Korea criticized in USTR annual report

The U.S. Trade Representative (USTR) announced its 2001 annual Foreign Trade Barriers report on Mar. 30, in which it criticized the trade practices of Korea, Japan, China and the European Union.

The report expressed concerns over the Korean government`s direct financing to some large corporations suffering from cashflow problems, including the Korea Development Bank`s purchase of corporate bonds issued by Hyundai Electronics Industries, adding that it is now working out measures in this connection.

It also pointed out that the intervention of the Korean government could violate the World Trade Organization (WTO) agreement concerning government subsidies. ``Korea is heading toward a more liberal economic system,`` said the report. ``However, political considerations and the Korean economy`s initial recovery from the financial crisis have slowed momentum toward reform.``

The USTR report mentioned Japan`s restrictive measure to limit competition against Nippon Telegraph and Telephone Corp. (NTT) and the rice market, China`s import regulations and inspection barriers, EU`s import restrictions on bananas and hormone-containing beef and the offering of financial aid to Airbus.

As for Korea, the USTR pointed out that Korea`s average import duty was 8.9 percent last year. However, the tariff imposed on high value-added agricultural products such as beef and nuts was as high as 40 percent, it contended. Korea adopted a regulative tariff system to protect local industries and many American products are losing their competitive edge in the Korean market because of the high tariffs and the value-added tax.

Non-tariff measure:

Under its Uruguay Round commitments, Korea agreed to cut its subsidies for agricultural products by as much as 13 percent by the year 2004. But Korea raised its support to local farmers by drastically increasing financial aid to dairy farmers in 1997 and 1998. The U.S., together with Australia, took issue with the subsidies at the WTO, although there is no conclusion yet.

Quantitative restrictions and import approvals:

The U.S. administration expressed its concern over the Korean government`s policy to specify country of origin on all products, which it said would have an influence on U.S. exports of beef. Korea decided to postpone its implementation of the policy by one year and study ways of solving the problem.

The Korean government is strictly controlling the purchase, distribution and final consumption of rice. Also, it restricts direct sales of imported rice to consumers. For this reason, the access of U.S.-produced rice to the Korean market has been limited. USTR is worried about the Korean position that the question of rice should not be part of a WTO agricultural agreement.

Protection of intellectual property rights:

Amid concerns over its difficulty protecting intellectual property rights, Korea was included last year in the list of countries for priority watch under the Super 301 clause of the trade act. The U.S. is encouraged by the fact that Korea is working harder to protect intellectual property rights by revising relevant laws, including those on patents and trademarks. USTR calls for even further efforts to protect intellectual property rights.

Han Ki-Heung eligius@donga.com