Video & Text Fwd: Portland Rally Opposing Korea FTA

* Video and text, thanks to Steve Zeltzer on Jan. 13, 2011



Demonstration opposing the Korea Free Trade Agreement. Speakers include Arthur Stamoulis, Oregon Fair Trade Campaign; Mitch Besser, displaced high-tech worker; Kim Kyung-Ran, director of external relations for the Korean Confederation of Trade Unions; and Madeline Elder, president, Communications Workers of America.

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See also Yonhap News
Obama gov't wants Congress to approve Korea FTA before July: Kirk
Jan. 14, 2011

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*The below text, thanks to Steve Zeltzer on Jan. 13, 2011

Key Points on the December 3, 2010 Supplemental Deal on the Korea FTA

Key Points on the December 3, 2010 Supplemental Deal on the Korea FTA
http://www.fairtrademinnesota.org/Summary of Korea FTA Supplemental deal.pdf
For more information, contact Public Citizen’s Global Trade Watch or see www.tradewatch.org 1
Key Points on the December 3, 2010 Supplemental Deal on the Korea FTA

* The supplemental agreement did not alter the basis for the International Trade Commission
projection that the Korea FTA will increase the U.S. trade deficit or the Economic Policy
Institute’s projection that the agreement would result in the loss of 159,000 American jobs.

* The supplemental deal did not alter the NAFTA-replicating foreign investor offshoring
protections; the new rights for the 200-plus Korean establishments operating here who would
be newly empowered to demand taxpayer compensation in foreign tribunals for U.S.
environmental, financial, labor or health policies; the financial sector regulatory limits; or
the limits on imported food and product safety standards and inspection that were included
in the Korea FTA text that President Bush signed in 2007.

*The Bush FTA labor chapter also was not altered, meaning that the provision inserted by
Bush prohibiting reference to the International Labor Organization (ILO) Conventions in
enforcing the FTA’s labor provisions remains intact.

* Many congressional Democrats and Democratic base groups opposed Bush’s Korea FTA. In a July 2010 letter to President Obama, 110 House members identified changes to the labor, investor and financial service rules in Bush’s text as essential. A September 2010 letter to President Obama signed by over 500 U.S. labor, consumer, environmental, faith, and family farm groups also demanded renegotiations of these damaging provisions.

* The supplemental agreement extends tariff phase-out timelines for both Korea and U.S.
autos, allows Korea to maintain pork tariffs for two extra years, waives application of
Korean auto safety standards for up to 75,000 U.S. cars, allows small volume U.S. auto
exporters access for cars that exceed Korean emissions and fuel efficiency standards by 19%,
added an auto-specific safeguard measure, requires Korea to develop a mechanism within
two years to review if auto regulations meet their goals in the least burdensome manner,
extended the length of L-1 visas for Korean workers in the United States and provided a
three-year extension for Korean generic drugs.

* The supplemental agreement does not require Korea to import any more U.S. cars nor are
tariff cuts conditioned on more U.S. cars being sold in Korea. In 2009, 5,878 U.S. passenger
vehicles were exported to Korea, while the U.S. imported 476,833 vehicles from Korea. Total
import penetration for autos in Korea is 4 percent.

* The supplemental agreement did not change the FTA’s 35% domestic content rule that allows duty-free treatment for vehicles with 65% of content sourced from China, Mexico or
other countries. Thus, even if the United States were to export more cars to Korea, this would
not necessarily translate into more jobs for U.S. workers in the auto parts, steel, glass, tire
and rubber industries. The EU-Korea FTA auto domestic content rule is 55%.

*None of the changes to the FTA’s textile provisions demanded by a bipartisan group of Congress people and by the industry were made.

*The issue of U.S. beef market access in Korea was not addressed in the supplemental.

