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

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in the FTA. The awards made by any arbitration tribunal would have binding force only between the disputants and with regard to the particular case. Transparency would be required, along with public hearings. Section C of the chapter contains definitions of terms and relevant conventions for use in the resolution of investment disputes. Annex 11-A defines “customary international law” for purposes of the chapter, while Annex 11-B deals with expropriation (direct and indirect) in some detail. To be considered expropriation, a party’s action or series of actions would be required to interfere “with a tangible or intangible property right or property interest in an investment.” Under a side letter to the FTA, the parties would agree that such property rights would include rights under contract and all other property rights in an investment, as defined in Article 11.28. Other annexes deal with the service of documents in such matters and the establishment of a possible future appellate body. Annex 11-E —known as the “fork in the road provision”—would require a U.S. investor to choose to pursue an investment claim either in the Korean court system or under the FTA’s investor-state dispute settlement process. Annex 11-F deals with taxation and expropriation. Specifically, the annex lists factors to be considered in determining whether a taxation measure can be considered an expropriation, clarifying that most tax measures are not instances of expropriation. Annex 11-G lays out the conditions under which Korea could restrict capital transfers through its Foreign Exchange Transactions Act, so that those restrictions will not be subject to dispute settlement through arbitration. Nonconforming Measures Related to Investment Provisions for the treatment of existing or future measures that are inconsistent with the agreement’s investment disciplines are included in each party’s Annexes I, II, and III of the FTA. Annex I lists exemptions for existing laws or regulations, maintained at the central or regional government level, that might violate the provisions of the agreement. NCMs at the local government level would be exempted without requiring any notation in an annex. 25 Annex II lists reservations to ensure that a party maintains flexibility to adopt or maintain measures that would be inconsistent with FTA disciplines. The actual content of the reservations in Annexes I and II varies widely. Some reservations are horizontal in nature, meaning that they address general policy provisions that affect all investment, whereas others only apply to investment in specific industries. Annex III lists NCMs specific to financial services relating to both existing and potential laws and regulations. 26 Korea has not included any investment-related horizontal reservations under Annex I. Five horizontal reservations (reservations that pertain to investment in any sector) are listed by Korea under Annex II. Under the first, Korea would reserve the right to adopt any measure deemed necessary for the maintenance of public order, provided that such measures are applied in accordance with Korean law, and not applied in an arbitrary manner or as a disguised restriction on investment. The second reservation states that Korea would be able to impose any measure related to the transfer or disposition of equity interests or assets held by state-owned enterprises or governmental authorities. The third reservation specifies the conditions under which foreign persons would be permitted to purchase land. In particular, Korea would reserve the right to adopt any measure related to the acquisition of farmland by foreign persons. The fourth reservation would accord differential treatment to countries 25 USTR, “Final - United States - Korea FTA Texts,” 2007, Article 11.12(1)(a)(iii). 26 Annex III is discussed in app. I, in the discussion of financial services. 6-8
that have signed any other bilateral or multilateral international agreements with Korea, prior to the entry into force of the U.S.-Korea FTA, and specifically those agreements involving aviation, fisheries, or maritime matters. Under the fifth reservation, Korea would maintain the right to impose restrictions on investment in services supplied by the government, such as law enforcement and correctional services. This measure would not apply to investors that supply such services through agreements with the Korean government, or to financial services. Other reservations are limited to specific industries or sectors. Horizontal reservations taken by the United States under Annex I would address the programs of the Overseas Private Investment Corporation and the registration of public offerings of securities, as well as existing NCMs at the regional (state) level. Appendix I-A of Annex I for the United States provides an illustrative list of NCMs maintained at the regional (state) level. 27 Under Annex II, the only horizontal reservation listed by the United States that applies to investment mirrors the reservation taken by Korea, which would accord differential treatment to countries under international agreements that have been signed prior to the entry into force of the U.S.-Korea FTA. The specific sectors for which investment-related reservations are listed in Annex I are presented in table 6.1, and potential measures listed in Annex II are presented in table 6.2. 