Trade Unionists & Activists Rally Against Korea US Free Trade Agreement KORA On 1/14/2011

The first speaker at the rally was Kim, Kyung Lan who is the Korean Confederation of Trade Unions KCTU Director External Relations and Outreach for the KCTU. The KCTU has been fighting strongly to protect temporary workers and Kim, Kyung Lan reported that 50% of Korean workers are now temporary as a result of deregulation and union busting.

Here are some key points of the corporate driven Obama Korea US Free Trade Agreement

Key Points on the December 3, 2010 Supplemental Deal on the Korea FTA
http://www.fairtrademinnesota.org/Summary of Korea FTA Supplemental deal.pdf
For more information, contact Public Citizen’s Global Trade Watch or see http://www.tradewatch.org 1
Key Points on the December 3, 2010 Supplemental Deal on the Korea FTA


The supplemental agreement did not alter the basis for the International Trade Commission
projection that the Korea FTA will increase the U.S. trade deficit or the Economic Policy
Institute’s projection that the agreement would result in the loss of 159,000 American jobs.


The supplemental deal did not alter the NAFTA-replicating foreign investor offshoring
protections; the new rights for the 200-plus Korean establishments operating here who would
be newly empowered to demand taxpayer compensation in foreign tribunals for U.S.
environmental, financial, labor or health policies; the financial sector regulatory limits; or
the limits on imported food and product safety standards and inspection that were included
in the Korea FTA text that President Bush signed in 2007.


The Bush FTA labor chapter also was not altered, meaning that the provision inserted by
Bush prohibiting reference to the International Labor Organization (ILO) Conventions in
enforcing the FTA’s labor provisions remains intact.


Many congressional Democrats and Democratic base groups opposed Bush’s Korea FTA. In
a July 2010 letter to President Obama, 110 House members identified changes to the labor,
investor and financial service rules in Bush’s text as essential. A September 2010 letter to
President Obama signed by over 500 U.S. labor, consumer, environmental, faith, and family
farm groups also demanded renegotiations of these damaging provisions.


The supplemental agreement extends tariff phase-out timelines for both Korea and U.S.
autos, allows Korea to maintain pork tariffs for two extra years, waives application of
Korean auto safety standards for up to 75,000 U.S. cars, allows small volume U.S. auto
exporters access for cars that exceed Korean emissions and fuel efficiency standards by 19%,
added an auto-specific safeguard measure, requires Korea to develop a mechanism within
two years to review if auto regulations meet their goals in the least burdensome manner,
extended the length of L-1 visas for Korean workers in the United States and provided a
three-year extension for Korean generic drugs.


The supplemental agreement does not require Korea to import any more U.S. cars nor are
tariff cuts conditioned on more U.S. cars being sold in Korea. In 2009, 5,878 U.S. passenger
vehicles were exported to Korea, while the U.S. imported 476,833 vehicles from Korea. Total
import penetration for autos in Korea is 4 percent.


The supplemental agreement did not change the FTA’s 35% domestic content rule that
allows duty-free treatment for vehicles with 65% of content sourced from China, Mexico or
other countries. Thus, even if the United States were to export more cars to Korea, this would
not necessarily translate into more jobs for U.S. workers in the auto parts, steel, glass, tire
and rubber industries. The EU-Korea FTA auto domestic content rule is 55%.


None of the changes to the FTA’s textile provisions demanded by a bipartisan group of
Congress people and by the industry were made.


The issue of U.S. beef market access in Korea was not addressed in the supplemental.

Details follow below…
For more information, contact Public Citizen’s Global Trade Watch or see http://www.tradewatch.org 2
WHAT WAS NOT CHANGED

- Labor chapter requirement that the ILO Conventions may not be referenced in enforcing the
FTA labor chapter. As a result of this clause, enforcement of the Korea FTA’s labor chapter is
limited to reference to the general two-page ILO Declaration on Fundamental Principles and Rights at
Work that does not establish the internationally-recognized core labor rights. The addition of this
limitation led Chamber of Commerce President Tom Donohue to reverse his opposition to FTA labor
provisions, noting that he was “encouraged by assurances that the labor provisions cannot be read to
require compliance with ILO Conventions.”1 Diverse U.S. unions made clear that this offensive
limiting language had to be cut. During his campaign, President Obama committed that all of his trade
agreements require adherence to the standards of the ILO core Conventions.2 In a September 14, 2010
statement, the UAW noted: “The UAW has serious concerns regarding the effectiveness of the worker
rights provisions of the proposed KORUS FTA in protecting basic international labor standards.”3 The
AFL-CIO also had a list of other Korea FTA labor chapter changes that were also ignored.4

