U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

Summary of Provisions
Chapter 13 of the FTA would generally require each party to allow cross-border trade in
financial services, accord national treatment and MFN treatment to investors of the other
party, and provide market access without limitations on the number of financial institutions,
value of transactions, number of service operations, or number of persons employed.
As in previous bilateral U.S. FTAs, cross-border trade would be limited to certain segments
of the financial services industry, as outlined in Annex 13-A. For insurance, FTA coverage
of cross-border trade would be limited to marine, aviation, and transit (MAT) insurance;
reinsurance and retrocession; 39 services auxiliary to insurance, such as consultancy, risk
assessment, actuarial and claim settlement services; and insurance intermediation services
such as brokerage and agency services. For banking and securities, FTA coverage of crossborder
trade would be limited to the provision and transfer of financial information and
financial data processing, advisory, and other auxiliary financial services as defined in the
text of the chapter. The provision regarding financial data processing, however, does not go
into effect until two years following entry into force of the agreement. Cross-border
intermediation services (i.e., deposit taking and lending) would be excluded from the
agreement.
Each party would be required to permit a financial institution of the other party to provide
new financial services on the same basis that it permits its own domestic institutions to
provide, without additional legislative action. The chapter would not require either party to
furnish or allow access to information related to individual customers or confidential
information, the disclosure of which would impede law enforcement, be contrary to the
public interest, or prejudice legitimate commercial concerns.
Under chapter 13, neither party could require financial institutions of the other party to hire
individuals of a particular nationality as senior managers or other essential personnel, nor
could a party require more than a minority of the board of directors to be nationals or
residents of the party. The parties would agree that transparent regulations and policies are
important, commit to publishing in advance all regulations of general application, and agree
to maintain or establish mechanisms to respond to inquiries from interested persons. Where
a party requires membership in a self-regulatory organization, the chapter would provide that
such organizations will be subject to the national treatment and MFN obligations of this
chapter.
The FTA would establish a Financial Services Committee to implement the provisions of
chapter 13. Chapter 13 would also provide for consultations and dispute resolution, and
includes cross references to the provisions covering dispute settlement procedures. Under
the FTA, parties may retain specific financial services measures that do not conform to the
FTA by including the measures in Annex III of the agreement. For example, Korea included
39 Retrocession is defined as risk accepted by a reinsurer, which is then transferred to another reinsurance
company.
4-9