US Criticizes Korean Trade Barriers

In its Annual Foreign Trade Barriers Report released on March 31, the Office of the United States Trade Representative (USTR) denounced the Korean government’s investment limitations on the service sector and its export-aid policies. The 25-page report on Korea raised questions about items such as post office insurance and regulations on motorcycles.

The report gives observers a look at the Korean industry sectors the U.S. may focus on in the Korea-US free trade agreement talks.

Export-aiding policies–

The report commented on the Korean government’s export-oriented industrial policies and says that Korea is pursuing an economic development strategy that is still too dependent on exports. It deals with issues of the government supporting traditional export industries such as cars, semiconductors, shipbuilding and steel, and next-generation export industries such as semiconductor equipment and telecommunications equipment. The report pointed out that the U.S. needs to urge the Korean government to ensure that its industry-assisting policies obey WTO regulations.

Slow privatization–

The report points out that no Korean public companies were privatized in 2005. It also mentions that the government has no plans to privatize the Korea Gas Corporation or Incheon International Airport in the near future. It also expressed concern that the plan for privatizing the Woori Financial Group, which the government owns a 79 percent stake in, has been delayed after public funds have been invested in it. That is, the fact that Woori Bank took the lead to extend lending terms when Hynix was in financial trouble could be considered a provision of subsidies.

It contended that financial services offered by the post office, which rank fourth in terms of insurance market share, could inflict undue damage on other financial companies in the country and abroad. The report said that the Korean government is reviewing ways to improve the status quo, but raising questions is necessary.

Motorcycles–

The report pointed out that Korean laws force motorcycle riders to stay on main roads. Sales of larger motorcycles made in the U.S. are hurt as a result. America is the leader in middle- and large-sized motorcycle production.

It went on to say that Korea’s provisions for copyright law need to be extended from the current 50 years after a copyright holders’ death up to 70 to 95 years, according to international trends.

Others–

It is pointed out that foreign investment is limited in various media industries, such as cable and satellite broadcasting, and that corruption still prevails in the medical and pharmaceutical market. Complex distribution systems and lack of transparency in the government’s decision-making process are also problems, said the report.

Seung-Ryun Kim srkim@donga.com