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

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investment (FDI) in facilities-based telecommunication-services firms to 49 percent of total voting shares. 59 The provisions of the FTA, however, remove this restriction, allowing 100 percent foreign ownership 2 years after the FTA enters into force. 60 Although high levels of competition, the maturation of important market segments (box 4.4), and FTA exclusions pertaining to mobile services 61 and nonfacilities-based service providers 62 may deter U.S. firms from entering the domestic Korean market and/or impair the ability of U.S. firms to offer telecommunication services to residential and/or corporate customers within Korea, the FTA’s investment provisions would likely benefit U.S. firms seeking to offer international corporate data, virtual private network, and Internet Protocol-based corporate customers in Korea. The telecommunication provisions of the U.S.-Korea FTA would likely have minimal impact on U.S. cross-border imports of telecommunication services, largely due to already high levels of price competition for voice telephone services between the United States and Korea. Efforts by the FCC to reduce accounting rates may have contributed to the decline in per minute prices during the years 2001 to 2005. Overall, U.S. imports of telecommunication services were relatively small, totaling $74 million, or 2 percent of total telecommunications exports, in 2005. 63 The FTA would likely have minimal impact on the entry of Korean telecommunication firms into the U.S. market, or the sales of existing Korean subsidiaries in the United States, due largely to the existing regulatory openness of the U.S. telecommunication services market. For example, Korean operator SK Telecom currently offers wireless service in the United States via Helio, a mobile virtual network operator (MVNO) 64 established as a 50/50 joint venture with U.S. Internet firm Earthlink. 65 High levels of competition in the U.S. telecommunication services market and several FTA exclusions pertaining to mobile services operators 66 in the United States may deter additional market entry by Korean telecommunication services firms. 59 USFCS, “Doing Business in Korea: A Country Commercial Guide for U.S. Companies,” 2005, 88; EIU, “Country Commerce: South Korea,” July 2006, 117; and USTR, “Korea,” 2007 National Trade Estimate Report on Foreign Trade Barriers, April 2, 2007, 367. 60 At the end of 2005, foreign ownership in Korea’s major fixed-line telecommunication services firms included 5 percent in Dacom, 46 percent in KT, and 48 percent in Hanaro Telecom. In the wireless sector, foreign ownership stood at 22.5 percent in KT Freetel, 27 percent in LG Telecom, and 49 percent in SK Telecom. EIU, “Country Commerce: South Korea,” July 2006, 118. 61 In Korea, commercial mobile services are not subject to commitments related to major suppliers, services resale, network unbundling, leased circuits, colocation, and access to poles, ducts, conduits, and rights-of-way. 62 In Korea, commitments related to network unbundling, interconnection, leased circuits, submarine cable access, colocation, and access to poles, ducts, conduits, and rights-of-way do not apply to non-facilities based providers. 63 USDOC, BEA, Survey of Current Business, October 2006. 64 MVNOs typically do not own spectrum allocation or telecommunication network facilities. As a result, MVNOs typically resell the wireless services of established mobile services providers. Helio, for example, leases network capacity from Verizon Wireless and Sprint Nextel. 65 Krause, “Amp'd Mobile Bankruptcy Casts Shadow on MVNOs,” June 6, 2007; Nam, “Helio's Losses To Widen This Year-SK Telecom,” February 7, 2007; Kawaguchi, “Telecommunications: Wireless-Asia,” April 2007, 12; and Tae-gyu, “Telecom Operators Set Eyes on Overseas Markets,” July 29, 2007. 66 In the United States, commercial mobile services are not subject to commitments related to dialing parity, major suppliers, services resale, and access to poles, ducts, conduits, and rights-of-way. 4-12
Box 4.4 Competitive conditions in the Korean telecommunication services market Fixed-Line Services Fixed-line services are provided in Korea by the incumbent, KT Corp., and several new entrant firms, including DACOM, Hanaro Telecom, and Onse Telecom. Despite the introduction of competition in the 1990s, KT Corp. dominates the fixed-line market, controlling 93.2 percent of local fixed-line subscribers, 65 percent of leased lines, and 86 percent of domestic long distance services. By contrast, high levels of competition have reduced KT Corp.’s share of the international long distance service market to approximately 45 percent. Overall, revenues in the fixed-line market are slowly contracting, due to fixed-to-mobile substitution, increasing levels of competition, and the growing use of Voice-over-Internet Protocol (VoIP). In 2005, the