Korean Opposition Promises To Axe KORUS FTA

by Mary Swire, Tax-News.com, Hong Kong

13 February 2012

South Korea’s main opposition Democratic Party (DP) has confirmed that it would cancel the free trade agreement (FTA) with the United States if it became the majority party in parliamentary elections due in April this year.

Despite the so-called KORUS FTA’s approval by the National Assembly late last year, and while talks are presently continuing with the United States for its implementation, the DP’s leader, Han Myeong-sook, has insisted that, unless the agreement is re-negotiated in the next month, her party would repeal it in the next parliamentary session. The DP holds a big lead in the opinion polls for the up-coming elections.

The DP, which caused rowdy scenes when the government forced the agreement through parliament, remains implacably opposed to the KORUS FTA, and is demanding that the agreement should be re-balanced. It believes that, following its first renegotiation in December 2010 at the insistence of the US, the treaty is now too favourable to the latter, and that it should be further renegotiated.

It is particularly calling for the cancellation of the agreement’s investor-state dispute (ISD) settlement clause, having initially called for, and obtained, additional assistance for South Korean farmers, traders and small- and medium-sized enterprises (SMEs), who would be affected by imports of products following reduced tariffs and by the opening up of the local market to US investments.

The DP had demanded that the ISD settlement system should be dropped from the FTA legislation completely, before its passage through parliament. It is said that the clause would open South Korean companies, particularly SMEs, to attack from US companies on domestic regulations established for the protection of local industries.

While the government and the ruling Grand National Party have persisted in their view that any demand for a further renegotiation of the KORUS FTA remains unrealistic prior to its ratification, they have shown a willingness to commit to enter into further talks with the US on the ISD settlement clause within a short period after the agreement entering into force.

However, the DP has rejected any such offer and has reiterated that the ISD settlement clause should be removed from the KORUS FTA, and that the government should look at whether there should be other changes to the agreement where US laws could possibly conflict with South Korean laws, prior to its ratification.

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