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

measures were somewhat improved by related provisions requiring an open, transparent
process to enact such measures. 39
In a press release, AT&T stated that the FTA would open Korea’s telecommunications
market to U.S. investors and said that lawmakers should approve the FTA. 40 The U.S.-Korea
Business Council remarked that the FTA will advance Korea’s ability to act as a financial
hub by attracting additional financial-services-related investment. 41 It added that it expects
the FTA to lead to increased FDI from the United States to Korea. 42
While industry representatives have expressed strong support for the Korea FTA’s investorstate
dispute settlement process, representatives of U.S. state and local governments and
environmental groups are not generally supportive of the FTA investment provisions, and
particularly of investor-state dispute settlement. The Intergovernmental Policy Advisory
Committee (IGPAC) report, reflecting the views of state and local government
representatives, asserts that legal challenges brought by foreign investors against U.S. state
and local regulations have overly burdened state and local governments and caused
confusion regarding the scope of states’ regulatory authority. The report expresses concern
that sophisticated investors will use these provisions in the United States to subvert state and
local regulatory efforts, a concern shared by a minority of the Trade and Environment Policy
Advisory Committee (TEPAC). 43
In its report, the IGPAC sets out three additional, specific concerns with the FTA investment
chapter. First, the committee sees the definition of “investment” as overly broad. In
particular, it is broader than the definition included in the NAFTA agreement in that it
includes licenses and permits as covered investments. Second, the committee is concerned
that the language in Article 10.5 (Minimum Standard of Treatment) can be interpreted to
mean that state court actions are subject to review by international investment tribunals.
Third, the committee is concerned that the due process standards outlined in Article 10.5 are
based not on U.S. constitutional norms of substantive due process, but on international
standards that are not as clear. 44
The TEPAC report states that the primary concern of representatives of the environmental
community is that language regarding indirect expropriation, new to this FTA, will permit
arbitrators to rule against good faith U.S. laws and regulations, and will provide foreign
investors greater rights than U.S. investors have under U.S. domestic law. The report also
expressed concern that the side letter to the FTA regarding property rights inappropriately
defines all contract rights as property rights, thus subjecting all contract rights to arbitration
under the investor-state dispute settlement process. 45 In comments separate from the principal
TEPAC report, a minority of the group expressed a number of additional concerns related
to the FTA investment chapter, including the overly broad definition of investment in
39 Frazier, testimony before the USITC, June 20, 2007, 77–78.
40 AT&T, “AT&T Reaction to Free Trade Agreement with South Korea (April 2, 2007).”
41 USKBC, “Letter to Susan Schwab, U.S. Trade Representative (May 25, 2007).”
42 USKBC, “Overall Benefits for the U.S.”
43 TEPAC, Advisory Committee Report, April 25, 2007.
44 IGPAC, Advisory Committee Report, April 24, 2007.
45 TEPAC, Advisory Committee Report, April 25, 2007.
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