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

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as an NCM a regulation 40 that requires a branch of a bank or securities company constituted under the laws of another country to bring and maintain operating funds within Korea. 41 Views of Interested Parties U.S. financial services industry representatives widely regard the agreement as a catalyst for substantial new opportunities in the Korean market. In testimony before the Commission, Laura Lane, corporate co-chair of the U.S.-Korea FTA Business Coalition, stated that it is the best financial services chapter negotiated in a free trade agreement to date. 42 In the banking and securities sector, Korea is believed to have made significant progress in reforming its banking sector in recent years, but opportunities for U.S. banks have been limited. 43 The ITAC on Services and Finance Industries (ITAC 10) report states that many elements of the FTA represent a marked improvement in the operating climate for U.S. firms doing business in Korea. 44 In particular, it states that the provisions on market access, national treatment, and transparency are critical to increased participation by U.S. firms in the Korean market, as well as furthering Korea’s efforts to become a regional financial hub. Further, the ITAC 10 report highlights the importance of allowing the delegation of core functions to offices outside Korea, allowing firms to transfer customer data into and out of the country, 45 and allowing the cross-border provision of portfolio management services. The ITAC 10 report expressed disappointment about the absence of investor-state arbitration related to the prudential carve-out, as well the inclusion of provisions that would allow Korea to restrict certain capital flows as they relate to investment. 46 In addition to creating new market opportunities for U.S. firms, one industry representative indicated that the agreement would send an important message to the region, where countries are reportedly wary of large U.S. banks that they believe, erroneously, to be interested in acquiring small domestic banks. If U.S. banks can successfully demonstrate their ability to bring healthy competition and innovative products to the commercial banking sector in Korea, perhaps the rest of the region would be more willing to allow those firms greater access to their markets. 47 The ITAC 10 report also expressed support for the insurance provisions of the FTA, characterizing them as “commercially meaningful.” 48 The report states that allowing greater market access to U.S. firms would help to strengthen the Korean insurance sector by introducing new products and positively influencing the way the industry operates. 49 Of particular importance to U.S. industry, the report stated, are the provisions for MFN and 40 This regulation is based on Korean legislation, namely The Banking Act and the Securities and Exchange Act. 41 U.S. industry representatives contend that this requirement is reasonable. U.S. industry representative, telephone interview by Commission staff, June 1, 2007. 42 Lane, testimony before the USITC, June 20, 2007, 106. 43 U.S. industry representative, telephone interview by Commission staff, June 1, 2007. 44 ITAC (10) on Services and Finance Industries, Advisory Committee Report, April 25, 2007. 45 Ibid. 46 Ibid. 47 U.S. industry representative, telephone interview by Commission staff, June 1, 2007. 48 ITAC (10) on Services and Finance Industries, Advisory Committee Report, April 25, 2007. 49 Ibid.; and U.S. industry representative, telephone interview by Commission staff, June 1, 2007. 4-10
national treatment, full establishment rights, cross-border provision of services, data transfer, and transparency. In addition, industry representatives support the requirement that the state-owned Korea Post and cooperative insurance providers be subject to the same regulatory requirements as private insurance firms. 50 On a general note, one industry representative expressed support for the negative list approach used in negotiating the FTA, as it limits the number of services subject to restriction. 51 Also, this representative viewed Korea’s commitment to accord to the United States any future trade liberalizations to which it agrees with a third-party country as particularly valuable to U.S. financial services firms, especially given Korea’s pending negotiations with China and Japan. 52 FTA Chapter 14—Telecommunications Assessment The FTA would likely have minimal impact on U.S. cross-border exports 53 of telecommunication services, largely due to already high levels of price competition for voice telephone services between the United States and Korea. Price competition contributed to a 66 percent decline in U.S. carrier revenues for U.S. calls terminating in Korea during 2001 to 2005, 54 even as the volume of U.S. calls, measured in minutes, grew by 25 percent. 55 Efforts by the U.S. Federal Communications Commission (FCC) to reduce international accounting rates 56 may also have contributed to the decline in per minute prices and associated U.S. carrier revenues during the years 2001 to 2005. 57 Overall, U.S. cross-border exports of telecommunication services to Korea were relatively small, totaling $150 million, or 3 percent of total telecommunications exports, in 2005. 58 By contrast, the provisions of the FTA likely would facilitate the entry of U.S. firms into the Korean market, either through the establishment of a wholly owned subsidiary or through investment in existing telecommunication companies. Currently, Korea limits foreign direct 50 Smith, testimony before the USITC, June 20, 2007, 64. 51 Goyer, testimony before the USITC, June 20, 2007, 46. 52 Ibid., 47. 53 The traditional international telephone call is the primary means of cross-border trade in telecommunication services between the United States and Korea. 54 U.S. carrier revenues derived from U.S.-originated calls terminating in Korea decreased from $24.3 million in 2001 to $15.8 million in 2005. U.S. Federal Communications Commission (USFCC), 2005 International Telecommunications Data, April 2007, 109–132. 