New prime minister says Kaesong Industrial Complex to benefit from FTA with U.S.


Incoming Prime Minister Han Duck-soo said Tuesday that goods produced in a joint industrial complex in North Korea will benefit from a free trade pact agreed upon with the United States the previous day.

Denying reports that the free trade agreement put aside the country-of-origin issue for future negotiations, Han said that the two countries cleared the way for treating goods produced in the Kaesong Industrial Complex as made in South Korea.

“The media reports that the Kaesong Industrial Complex was put on as a ‘built-in’ agenda are not true,” Han, who took office early in the day, told reporters in his inaugural press conference at the government building.

A “built-in” agenda refers to a negotiating scheme for sensitive issues in which the countries involved agree to put them on hold and discuss them in the future. Local reports have called the Kaesong issue “built-in,” as Seoul has been pushing for its inclusion in the trade deal despite Washington’s objection.

Under the deal, the two sides agreed to establish a “committee on outward processing zones on the Korean Peninsula” to discuss the Kaesong issue as part of their trade liberalization. But they also stipulated that such a step will be made under specific circumstances, such as the progress in denuclearizing North Korea, according to a statement by the Ministry of Foreign Affairs and Trade.

Han said the agreement is in line with South Korea’s constitution that its territory is the entire Korean Peninsula, and it does not recognize North Korea as a state.

Han also said the government will make public all of the contents of the agreement in mid-May when it is expected to be completed, and all the documents related to the agreement will be released three years later.

The Kaesong complex, just north of the inter-Korean border, is one of two flagship projects the South operates in the spirit of reconciliation with the North following the historic inter-Korean summit in 2000. Over 11,000 North Korean workers are employed by dozens of South Korean companies there, where they produce garments, utensils and other labor-intensive goods. Another reconciliation project is the operation of tours to the North’s scenic Mount Geumgang.

South Korean companies operating in Kaesong say the inclusion of the goods in the FTA is crucial, as this will allow them to export goods to the world’s largest market, as well as provide a template for future trade deals with other countries. 

U.S. Accepts Kaesung Industrial Complex as an “Outward Processing Zones”
Daily NK
Kim Song

A press conference was held following the conclusion of the Korea-U.S. Free Trade Agreement (FTA) on the 2nd where Korea’s Trade Minister Kim Hyun Chong announced, “The U.S. agreed to recognize the Kaesung Industrial Complex as a remote location.” By this he meant that goods manufactured in Kaesung complex would be accepted as goods made in Korea.

As annexes to the agreement, Committee on Outward Processing Zones on the Korean Peninsula must be established. Undeniably, the article also states that the contents would have to be approved by the U.S.

It seems that both sides agreed that this approach would be the U.S.’s minimal request and compromise on the Kaesung issue and a built-in tactic to keep the negotiating flame burning rather than a deal-breaker.

Previously, the U.S. made concessions regarding Outward Processing Zones with Singapore and Israel’s FTA. As for Korea, these preferential tariffs, not only acknowledges goods manufactured from Kaesung by the FTA, but sets a standard to other sectors in the world such as the European Free Trade Association and ASEAN.

It appears that the recognition of Kaesung as an Outward Processing Zone was based on an agreement that the Korean Peninsula would advance towards denuclearization.

The denuclearization of the Korean Peninsula will eventually lead to the removal of laws that will further eliminate hostile diplomacy and trade between the U.S. and North Korea. It is possible that denuclearization will establish the normalization of U.S.-North Korea relations and solve the issue of Kaesung naturally, in due time.

However, the denuclearization of the Korean Peninsula is not something to be solved within a short time. As a U.S. official once revealed, amity between the U.S.-North Korea can only be possible when North Korea decides to comply with the rules of the international community. In the bigger picture of the Korean Peninsula and economic conglomerate, Kaesung in relation to denuclearization is only a long-term sketch.

Furthermore, there is one minor glitch. Kaesung complex does not match the international standards accepted by the U.S. in relation to labor requirements and such. At any opportunity given, Jay Lefkowitz, U.S. Special Envoy on Human Rights in North Korea, has continuously targeted wage issues at Kaesung complex. Additionally, there have been many criticisms on pay issues regarding North Korean laborers working even within the nation, as well as violations to contracts of employment.

Throughout the FTA, President Roh Moo Hyun has been striving to protect rice while trying to negotiate the Kaesung Industrial Complex. Though President Roh argues that political calculations were omitted from the negotiations, these two issues contradict his words.

Some argue that the future will depend on South Korea’s attitude to the U.S. It is even possible that this is a political attempt by the U.S. to lure North Korea into denuclearization.


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