- Foreign investor offshoring privileges and investor-state private enforcement: No changes were
made to the Bush text’s investment chapter. The Korea FTA’s investment text remains almost word-
for-word the same as CAFTA, which expanded on the investor rights provided in NAFTA. The Korea
FTA contains the special privileges and protections for foreign investment that promote offshoring.
This includes a guaranteed minimum standard of treatment for offshore operations that extend beyond
what countries afford domestic corporations and rights to “regulatory takings” compensation for
domestic policies that investors claim undermine expected future profits. The Korea FTA also
replicates the NAFTA-CAFTA “investor-state” enforcement system. This empowers foreign investors
and corporations to privately enforce their new FTA privileges by suing host governments in World
Bank and UN tribunals for cash compensation. The definition of foreign investor in the Korea FTA
would allow a Chinese firm who (directly or through a subsidiary) incorporated in Korea that
established a U.S. operation to use this system. Investor-state enforcement is not necessary or
appropriate for an agreement between two developed countries with well established rule of law and
sound domestic court systems. The U.S.-Australia FTA does not have investor-state private
enforcement. These terms are a special threat in the Korea FTA: there are 300 Korean establishments5
operating within the U.S. that would be newly empowered to launch extrajudicial attacks on U.S.
domestic policies. Compensation for such claims is paid with our tax dollars, exposing the Treasury to
new liabilities. Over $300 million in compensation has been paid to NAFTA-country corporations and
investors using this private enforcement system against health, safety, zoning and other policies.6

- Financial regulation limits: The Bush FTA terms remain unchanged. Any policies that limit
financial firm size or impose firewalls are subject to challenge.7 Nations are prohibited from using
capital controls or banning risky financial products and services. These limits could conflict with U.S.
and Korean financial reregulation policies. While the Korean and U.S. governments may refrain from
attacking financial reregulation measures in the wake the crisis, the Korea FTA allows private
corporate enforcement of its key financial regulatory limits.8 A spokesperson for Citigroup raved that
the Korea FTA has “the best financial services chapter negotiated in a free trade agreement to date.”9

- Limits on imported food and products safety standards and inspection: The Bush terms remain
unchanged. The U.S. now imports nearly $65 billion in food annually - almost double the value
imported when NAFTA and the WTO went into effect. Like NAFTA and CAFTA, the Korea FTA
requires the U.S. to import meat and poultry that does not meet U.S. safety standards. This food shows
up in stores with a USDA label. The Korea FTA also incorporates the WTO standard of presuming a
country's domestic food and product safety standard is a trade barrier subject to challenge and
sanctions if it extends beyond the weak international standards set by the Codex Alimentarius, a UN
For more information, contact Public Citizen’s Global Trade Watch or see http://www.tradewatch.org 3
body dominated by agribusiness representatives. Domestic food safety, product safety and worker
safety rules that are challenged in Korea FTA tribunals must be eliminated or the U.S. would face
permanent trade sanctions - as has happened in the NAFTA case against the U.S. safety ban on
Mexican-domiciled trucks. China recently won a WTO challenge against the U.S. safety-based ban on
Chinese chicken imports. Currently, Mexico and Canada are challenging the U.S. country-of- origin
food labeling policy at the WTO using rules similar to those in the Korea FTA.

- Textile tariffs cuts that favor Korea: U.S. tariffs for 44 product lines phase out more quickly than
Korean tariffs on the same goods. Especially exposed are industrial and technical textiles, such as
Kevlar and flame retardant fabrics. Korea is the main U.S. competitor in this essential high tech sector.
As well, the agreement would immediate zero out tariffs on fiber fill even though the U.S. currently
has anti-dumping duties in place on such Korean goods. The agreement provides no special protections
to avoid duty-free treatment being given to Chinese goods transshipped through Korea, which is
already a serious problem prior to tariff elimination.