Korea Fair Trade Commission issued corrective orders and levied fines against Korea’s four fixed-line providers for price collusion in local, domestic long distance, international long distance, leased-line, and high-speed internet services. High-Speed Internet Services The main providers of high-speed Internet services in Korea are KT Corp., Hanaro Telecom, DACOM, Dreamline, Onse Telecom, and Powercomm. High-speed Internet services are primarily delivered over Asymmetric Digital Subscriber Line (ADSL) technologies, although access via wireless, satellite, and hybrid fibre-coaxial technologies are also available. In 2005, the broadband penetration rate in Korea stood at approximately 25 percent, one of the highest in the world. Overall, an increasingly saturated market and competition-induced price declines have resulted in slower growth in both subscriber numbers and revenues in Korea’s high-speed Internet market. Licensed VoIP services were launched by resellers in mid-2005. Currently, VoIP services are provided in Korea by the main network operators, as well as smaller firms like Skype, Samsung Networks, and Anyuser Net. Mobile Services Mobile services in Korea are provided by SK Telecom, KTF Corp., and LG Telecom. Over the past few years, Korean government regulators have taken steps to stimulate competition in mobile services, including banning handset subsidies, actively regulating interconnection rates, and preventing large operators from offering discounted service bundles. After several years of strong growth, the Korean mobile services market is now entering the mature stage, characterized by high levels of mobile service penetration (82 percent) and intense competition among its three service providers. Korea is a global leader in the deployment of third generation (3G) 1 networks and services, with the first such network launched in September 2000. Currently, nearly 43 percent of Korea’s mobile customers subscribe to 3G services. Such leadership is driven in part by the Ministry of Information and Communication (MIC), which actively controls licensing and monitors carrier commitments to invest in, and launch, 3G technologies and services. High levels of competition in mobile voice services, which have led to declining revenues, have also driven 3G product development to include not only messaging services but also advanced services such as mobile television, music and game downloads, and e-gift services. 1 Third generation (3G) technologies, which are based upon the International Telecommunication Union’s International Mobile Telecommunications-2000 (IMT-2000) family of standards, offer substantially higher bandwidth than previous technological standards, enabling not only greater capacity for voice transmissions but also data transfer rates of up to 2 megabits per second (Mbps). Such high data transfer rates allow mobile services providers to offer an expanded range of value-added services, including text and multimedia messaging; Internet/e-mail access; downloadable music, ringtones, graphics, and audio/video clips; and mobile television. Sources: Kawaguchi, “Telecommunications: Wireless-Asia,” April 2007; Mergent, “The Asia-Pacific Telecommunications Sectors,” January 2007; Datamonitor, “Fixed Line Telecoms in South Korea,” June 2006; Datamonitor, “Internet Access in South Korea,” July 2006; and Tae-gyu, “Telecom Operators Set Eyes on Overseas Markets,” July 29, 2007; and Primetrica, “Korea,” GlobalComms Database, April 2006. 4-13
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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.
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U.S. Exports The impact of the FTA
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Page 114 and 115: In its report, the ITAC on Distribu
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Page 120 and 121: prohibit improper inducements by ph
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Page 124 and 125: U.S. exports of auto parts would be
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Page 128 and 129: Passenger Vehicles 433 Assessment U
Page 130 and 131: Table 3.16 Korean passenger vehicle
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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
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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
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Page 157 and 158: Box 4.2 Financial services: Competi
Page 159 and 160: Summary of Provisions Chapter 13 of
Page 161: national treatment, full establishm
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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
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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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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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