Months After Ratification, Sparring in Seoul Continues over US FTA

15 February 2012

The recently ratified trade pact between the US and Korea could soon face a new setback, with opposition parties in Seoul warning that they might repeal the bilateral deal unless various provisions of the pact are renegotiated.

"If we become the majority party in the upcoming general elections as expected, we will take every measure possible to repeal the Korea-US FTA," the Democratic United Party (DUP) - South Korea's main opposition party - said in a letter to US officials, including US President Barack Obama.

South Korea is set to hold elections in April of this year; recent polls indicate that the Democratic United Party will likely win the election by a wide margin.

In response to the opposition parties' threat to repeal the pact, ruling party leader Park Geun-hye said on Monday: "[The DUP] claimed it was pushing for the FTA for national interests when it was in power, but it is now making the exact opposite argument after it became an opposition party."

"I cannot let those who claim they will scrap the FTA if they win the elections lead the country," Park continued.

The FTA was ratified by the US Congress and signed into law in October of last year; the pact was then ratified a month later in the South Korean parliament in a chaotic plenary session that saw one opposition lawmaker release a tear gas canister in protest as the ruling Grand National Party pushed the pact through. (See Bridges Weekly, 23 November 2011)

The pact has not yet been implemented, however, with discussions between Seoul and Washington on scheduling continuing.

Bilateral trade in goods between the two countries totalled US$88 billion in 2010, according to the Office of the US Trade Representative. The US-Korea pact is expected to increase US goods exports by approximately US$12 billion, according to estimates from the US International Trade Commission.

Investor-state dispute clause, automobile market access questioned

The DUP, together with the United Progressive Party - also an opposition party - have called for the renegotiation of ten clauses that they have deemed "poisonous," including an investor-state dispute clause in the trade pact's chapter on foreign investments that allows either party to bypass domestic courts and refer investor-state disputes to an international arbitration panel.

Critics argue that this provision would give US investors undue right to sue the Korean government; proponents note that the clause has already appeared in past Korean FTAs and has yet to lead to Seoul being sued.

The US-Korea trade pact was signed in 2007 under then-US President George W. Bush and then-Korean President Roh Moo-hyun. At the time of signature, the DUP was still in power in Seoul. The agreement was then renegotiated in 2010 in order to resolve differences between the two countries on automobiles and beef trade (see Bridges Weekly, 9 December 2010).

The 2010 changes to allow US automakers greater access to the Korean market - specifically a special safeguard clause - are also among the provisions being challenged by the DUP lawmakers.

A special safeguard measure for surges in auto trade was included in the 2010 renegotiation in order to respond to the concerns of US automakers. Under the measure, increased duties through the "special auto safeguard" will be available for a decade following the US's elimination of tariffs on Korean auto products. (See Bridges Weekly, 9 December 2010).

ICTSD reporting; "Opposition Parties Warn US They'll Scrap FTA," THE CHOSUN ILBO, 9 February 2012; "DUP takes election gamble on Korea-US FTA renegotiations," THE KOREA HERALD, 12 February 2012; "South Korea opposition party says it will repeal US trade deal," REUTERS, 8 February 2012; "Park Geun-hye denounces opposition's move to scrap US FTA," YONHAP NEWS AGENCY, 13 February 2012.

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