WHAT WAS CHANGED (AND SOME NOTABLE THINGS NOT CHANGED FOR AUTOS)

- Automotive rule of origin remains at 35% of value and no limit on Korea’s duty drawbacks for
imported parts: A vehicle will qualify for FTA tariff terms even if parts comprising 65% of value are
from another country. Thus, even if the United States were to export more cars to Korea, this would
not necessarily translate into more jobs for U.S. workers in the auto parts, steel, glass, tire and
rubber industries. Calling the agreement's “rule-of-origin” and “duty drawback” provisions “highly
problematic” in a September 2010 statement, the UAW warned that “the U.S. and Korea are
effectively signing an automotive free trade agreement with the world.”10 The statement notes:
“Workers and their unions in Korea are opposed to the KORUS FTA, in part, because it would
encourage Korean manufacturers to significantly increase the sourcing of production to low-wage
nations of Asia, including China… Thus, Hyundai, for example, could source the production (and
employment) of up to 65 percent of the value of its vehicles to China or elsewhere, import these parts
and components back into South Korea for final assembly, and then export the finished vehicle to the
United States duty-free.” Also, under the FTA, Korea is allowed to refund 100% of duties on imported
parts. The EU-Korea 55% auto rule of origin requires a majority of value to come from the trade pact
partners and duty drawbacks (refunds) are capped at 5%.

US-Korea FTA December 3 Supplemental versus EU-Korea FTA
Unchanged auto rule of origin at 35%. Auto rule of origin 55%
No limits on duty drawbacks Refundable duty capped at 5% for all countries
(such as China) with whom Korea has no FTA.
Cap triggered by significant increase of sourcing
from any country that has not concluded an FTA
with Korea i.e. where MFN duties still apply such
as China.

- Automobile and truck tariff phase-out schedule changes: The supplemental agreement extends
tariff phase-out timelines for both Korea and U.S. autos, but still results in removal of all tariffs upon
full implementation. This is a key point, because the ITC study that found the FTA will increase the
U.S. trade deficit generally and the automotive trade deficit with Korea and the world specifically is
based on full implementation. The study did not consider the previous tariff phase out patterns, but
only the end result, which does not change under the supplemental agreement.) The supplemental
shortens elimination of tariffs on electric cars and plug-in hybrids for both countries from ten years to
For more information, contact Public Citizen’s Global Trade Watch or see http://www.tradewatch.org 4
five years. The U.S. would be permitted to keep its 2.5% tariff on other autos in place until the fifth
year. South Korea will immediately cut its tariff on U.S. autos from 8 percent to 4 percent and then
eliminate the 4% tariff in the fifth year. (The EU-Korea FTA eliminates Korea tariffs immediately with
Europes 10% tariff phased out over 5 years. 11) Korea’s 10% truck tariff will be eliminated
immediately, while the U.S. 25% truck tariff will remain in place until the eighth year and be zeroed
out by year ten. Currently, Korea exports no trucks to the United States while about 10% of U.S.
exports to Korea are trucks.

US-Korea FTA December 3 Supplemental versus EU-Korea FTA
Korean 8% auto tariff goes to 4%
immediately and to 0 in year five. U.S.
2.5% auto tariff goes to 0 in year five.
Korean auto tariff goes to zero immediately.
EU's 10% tariff phased out over 5 years, goes to
0 in year six.
Korean 10% truck tariff removed
immediately. U.S. 25% truck tariff phased
out starting eighth year and goes to 0 by
year ten.
Korean 10% truck tariff removed immediately.
E.U. eliminates 22% tariffs over a period of
three to five years, depending on the truck
category.

- Auto Non-tariff barriers: While various specific Korean non-tariff barriers, such as related to
charging higher insurance rates for imported cars, were not eliminated, Korea agreed to a 12-month
grace period before auto firms must meet new vehicle regulations. The supplemental agreement also
requires Korea to develop a new system within two years to review existing auto regulations with
respect to whether they accomplish their objectives in the least burdensome manner. The supplemental
agreement allows for 25,000 cars per U.S. automaker – or more than three times the number of waivers
allowed in the original agreement – to be imported into Korea if they meet U.S. safety standards even
if they do not meet Korean standards. However, use of the waivers requires there being demand for
U.S. cars in Korea. Less than 6,000 U.S. cars were sold in Korea in 2009. Also, under the supplemental
agreement, all U.S. autos will be considered compliant with new Korean environmental standards on
fuel economy and greenhouse gas emissions, developed since President Bush signed the FTA in 2007,
if they achieve 119 percent of the targets in these regulations. Given Koreans strong antipathy towards
imports – only 4 percent import penetration for all foreign autos and massive street riots against more
imported U.S. meat – the question is whether zeroing out tariffs and removing non-tariff obstacles will
result in significant increases of U.S. auto exports to Korea.