Details follow below…
For more information, contact Public Citizen’s Global Trade Watch or see www.tradewatch.org 2 WHAT WAS NOT CHANGED

- Labor chapter requirement that the ILO Conventions may not be referenced in enforcing the
FTA labor chapter. As a result of this clause, enforcement of the Korea FTA’s labor chapter is
limited to reference to the general two-page ILO Declaration on Fundamental Principles and Rights at Work that does not establish the internationally-recognized core labor rights. The addition of this limitation led Chamber of Commerce President Tom Donohue to reverse his opposition to FTA labor provisions, noting that he was “encouraged by assurances that the labor provisions cannot be read to require compliance with ILO Conventions.”1 Diverse U.S. unions made clear that this offensive limiting language had to be cut. During his campaign, President Obama committed that all of his trade agreements require adherence to the standards of the ILO core Conventions.2 In a September 14, 2010 statement, the UAW noted: “The UAW has serious concerns regarding the effectiveness of the worker rights provisions of the proposed KORUS FTA in protecting basic international labor standards.”3 The AFL-CIO also had a list of other Korea FTA labor chapter changes that were also ignored.4

- Foreign investor offshoring privileges and investor-state private enforcement: No changes were
made to the Bush text’s investment chapter. The Korea FTA’s investment text remains almost word- for-word the same as CAFTA, which expanded on the investor rights provided in NAFTA. The Korea FTA contains the special privileges and protections for foreign investment that promote offshoring. This includes a guaranteed minimum standard of treatment for offshore operations that extend beyond what countries afford domestic corporations and rights to “regulatory takings” compensation for domestic policies that investors claim undermine expected future profits. The Korea FTA also replicates the NAFTA-CAFTA “investor-state” enforcement system. This empowers foreign investors and corporations to privately enforce their new FTA privileges by suing host governments in World Bank and UN tribunals for cash compensation. The definition of foreign investor in the Korea FTA would allow a Chinese firm who (directly or through a subsidiary) incorporated in Korea that established a U.S. operation to use this system. Investor-state enforcement is not necessary or appropriate for an agreement between two developed countries with well established rule of law and sound domestic court systems. The U.S.-Australia FTA does not have investor-state private enforcement. These terms are a special threat in the Korea FTA: there are 300 Korean establishments5 operating within the U.S. that would be newly empowered to launch extrajudicial attacks on U.S. domestic policies. Compensation for such claims is paid with our tax dollars, exposing the Treasury to
new liabilities. Over $300 million in compensation has been paid to NAFTA-counter corporations and investors using this private enforcement system against health, safety, zoning and other policies.6

- Financial regulation limits: The Bush FTA terms remain unchanged. Any policies that limit
financial firm size or impose firewalls are subject to challenge.7 Nations are prohibited from using capital controls or banning risky financial products and services. These limits could conflict with U.S. and Korean financial reregulation policies. While the Korean and U.S. governments may refrain from attacking financial reregulation measures in the wake the crisis, the Korea FTA allows private corporate enforcement of its key financial regulatory limits.8 A spokesperson for Citigroup raved that the Korea FTA has “the best financial services chapter negotiated in a free trade agreement to date.”9

- Limits on imported food and products safety standards and inspection: The Bush terms remain
unchanged. The U.S. now imports nearly $65 billion in food annually - almost double the value
imported when NAFTA and the WTO went into effect. Like NAFTA and CAFTA, the Korea FTA
requires the U.S. to import meat and poultry that does not meet U.S. safety standards. This food shows up in stores with a USDA label. The Korea FTA also incorporates the WTO standard of presuming a country's domestic food and product safety standard is a trade barrier subject to challenge and sanctions if it extends beyond the weak international standards set by the Codex Alimentarius, a UN For more information, contact Public Citizen’s Global Trade Watch or see www.tradewatch.org 3 body dominated by agribusiness representatives. Domestic food safety, product safety and worker safety rules that are challenged in Korea FTA tribunals must be eliminated or the U.S. would face permanent trade sanctions - as has happened in the NAFTA case against the U.S. safety ban on Mexican-domiciled trucks. China recently won a WTO challenge against the U.S. safety-based ban on Chinese chicken imports. Currently, Mexico and Canada are challenging the U.S. country-of- origin food labeling policy at the WTO using rules similar to those in the Korea FTA.

- Textile tariffs cuts that favor Korea: U.S. tariffs for 44 product lines phase out more quickly than Korean tariffs on the same goods. Especially exposed are industrial and technical textiles, such as Kevlar and flame retardant fabrics. Korea is the main U.S. competitor in this essential high tech sector. As well, the agreement would immediate zero out tariffs on fiber fill even though the U.S. currently has anti-dumping duties in place on such Korean goods. The agreement provides no special protections to avoid duty-free treatment being given to Chinese goods transshipped through Korea, which is already a serious problem prior to tariff elimination.


