ROK insists Kaesong Products made in ROK, US says “nope”

UPDATE: Contrary to a previous post (Listed below), South Korea is now insisting that goods made in the Kaesong Industrial Zone be labeled “Made in South Korea” for trade with the US, and the US is insisting that this will not be possible under the proposed FTA.  I hope someone will blink because reduced trade barriers will be good for both countries.

From the Joong Ang:

U.S. reaffirms its stance against Kaesong in FTA
Franklin Lavin, the U.S. Department of Commerce international trade undersecretary, has reiterated the American position not to include goods produced in the Kaesong Industrial Complex in North Korea in the free trade agreement with South Korea.

“The simple fact is that a bilateral agreement is between two countries,” Mr. Lavin said in a lecture organized by the American Chamber of Commerce yesterday.

“We have no negotiating authority, no congressional authority, to include any other economic entity in that bilateral agreement.”

Koreans negotiators, pushing to include Kaesong products in the FTA with the U.S., cited earlier free trade pacts with Chile and Singapore, which accepted the offer, as a precedent. 

From the KBS:

Seoul Not to Compromise Kaesong Label
Friday, July 21, 2006

A top aide to South Korean President Roh Moo-hyun said Friday the South Korean government will not compromise on the issue of labeling goods manufactured in the inter-Korean industrial complex Kaesong as ‘South Korean-made’ in the ongoing talks for a free trade agreement (FTA) with the United States.

Senior presidential secretary for economic affairs Chung Moon-soo said that Seoul will never yield to Washington regarding the country-of-origin issue for South Korean products made in the Kaesong Industrial Complex.

South Korea’s Trade Minister Kim Hyun-chong also expressed a similar stance on the issue.

Earlier in Washington, U.S. Congress International Relations Committee Chairman Henry Hyde reportedly urged the U.S. government not to regard products made in Kaesong as South Korea-made.

In addition, Deputy U. S. Trade Representative Karan Bhatia has made clear that any deal that is beneficial to North Korea would run counter to the U.S. government’s position.

From the Korea Times:

Korea May Not Insist on Kaesong
By Park Hyong-ki
Kim Jong-hoon, chief of Korea’s negotiating team with the United States on a free trade agreement (FTA), Thursday hinted that Seoul may not insist on including the Kaesong issue in the bilateral trade pact.

“We have not decided on which areas we will defend at all costs,’’ Kim told economic editors of newspapers and broadcasting stations. “I will consult decision-makers on the list.’’

Kim’s remarks came after last week’s negotiations in Seoul where the U.S. delegation, led by Wendy Cutler, rejected Seoul’s request for the exemption of tariffs on products made in the South Korean-led industrial complex in the North Korean town, in the event Kaesong-made goods are exported to the U.S.

The U.S. has reportedly been sensitive to transfers of cash to North Korea for fear they may sustain Pyongyang’s programs of weapons of mass destruction. About 6,000 North Korean workers work in Kaesong for about $60 per month. Kaesong is still in a developing stage so if more companies move in to set up shop, it would spell larger cash flows into the financially-strapped communist state.

Regarding Seoul’s decision to halve “screen quota’’ or its mandatory 146-day viewing of Korean films at theaters before FTA talks began, Kim said, “It provided an atmosphere conducive to the start of FTA negotiations.’’

He said that previous efforts to establish a bilateral trade pact with the United States were thwarted over the screen quota issue.

“We believed that if the screen quota remained intact, it would hobble any agreement at the last minute,’’ he said. “Besides, culture is a two-way street. We can’t just keep on insisting our position.’’

Talking about the rupture of the second round talks, Kim said that Wendy Cutler, chief U.S. negotiator, didn’t have authority to make spot decisions so had to consult with Washington, costing a lot on negotiating time.

The two sides are scheduled to meet for the third round in September in U.S.

Here is the position of the US (From the Donga)

The dissensions that had grown between Korea and the U.S. over the Gaesong Industrial Complex and tourism of Mt. Geumgang show signs of evolving into serious rifts.

At the U.S.-Korea Inter-Parliamentary Exchange Council press conference held at Rayburn House in Washington on July 18, the American chairman Edward Royce (Republican) emphasized the importance of where the profits from the industrial complex end up, stating the concern that the North Korean leadership may use the cash it earns for developing weapons of mass destruction such as missiles,

Officials from the Bush administration also recently noted that three laws on terrorism must be amended if the U.S. was to allow tax-free imports of goods produced in countries that support terrorism, such as North Korea, adding that such revision would be impossible for the U.S. Congress to accept. In effect, the U.S. will not be including products made in the Gaesong Industrial Complex in the Korea-U.S. Free Trade Agreement negotiations, because of the inconsistencies with existing laws and regulations.

Stuart Levey, U.S. Treasury`s undersecretary for terrorism and financial intelligence who visited Korea on July 16-18 is also reported to have met with Korean government officials and expressed a deep interest in whether a U.N. Security Council Resolution controlling the shipping of military supplies into North Korea would conflict with Mt. Geumgang tourism and the Gaesong complex.

In his statement upon departure from Seoul, disclosed on the U.S. Treasury website on July 18, he declared that they had discussed “issues of common interest, including the new United Nations Security Council Resolution that requires all member states to prevent the transfer of any financial resources in relation to DPRK`s missile or WMD programs.”

On July 18 Levey visited the Ministry of Finance and Economy (MOFE) and requested to know the Korean government’s position on the recent Security Council’s Resolution against North Korea; however a senior MOFE official replied that as the issue lies with the Ministry of Unification, MOFE was not in a place to provide an answer.

“We explained it [to Undersecretary Levey before he asked] because some concerns had been raised that the U.N. Security Council Resolution could clash with the Mt. Geumgang tourism and Gaesong Industrial Complex,” said Song Min-soon, chief presidential secretary for unification, foreign and security policy.

He went on to deny allegations that tensions had arisen between the two countries over the issue, stating that “Korean government officials had expressed there was no problem with the two enterprises regarding the purpose and range of domestic statutes, judicial judgement or international law mentioned in the Security Council Resolution, and Undersecretary Levey had responded that he understood well.”

While Washington has not demanded outright for South Korea to stop its industrial and tourism enterprises in the North, it has been reported to have conveyed strong concerns over the businesses bringing cash into North Korea.

However, a senior Korean official displayed a firm determination in pursuing the Gaesong project. “The Gaesong Industrial Complex is the epitome of the [current administration’s] North Korean policies. We will carry on with it no matter what difficulties are to be faced,” he said.

Fears have been raised that in case North Korea follows its arbitrary announcement on July 19 that it will no longer permit meetings of separated families with further measures to step up tension on the peninsula, South Korea and the U.S. could come to serious troubles over the Gaesong and Mt. Geumgang projects.

Meanwhile, a group of 56, comprised of people from credit assurance companies and from corporate banking divisions of banks such as Kookmin, Shinhan, Hana, Woori, Korea Development Bank (KDB), Kiup, City Bank Korea, Daegu, Busan, Kwangju, Jeonbuk and Kyongnam will be visiting the Gaesong Industrial Complex on July 21, sponsored by the Ministry of Unification.



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