28 In several cases, the reservation indicates a potential constraint on foreign investment that may not have a significant effect on investors’ activities or business results. Consequently, the inclusion of a sector in an annex does not mean that the entire sector has been exempted from coverage by the investment disciplines of the FTA. Views of Interested Parties U.S. industry representatives state that they are generally satisfied with the investment provisions of the U.S.-Korea FTA, 29 and particularly cite the inclusion of the investor-state dispute settlement process, and the agreement’s provisions on expropriation, transparency, performance requirements, and nondiscriminatory national treatment standards. 30 Various industry ITAC reports cite in particular the investor-state dispute settlement provisions and the fact that they apply to both existing and future investment agreements between a U.S. investor and the government of Korea. 31 The Distribution Services for Trade Policy Matters 27 This list is provided for transparency purposes only, and is not meant to be binding on the U.S. government or any state government. 28 Investment-related reservations related to financial services, including insurance, are listed in Annex III, and are presented in app. I of this report. 29 ITAC (11) on Small and Minority Business, Advisory Committee Report, April 26, 2007; industry representatives, telephone interviews by Commission staff, May 31 and June 4, 2007; USKBC, “Letter to Susan Schwab, U.S. Trade Representative (May 25, 2007)”; and ECAT, “ECAT Welcomes Announcement of Successful Conclusion of U.S.-Korea FTA Negotiations (April 2, 2007).” 30 ACTPN, Report, April 26, 2007; ITAC (2) on Automotive Equipment and Capital Goods, Advisory Committee Report, April 27, 2007; ITAC (3) on Chemicals, Pharmaceuticals, Health/Science Products and Services, Advisory Committee Report, April 24, 2007; ITAC (8) for Information and Communications Technologies, Services and Electronic Commerce, Report, April 27, 2007; ITAC (10) on Services and Finance Industries, Advisory Committee Report, April 25, 2007; industry representative, telephone interview by Commission staff, May 31, 2007; USKFTABC, “U.S.-Korea FTA Negotiation Priorities”; and USKBC and AMCHAM in Korea, “Comments on the Proposed Free Trade Agreement Between the United States and the Republic of Korea, for the Trade Policy Staff Committee, Office of the USTR, March 24, 2006.” 31 ITAC (2) on Automotive Equipment and Capital Goods, Advisory Committee Report, April 27, 2007; ITAC (4) on Consumer Goods, Report, April 26, 2007; and ITAC (10) on Services and Finance Industries, Advisory Committee Report, April 25, 2007. 6-9
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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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passage. NCTO indicated that, even
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In its report, the ITAC on Distribu
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of the U.S. footwear market, with C
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of these producers. 362 RPFMA noted
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prohibit improper inducements by ph
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Machinery, Electronics, and Transpo
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U.S. exports of auto parts would be
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imports from and exports to Korea.
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Passenger Vehicles 433 Assessment U
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Table 3.16 Korean passenger vehicle
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import activities have continued
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Box 3.4 Automotive-related FTA Prov
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access. The FTA affirms the parties
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gaining U.S. market share regardles
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keep the products out.” 492 Mr. B
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these vehicles to Korea. The commit
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Brown expressed concern about the r
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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 and 162: national treatment, full establishm
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 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
Page 210 and 211: Both the United States and Korea ar
Page 212 and 213: 8) 87 also expressed support for th
Page 214 and 215: Box 6.2 Recent conditions of IPR pr
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Page 218 and 219: Views of Interested Parties A numbe
Page 220 and 221: GPHA stated in testimony before the
Page 222 and 223: Box 6.3 Labor market conditions in
Page 224 and 225: FTA Chapter 20—Environment 131 As
Page 226 and 227: trade measures are the least disrup
Page 228 and 229: FTA Chapter 22-Institutional Provis
Page 230 and 231: Views of Interested Parties The Ind
Page 233 and 234: CHAPTER 7 Literature Review and Sum
Page 235 and 236: 7-3 Table 7.1 Model, liberalization
Page 237 and 238: terms. Much of the increase in U.S.
Page 239 and 240: Liberalization generated small incr
Page 241 and 242: Sander Levin, Member of the U.S. Ho
Page 243 and 244: Regarding footwear and travel goods
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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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