WHAT WAS CHANGED (AND SOME NOTABLE THINGS NOT CHANGED FOR AUTOS)

- Automotive rule of origin remains at 35% of value and no limit on Korea’s duty drawbacks for
imported parts: A vehicle will qualify for FTA tariff terms even if parts comprising 65% of value are from another country. Thus, even if the United States were to export more cars to Korea, this would not necessarily translate into more jobs for U.S. workers in the auto parts, steel, glass, tire and rubber industries. Calling the agreement's “rule-of-origin” and “duty drawback” provisions “highly problematic” in a September 2010 statement, the UAW warned that “the U.S. and Korea are effectively signing an automotive free trade agreement with the world.”10 The statement notes: “Workers and their unions in Korea are opposed to the KORUS FTA, in part, because it would encourage Korean manufacturers to significantly increase the sourcing of production to low-wage nations of Asia, including China… Thus, Hyundai, for example, could source the production (and employment) of up to 65 percent of the value of its vehicles to China or elsewhere, import these parts and components back into South Korea for final assembly, and then export the finished vehicle to the United States duty-free.” Also, under the FTA, Korea is allowed to refund 100% of duties on imported parts. The EU-Korea 55% auto rule of origin requires a majority of value to come from the trade pact partners and duty drawbacks (refunds) are capped at 5%.


US-Korea FTA December 3 Supplemental versus EU-Korea FTA
Unchanged auto rule of origin at 35%. Auto rule of origin 55%
No limits on duty drawbacks Refundable duty capped at 5% for all countries
(such as China) with whom Korea has no FTA.
Cap triggered by significant increase of sourcing
from any country that has not concluded an FTA
with Korea i.e. where MFN duties still apply such as China.


- Automobile and truck tariff phase-out schedule changes: The supplemental agreement extends
tariff phase-out timelines for both Korea and U.S. autos, but still results in removal of all tariffs upon full implementation. This is a key point, because the ITC study that found the FTA will increase the U.S. trade deficit generally and the automotive trade deficit with Korea and the world specifically is based on full implementation. The study did not consider the previous tariff phase out patterns, but only the end result, which does not change under the supplemental agreement.) The supplemental shortens elimination of tariffs on electric cars and plug-in hybrids for both countries from ten years to

For more information, contact Public Citizen’s Global Trade Watch or see www.tradewatch.org 4
five years. The U.S. would be permitted to keep its 2.5% tariff on other autos in place until the fifth year. South Korea will immediately cut its tariff on U.S. autos from 8 percent to 4 percent and then eliminate the 4% tariff in the fifth year. (The EU-Korea FTA eliminates Korea tariffs immediately with Europes 10% tariff phased out over 5 years. 11) Korea’s 10% truck tariff will be eliminated immediately, while the U.S. 25% truck tariff will remain in place until the eighth year and be zeroed out by year ten. Currently, Korea exports no trucks to the United States while about 10% of U.S. exports to Korea are trucks.


US-Korea FTA December 3 Supplemental versus EU-Korea FTA
Korean 8% auto tariff goes to 4%
immediately and to 0 in year five. U.S.
2.5% auto tariff goes to 0 in year five.
Korean auto tariff goes to zero immediately.
EU's 10% tariff phased out over 5 years, goes to 0 in year six.
Korean 10% truck tariff removed
immediately. U.S. 25% truck tariff phased
out starting eighth year and goes to 0 by
year ten.
Korean 10% truck tariff removed immediately.
E.U. eliminates 22% tariffs over a period of
three to five years, depending on the truck
category.