55 The volume of U.S.-originated calls to Korea, measured in minutes, increased from 258.4 million minutes in 2001 to 322.2 million minutes in 2005. USFCC, 2005 International Telecommunications Data, April 2007, 109–132. 56 Under traditional settlement procedures, carriers negotiate bilateral accounting rates, or per-minute fees, for carrying and terminating international telephone traffic. 57 FCC, Benchmark Order, 12 FCC Rcd 19,806 (1997). The Order established a 5-year time-frame during which settlement rates would be reduced to $0.15 per minute for upper income countries, $0.19 per minute for middle-income countries, and $0.23 per minute for lower-income countries. Although the FCC’s initial accounting rate goals were not met due to resistance from many countries, average U.S. accounting rates began to fall after the issuance of the Order. 58 USDOC, BEA, Survey of Current Business, October, 2006. 4-11
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U.S. International Trade Commission
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This report was prepared principall
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CONTENTS-Continued Chapter 3. Secto
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CONTENTS—Continued Chapter 5. Imp
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CONTENTS-Continued Chapter 7. Liter
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CONTENTS-Continued Tables—Continu
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Abbreviations and Acronyms 3G third
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Abbreviations and Acronyms—Contin
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Abbreviations and Acronyms—Contin
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vehicles) would likely be diverted
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Sector-specific Assessments The U.S
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total increased fish imports from K
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Korea would likely limit the impact
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Intellectual property rights (IPR):
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sector barriers. 5 These merchandis
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Table 1.1 U.S.-Korea FTA: Location
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Table 1.2 Korean tariff rates on im
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Table 1.4 U.S.-Korea FTA: Summary o
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observed GDP for model regions). Th
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Box 2.1 Interpreting the model resu
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Table 2.1 U.S.-Korea FTA: Simulated
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2-8 This page has been updated to r
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Figure 2.2 U.S-Korea FTA: Simulated
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As shown in figure 2.2, the largest
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2-14 This page has been updated to
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Economy-wide Impact of Implementing
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Grain (Wheat, Corn, and Other Feed
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Korea imported 3.8 million mt of wh
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U.S. oilseed product exports to Kor
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Table 3.2 U.S. oilseed product expo
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Table 3.3 Animal feed exports to Ko
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consumed domestically by the U.S. l
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ates. For corn starch, the United S
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quota rates have been effectively e
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Noncitrus Fruit 87 Views of Interes
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3-20 Table 3.9 U.S.-Korea trade and
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Korean grapes are much more costly
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Potato Products 122 Assessment The
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ate is 304 percent ad valorem. 141
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Other Vegetables 162 Assessment The
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U.S. exports of other fresh and pro
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tariff concessions that could accru
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Dairy Products 215 Similarly, the p
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TRQ for food whey, 223 based on cur
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potential changes in trade based so
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Figure Figure 3.1 Korea: Beef and v
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Views of Interested Parties The inc
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are subject to the same food safety
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enefit under the provisions of this
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Box 3.2 Potential price and quantit
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50 percent, while the vegetable jui
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and major supplier, and U.S. tariff
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textiles and apparel through 2005.
Page 110 and 111: U.S. Exports The impact of the FTA
Page 112 and 113: passage. NCTO indicated that, even
Page 114 and 115: In its report, the ITAC on Distribu
Page 116 and 117: of the U.S. footwear market, with C
Page 118 and 119: of these producers. 362 RPFMA noted
Page 120 and 121: prohibit improper inducements by ph
Page 122 and 123: Machinery, Electronics, and Transpo
Page 124 and 125: U.S. exports of auto parts would be
Page 126 and 127: imports from and exports to Korea.
