for the U.S. Trade Representative, insisted that an FTA with the U.S. would help allay rising security concern among South Koreans in the aftermath of the North's nuclear test.

"The events on the Korean peninsula simply underscore the importance of maintaining close ties between the United States and the Republic of Korea. A free trade agreement will advance that effort," Norton said.

Voicing concern about possibly jittery foreign investors, South Korea's Finance and Economy Minister Kwon O-kyu said the North Korean nuclear crisis has highlighted the importance of an FTA with the U.S.

Between the third negotiation in September, and the fourth in late October, the possibility of the Democrats capturing one or both houses of the U.S. Congress in the November 7 mid-term elections was widely discussed in the U.S.  Since much of the interest in liberalalizing trading arrangements in recent years has come from the Republicans rather than the Democrats, this raised the likelihood that the Congress may be less supportive of an FTA in 2007.  U.S. bloggers Dan Drezner and Jonathan Dingel discuss the issue.  Here is a Council of Foreign Relations brief on the trade implications of Democratic gains: Taking the Slow Track on Trade (Oct 23)

Since August, it had become increasingly clear that the FTA negotiations would not be completed in 2006, as originally contemplated.  The fifth round of negotiations is scheduled for the United States from December 4-8, and a sixth round is now scheduled for mid-January. (S.Korea says progress made in FTA talks with U.S., People's Daily Online, Oct. 28)

Negotiations continued after the 3rd session in early September in Seattle.  Cutler noted in a Monday news conference (Cutler Press Conference, October 23, 2006, Jeju, Korea) that:

Since the third round of negotiations in Seattle, both sides have taken a number of steps to advance the negotiations. And these steps include teleconferences and videoconferences between several negotiating groups, including services andpharmaceuticals. And Ambassador Kim and I have been in frequent contact. In addition the government procurement negotiating group met last week in Geneva.

Here is a transcript of the Cutler press conference: United States Trade Representative Wendy Cutler, Press Conference, October 23, 2006, Jeju, Korea (USTR web site).  Deputy USTR Karan Bhatia also spoke on FTA issues  at Yonsai University on Oct 24, dealing with four "myths" about the impact of an FTA: Remarks by Ambassador Karan Bhatia Deputy U.S. Trade Representative (USTR web site).

News reports on different issues:

As noted above, there were 16 different topical negotiations.  The newspaper stories, however, tended to focus on a few topics.

Manufacturing and textiles:

  • The U.S. made concessions on manufactured goods and textiles on Monday, but the talks in the manufacturing meetings broke down almost immediately over Korean disappointment with the scale of the concessions.  Cutler's press conference indicates that these concessions were accelerations in the timing of tariff eliminations.  The chief negotiators negotiated a restart. (Fresh Korea-U.S. FTA Talks Stumble on First Day , Chosun Ilbo, Oct. 24)  Cutler also noted that a large proportion of the U.S. manufacturing concessions dealt with auto parts.
  • Negotiations resumed on Tuesday, when new U.S. proposals were put on the table.  Korean sources indicate that the U.S. sweetened its offer to drop tariffs on 1,000 products immediately.  (Korea-U.S. Talks on Manufactured Goods Resume , Chosun Ilbo, Oct 25)
  • On Wednesday, Korea indicated that the revised U.S. tariff concessions were still inadequate.  "Sources said the revised proposal failed to satisfy Korean negotiators, as the concessions did not include tariffs on major export items, including the current 2.5 percent tariff on automobiles and almost 20 percent tariff on trucks." (Korea, US Wrestle Over Tariff Reductions, Kim Yon-se, Korea Times, Oct 25.)
  • The U.S. made a revised proposal on manufactures on October 24, but the Koreans did not find this satisfactory.  The U.S. still placed cars in an "undefined category" meaning that the tariff concession still had not been decided.  The story suggests the U.S. is keeping auto concessions up in the air, to pressure Korea on agriculture.    Free-trade talks continue, heated (The Hankyoreh, Oct 26)   "..Korea is still dissatisfied with a revised proposal the U.S. submitted the previous day that would immediately scrap tariffs on some 1,000 goods but does not include the lower tariffs on car parts Korea wanted."  (Korea-U.S. Free Trade Talks Stumble Over Textiles , Chosun Ilbo, Oct. 26)  "...the U.S. said it would compromise on the auto parts sector by removing tariffs within 10 years. Its previous position was to designate the area as "undefined," which means there would be no timeframe for concluding debate over the issue, and it would likely not be included in the terms of the FTA....The U.S. remains adamant upon keeping automobiles as an "undefined" category under the FTA, while South Korea is sticking to its stance that it wants concessions from the U.S. in that area." ('Some progress' in FTA talks; big issues still unresolved, The Hankyoreh, Oct 28)
  • "....while South Korea refused to revise its tax system on foreign cars, which is said to limit sales."  (S.Korea, U.S. FTA talks end, no progress, UPI, Oct. 27)
  • Yarn-forward rule: textiles must be made from Korean yarn to qualify as Korean goods for U.S. tariff purposes.  Since most Korean products are made from imported yarn, Korea will get more benefit it this rule can be modified.  No progress: Free-trade talks continue, heated (The Hankyoreh, Oct 26)  "Korea wants the U.S. to soften regulations on country of origin which Washington says are necessary to protect its textile industry, but the U.S. refused and walked out." (Korea-U.S. Free Trade Talks Stumble Over Textiles , Chosun Ilbo, Oct. 26)  "The U.S. side proposed eliminating tariffs over 10 years for textile imports..." (S.Korea, U.S. FTA talks end, no progress, UPI, Oct. 27)  Textiles talks, scheduled for three days, were terminated after two: Free-trade talks continue, heated, The Hankyoreh, Oct 25.