- Auto Non-tariff barriers: While various specific Korean non-tariff barriers, such as related to
charging higher insurance rates for imported cars, were not eliminated, Korea agreed to a 12-month grace period before auto firms must meet new vehicle regulations. The supplemental agreement also requires Korea to develop a new system within two years to review existing auto regulations with respect to whether they accomplish their objectives in the least burdensome manner. The supplemental agreement allows for 25,000 cars per U.S. automaker – or more than three times the number of waivers allowed in the original agreement – to be imported into Korea if they meet U.S. safety standards even if they do not meet Korean standards. However, use of the waivers requires there being demand for U.S. cars in Korea. Less than 6,000 U.S. cars were sold in Korea in 2009. Also, under the supplemental agreement, all U.S. autos will be considered compliant with new Korean environmental standards on fuel economy and greenhouse gas emissions, developed since President Bush signed the FTA in 2007, if they achieve 119 percent of the targets in these regulations. Given Koreans strong antipathy towards imports – only 4 percent import penetration for all foreign autos and massive street riots against more
imported U.S. meat – the question is whether zeroing out tariffs and removing non-tariff obstacles will result in significant increases of U.S. auto exports to Korea.

- Special automotive safeguard: The supplemental agreement added an automotive-specific
safeguard measure. The Bush-signed agreement included a general safeguard mechanism only.

- Additional changes:

Korean tariffs on American pork extended: Originally, Korea would have eliminated tariffs on
American pork by 2013. The supplemental agreement extends this to 2015.

*Visas for Korean workers in U.S. extended: The L-1 visa for intra-company transfers was
extended to five years. This covers managers/executives and “specialized knowledge staff” (those with knowledge of a firm’s products/services, research, systems, proprietary techniques, management, or procedures.

*Peace clause for Korean generic drugs extended: The sale of Korean generic medicine in the
United States will not be subject to patent or other disputes for three years instead of 18 months.


For more information, contact Public Citizen’s Global Trade Watch or see www.tradewatch.org 5


ENDNOTES

1 U.S. Chamber of Commerce, “Chamber Welcomes Bipartisan Deal to Move Trade Agenda Forward,” Press Release, May 10, 2007,
Available at: http://www.uschamber.com/press/releases/2007/may/chamber-welcomes-bipartisan-deal-move-trade-agenda-forward
2 See e.g. Obama’s response to an Oregon Fair Trade Coalition questionnaire, May 9, 2008. Available at http://www.citizen.org/documents/ORFairTradeCoalitionObama.pdf
3 UAW Statement, September 14, 2010, page 7. See International Metal Workers Federation
http://www.imfmetal.org/files/10102608591310005/UAW_KORUS_FTA_ENGLISH.pdf Johanne
4 Jeff Vogt, “Comments Concerning Free Trade Agreement with the Republic of Korea before the USTR,” The American Federation of
Labor & Congress of Industrial Organizations, Docket No. USTR-2009-0020, Sept. 15, 2009, at 4-5, Available at:
http://www.regulations.gov/search/Regs/contentStreamer?objectId=0900006480a22cb2&disposition=attachment&contentType=msw8
5 See map of Korean firms established in the U.S. at http://www.citizen.org/Page.aspx?pid=3967
6 For a list of NAFTA cases, see http://www.citizen.org/documents/NAFTA_Investor_State_Chart_Nov_2010.pdf
7 See Public Citizen, “Fixes to Problematic Foreign Investor, Financial Deregulation Provisions in Bush’s Korea FTA Text Could Limit Prospective Damage, Start Obama’s Promised Trade Reforms,” July 2010, Available at:
http://www.citizen.org/documents/Talkingpointsinvestmentand%20financiaservices10.pdf
8 See Public Citizen, "Fixes to Problematic Foreign Investor, Financial Deregulation Provisions in Bush’s Korea FTA Text Could Limit Prospective Damage, Start Obama’s Promised Trade Reforms," July 2010.
9 U.S. International Trade Commission. “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,” USITC Publication 3949. September 2007, Corrected printing March 2010, at 4-10, Available at:
http://www.usitc.gov/publications/332/pub3949.pdf
10 UAW Statement, September 14, 2010, page 3. See International Metal Workers Federation
http://www.imfmetal.org/files/10102608591310005/UAW_KORUS_FTA_ENGLISH.pdf Johanne
11 See U.S. International Trade Commission. “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,” USITC Publication 3949. September 2007, Corrected printing March 2010, at 2-14, Table 2.3, Available at:
http://www.usitc.gov/publications/332/pub3949.pdf. See also Robert E. Scott, “Trade Policy and Job Loss,” Economic Policy Institute, Working Paper #289, Feb. 25, 2010, at 10, Table 5. Available at: http://www.epi.org/publications/entry/trade_policy_and_job_loss/