Page 128 and 129: Passenger Vehicles 433 Assessment U
Page 130 and 131: Table 3.16 Korean passenger vehicle
Page 132 and 133: import activities have continued
Page 134 and 135: Box 3.4 Automotive-related FTA Prov
Page 136 and 137: access. The FTA affirms the parties
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Page 140 and 141: keep the products out.” 492 Mr. B
Page 142 and 143: these vehicles to Korea. The commit
Page 144 and 145: Brown expressed concern about the r
Page 146 and 147: goods; and high-technology medical,
Page 148 and 149: device pricing, reimbursement, and
Page 151 and 152: CHAPTER 4 Impact of Market Access P
Page 153 and 154: elative to GDP than do China, Japan
Page 155 and 156: services as a substantial improveme
Page 157 and 158: Box 4.2 Financial services: Competi
Page 159: Summary of Provisions Chapter 13 of
Page 163 and 164: Box 4.4 Competitive conditions in t
Page 165 and 166: and cross-connect links 70 are more
Page 167 and 168: Box 4.5 U.S. legal services trade w
Page 169 and 170: establish offices in Korea to provi
Page 171 and 172: Box 4.6 Competitive conditions in t
Page 173 and 174: equirements and foreign ownership r
Page 175 and 176: CHAPTER 5 Impact of Trade Facilitat
Page 177 and 178: publication and administration of t
Page 179 and 180: Views of Interested Parties In its
Page 181 and 182: Summary of Provisions This chapter
Page 183 and 184: use of TBTs to protect Korea’s au
Page 185 and 186: conformity assessment procedures el
Page 187 and 188: FTA Chapter 15-Electronic Commerce
Page 189: Views of Interested Parties The U.S
Page 192 and 193: quantities as to be a substantial c
Page 194 and 195: that such transshipment could imped
Page 196 and 197: Box 6.1 Foreign investment in Korea
Page 198 and 199: in the FTA. The awards made by any
Page 200 and 201: Table 6.1 U.S.-Korea FTA: Industry
Page 202 and 203: (ITAC 5) report cited as particular
Page 204 and 205: Section C of Chapter 11 and the lac
Page 206 and 207: practices, and violations of consum
Page 208 and 209: FTA Chapter 17—Government Procure
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Both the United States and Korea ar
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8) 87 also expressed support for th
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Box 6.2 Recent conditions of IPR pr
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protection to life of the author pl
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Views of Interested Parties A numbe
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GPHA stated in testimony before the
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Box 6.3 Labor market conditions in
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FTA Chapter 20—Environment 131 As
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trade measures are the least disrup
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FTA Chapter 22-Institutional Provis
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Views of Interested Parties The Ind
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CHAPTER 7 Literature Review and Sum
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7-3 Table 7.1 Model, liberalization
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terms. Much of the increase in U.S.
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Liberalization generated small incr
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Sander Levin, Member of the U.S. Ho
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Regarding footwear and travel goods
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Korea’s establishment as a region
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The California Table Grape Commissi
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order activity, and facilitate expa
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At the Commission’s hearing, Mr.
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Information Technology Industry Cou
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With respect to tariff and nontarif
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deterring illegal transshipments. I
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PhRMA identified what it views as t
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the TIA stated that it supports the
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access to the market. The Council a
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United States, Spain, Chile, Brazil
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Bibliography Advanced Medical Techn
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AT&T. “AT&T Reaction to Free Trad
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______. “Korea-U.S. Free Trade Re
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______. “Country Finance: South K
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Global Trade Information Services I
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International Labor Organization (I
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Jones, Laura E. Executive Director.
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Lee, Hyunok, and Daniel A. Sumner.
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Nam, In-Soo. “Helio's Losses To W
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Powers, Mark. Northwest Horticultur
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Smith, Brad. American Council of Li
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U.S.-Korea Business Council (USKBC)
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______. “Korea, Republic of Oilse
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U.S. International Trade Commission
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Ward, David. American Council on Ed
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APPENDIX A Request Letter from USTR
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APPENDIX B Federal Register Notices
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pwalker on PROD1PC71 with NOTICES 2
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APPENDIX C Hearing Participants
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ORGANIZATION AND WITNESS: PANEL 1 (
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APPENDIX D U.S.-Korea FTA: Chapter-
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fees and charges on trade in goods
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determines the tariff classificatio
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The transparency provisions would a
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necessary duties within 1 year of i
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technical regulation or conformity
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procedures), and practices of a par
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aviation, fisheries, or maritime ma
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of standards and criteria and on te
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of the FTA that impose unilateral o
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use of electronic authentication in
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parties’ rights and obligations u
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establishment of Uniform Domain-Nam
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government to take appropriate meas
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environmental laws. 102 In the U.S.
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not limited to, policies on commerc
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Economic indicators 2002 2006 Popul
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Table E.1 Leading U.S. exports to K
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APPENDIX F GTAP Model
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Updating the GTAP Database The curr
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Key Assumptions Agency. 4 The price
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Table F.2 U.S.-Korea FTA benchmark
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Measuring the Impacts of the FTA an
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General Effects of Trade Agreements
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APPENDIX H Tariff Equivalents in Ko
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Previous Literature The method for
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For the purposes of this report, a
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Table H.1 Tariff equivalents in Kor
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APPENDIX I Services Nonconforming M
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Table I.1 U.S.-Korea FTA: Korean se
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APPENDIX J Description of Possible
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are in effect import prices, and th
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APPENDIX K Overview of Agricultural
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Additionally, although current regu
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About This Report The United States
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