  • In her press conference, Cutler indicated that the U.S. opened the meeting with concessions on agriculture - again, accelerating tariff reductions.
  • Korean agriculture: Korea presented a revised proposal to the U.S. on October 25, but it didn't go far enough, "leaving most of the 284 exemptions intact."  The Korean lead on the agriculture negotiations said, "there is no difficulty in introducing special safeguards on agricultural products, but the discussion is still ongoing as to how to fine-tune the products involved and the breadth of the proposal."  Free-trade talks continue, heated (The Hankyoreh, Oct 26)   "South Koreans offered to cut or eliminate tariffs on 240 agricultural products, excluding rice, beef and oranges, but the U.S. side rejected the proposition, and insisted on no exceptions." (S.Korea, U.S. FTA talks end, no progress, UPI, Oct. 27)
  • "In the agricultural sector, Korea offered a revised concession list on opening markets, but the U.S. turned it down saying there was no noticeable change in the items Korea wants kept out of the free trade agreement. The two sides agreed in principle to come up with safeguards or emergency export restrictions in the agricultural sector but differed on how long such measures should exist. The U.S. wants them to be temporary and Korea permanent. "  (Korea-U.S. Free Trade Talks Stumble Over Textiles ,Chosun Ilbo, Oct. 26)
  • The news stories don't say much about rice.  Cutler was asked, in the news conference at the start of the negotiations, "...as I understand it you have not yet made an official request to open up the Korean rice market.  So could we understand that this represents the United States respecting the sensitivity of the product in Korea?"  Her answer was that, typically it trade negotiations, the hardest issues were delayed until later in the process.  "So I would not read anything into the fact that we haven't started officially negotiating on rice.  Let me just say that this is not unique for rice, there are other sensitive issues in the negotiation that we're kind of putting aside for now, once again, so that we can focus on the easier issues, the middle issues, make progress, and then get to the more difficult issues at the end of the negotiation."  (Cutler Press Conference, October 23, 2006, Jeju, Korea)
  • "Washington wants Korea to fully open up its agricultural market within 10 years after the trade pact goes into effect.  Korean negotiators suggested that a grace period of five years may be required for the introduction of such products in the short term, 10 years for the mid-term and 15 years for products Korea wants to introduce very slowly. These are longer than the immediate, three-year, five-year and 10-year liberalization timetable that Seoul and Washington agreed on for manufactured goods. " (Negotiators fight tight deadline as FTA talks open in Jeju , Yoo Soh-jung, The Korea Herald, Oct24)
  • What the U.S. cattlemen want: "In 2003 alone, this export market for cattle producers was valued at over $815 million – our third largest export market. NCBA supports this FTA but several key issues must be resolved, including: the re-opening of the South Korean market to beef, elimination of Korea’s tariffs on beef, and resolution of important sanitary and phytosanitary (SPS) issues."  (Cattlemen's Capitol Concerns, cattlenetwork.com, Oct 27).