- Special automotive safeguard: The supplemental agreement added an automotive-specific
safeguard measure. The Bush-signed agreement included a general safeguard mechanism only.

- Additional changes:

Korean tariffs on American pork extended: Originally, Korea would have eliminated tariffs on
American pork by 2013. The supplemental agreement extends this to 2015.


Visas for Korean workers in U.S. extended: The L-1 visa for intra-company transfers was
extended to five years. This covers managers/executives and “specialized knowledge staff” (those with
knowledge of a firm’s products/services, research, systems, proprietary techniques, management, or
procedures.


Peace clause for Korean generic drugs extended: The sale of Korean generic medicine in the
United States will not be subject to patent or other disputes for three years instead of 18 months.




For more information, contact Public Citizen’s Global Trade Watch or see http://www.tradewatch.org 5

ENDNOTES

1
U.S. Chamber of Commerce, “Chamber Welcomes Bipartisan Deal to Move Trade Agenda Forward,” Press Release, May 10, 2007,
Available at: http://www.uschamber.com/press/releases/2007/may/chamber-welcomes-bipartisan-deal-move-trade-agenda-forward
2
See e.g. Obama’s response to an Oregon Fair Trade Coalition questionnaire, May 9, 2008. Available at
http://www.citizen.org/documents/ORFairTradeCoalitionObama.pdf
3
UAW Statement, September 14, 2010, page 7. See International Metal Workers Federation
http://www.imfmetal.org/files/10102608591310005/UAW_KORUS_FTA_ENGLISH.pdf Johanne
4
Jeff Vogt, “Comments Concerning Free Trade Agreement with the Republic of Korea before the USTR,” The American Federation of
Labor & Congress of Industrial Organizations, Docket No. USTR-2009-0020, Sept. 15, 2009, at 4-5, Available at:
http://www.regulations.gov/search/Regs/contentStreamer?objectId=0900006480a22cb2&disposition=attachment&contentType=msw8
5
See map of Korean firms established in the U.S. at http://www.citizen.org/Page.aspx?pid=3967
6
For a list of NAFTA cases, see http://www.citizen.org/documents/NAFTA_Investor_State_Chart_Nov_2010.pdf
7
See Public Citizen, “Fixes to Problematic Foreign Investor, Financial Deregulation Provisions in Bush’s Korea FTA Text Could Limit
Prospective Damage, Start Obama’s Promised Trade Reforms,” July 2010, Available at:
http://www.citizen.org/documents/Talkingpointsinvestmentand%20financiaservices10.pdf
8
See Public Citizen, "Fixes to Problematic Foreign Investor, Financial Deregulation Provisions in Bush’s Korea FTA Text Could Limit
Prospective Damage, Start Obama’s Promised Trade Reforms," July 2010.
9
U.S. International Trade Commission. “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,”
USITC Publication 3949. September 2007, Corrected printing March 2010, at 4-10, Available at:
http://www.usitc.gov/publications/332/pub3949.pdf
10
UAW Statement, September 14, 2010, page 3. See International Metal Workers Federation
http://www.imfmetal.org/files/10102608591310005/UAW_KORUS_FTA_ENGLISH.pdf Johanne
11
See U.S. International Trade Commission. “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral
Effects,” USITC Publication 3949. September 2007, Corrected printing March 2010, at 2-14, Table 2.3, Available at:
http://www.usitc.gov/publications/332/pub3949.pdf. See also Robert E. Scott, “Trade Policy and Job Loss,” Economic Policy Institute,
Working Paper #289, Feb. 25, 2010, at 10, Table 5. Available at: http://www.epi.org/publications/entry/trade_policy_and_job_loss/