  • A leaked memo suggests there are divisions within the Korean government about the appropriate position to take on intellectual property rights (IPR) issues.  "The memo showed that the Ministry of Foreign Affairs and Trade (MOFAT) was pushing for an early consensus to clear one of the big barriers to the establishment of the FTA but other government agencies showed reservations."  The story is not very clear about the nature of the disagreements.  (IPR Dispute Delays FTA, Kim Yon-se, Korea Times, Oct. 25)
  • The Hankyoreh reported conflicting stories on one aspect of screen quotas.  To get the negotiations started, the Koreans made a commitment to reduce requirements that movie theatres show domestic films 146 days a year.  They cut these domestic film quotas in half.  The Hankyoreh reported that in teleconferences leading up to this meeting, the U.S. requested the Koreans to exempt films delivered digitally from the quota requirements.  "Currently, the majority of film prints distributed to theaters are in the form of film stock. But industry watchers predict that in a matter of years, films will be distributed to movie theaters online, via digital files. This would mean the U.S. proposal could be a loophole in which the screen quota system will be neutralized in the future, when all movies are digitally transmitted, industry experts said. South Korea thus reportedly wants digital prints to also be included under the quota system." (US makes proposal on FTA screen quota issue: sources, The Hankyoreh, Oct. 24)  However, a subsequent story in The Hankyoreh reported that, on Tuesday, Korean officials denied this report: S. Korea denies U.S. demanded wider opening of digital movie market in FTA talks (Oct. 24)
  • Here is a report that the So. Koreans have made an informal commitment to not increase the domestic film quotas after an FTA is signed: "Our position for the future is that Korea will by all means keep its promise to the U.S. to maintain the reduced screening quota (or further curtail it).   It is a promise between the two countries,’’ said the memo, distributed to related ministries.  Our statement that we will get concessions from the U.S. (in which the screen quota for Korean movies can be re-implemented in its original strength if the domestic movie industry faces difficulties) is merely a persuasion card to placate the domestic movie industry,’’ the government document also said."(Seoul Pledges More Screen Quota Cut, Kim Yon-se, Korea Times, Oct. 27)
  • The U.S. is requesting that its financial services firms doing business in the Korean market have the right to bring personal information about Korean citizens outside the country.  A story by Kim Yon-se in the Korea Times suggested that this might be an issue in these meetings: US Wants Credit Data on Koreans (Oct. 23)
  • Kim Yon-se also reported, just before the meetings, that the U.S. was pressing Korea to open up its media markets: US Demands Wider Opening of Korean Newspaper Market, Korea Times, Oct. 22)  "The [Korean - Ben] 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.  Korea replied that there are no regulations which prevent foreign papers from providing articles via the Internet, he said. "
  • The U.S. and Korea didn't reach a meeting of the minds on legal services: South Korea Poised to Admit Foreign Lawyers as Trade Bill Looms (Edvard Pettersson, Bloomberg, Nov 8 - a nice survey of the issues connected with opening the Korean legal market)

Other issues:


There were a variety of protests conducted during the period of the negotiations:


On Thursday, Wendy Cutler found time to visit a local school.  A report on the gdimension blog: FTA Talks Wind Down.

A Korea Times poll conducted in Korea immediately after the negotiations, on October 28 and 29, found Koreas divided over the FTA.   

About 46 percent of respondents in the latest Korea Times survey said that they support a bilateral free trade agreement (FTA) between Korea and the United States. Among this 46 percent, 3 percent said they fully back the trade accord, while 43 percent said they are ``more or less¡¯¡¯ behind an FTA with the U.S... 

Almost 44 percent oppose Korea¡¯s plan to seal an FTA deal with the world¡¯s largest economy, the U.S., fearing that full market access will further polarize and imbalance the nation¡¯s economy.

Among this 44 percent, 9 percent strongly raised their voice against the bilateral trade deal, while about 35 percent said they ``somewhat¡¯¡¯ oppose the KorUS-FTA.

The remaining 10 percent said that they are not sure whether an FTA with the U.S. will result in a ``win-win¡¯¡¯ situation or not.

(Nation Divided on FTA, Park Hyong-ki, The Korea Times, Oct 31).  Here is another story on what sounds like the same survey.  Topics covered range from the FTA, to opinions about North Korea, to what foreign countries you like or dislike: Economic Slump More Serious Than Nukes (Ryu Jin, Korea Times, Oct 31).

Post revised on Oct 31.


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