Questions and Answers from Economic Press Roundtable with Embassy Official

February 8, 2006

[Opening Remarks]

QUESTION: I am from Dong-A Daily. Previously you said that you hope that other Northeast Asian countries will be inspired by the ROK-US FTA and move to sign FTAs with the US. So does the US have any further plans or strategy to sign FTAs with other Northeast Asian or Asian countries?

EMBASSY OFFICIAL: I am not aware of any concrete plans at this time. It is more a general hope that they will be inspired to take the steps that would make them attractive FTA partners or economic partners for the US. I am not trying to state that we are in any consultative process about actually doing that with any of the other Asian countries in the region.

QUESTION: I have three questions. First is that the beef issue and the screen quote issue has been resolved before the announcement of the FTA. The first question is, I am wondering whether there will be additional requests from the US side regarding these two issues during the process of FTA negotiations. The second question, we know that the US Government has a rather negative position on considering the Kaesong Industrial Complex products as Korean products, so I would like to know what the US government’s position will be on that. And third, what is the issue that the US will consider to be the most important in the FTA negotiations?

EMBASSY OFFICIAL: Good questions. On the beef issue we were quite happy that we were able to reach agreement on the 13th of January to come up with a plan together to reopen the Korean market to imports of boneless beef from the US.

And we are working now, apparently there will be some more additional…I’m not the expert on this, we have an agricultural counselor at the embassy… but there will be a rule that is published by the Korean side for comment, at the same time the Korean Government will send some teams to the US to look at our procedures for verifying that the type of beef that will be shipped to Korea is going to be handled properly. And then, hopefully, if all this goes well, then we will actually see some shipments towards the end of March.

So hopefully at that point we will be able to invite you all to some kind of event and serve some good American beef and have a little bit of a party. We don’t want to plan it yet, but we hope to do that.

At the same time, from our perspective, the beef issue is not completely resolved; in fact it is sort of partially resolved. The remaining concern that we have is that we continue to think that there are other types of beef products that are demonstrably safe and should be allowed into Korea. These include something called variety meats (I hope you know how to interpret that because I sure don’t), offals and specific cuts of bone-in beef, like the short rib Kalbi. We think those are safe and hope to have a continued dialogue on those items.

That dialogue that we will be having, one factor in that, is that the O.I.E., a French abbreviation for World Animal Health Organization, is at the same time reviewing guidelines, and we think that process can also contribute to helping us sort out this question of the other kinds of beef, which we think are safe and are consumed in the US certainly, and that we hope to be able to export to Korea.

And the last point on this, you raised this as, is this an issue in the FTA talks? This is the kind of issue we would be talking about regardless of whether we would be having FTA talks and so we’ll have discussions on the continuing beef issue, or we hope we will, because the US doesn’t consider it completely resolved. But I don’t that those talks will happen…they’re technical discussions so we get scientists together and talk about that stuff…so I don’t think that will happen in the context of the FTA negotiations.

Once FTA talks are launched that means that we will be in the FTA negotiations talking about an FTA, which is, at the end of the day, like a big thick pile of paper with lots of agreements on it that you sign at the bottom, and get ratified by legislatures. It’s like a contract, and the FTA talks will be focusing on reaching agreement on the terms of that. That does not mean that we would have any other economic discussions between the two countries at the same time. We will have technical discussions on beef, we’ll probably have…our financial people will continue to talk about financial matters other things will continue to happen in bilateral economic relations at the same time as the FTA talks. Just because we have FTA talks doesn’t mean that everything gets loaded into just that single discussion.

On the screen quota question, the screen quota was an issue of long standing concern to the US that was left over from the unsuccessful B.I.T Talks, Bilateral Investment Treaty Talks, and so we are quite happy by the resolve that was shown by the Roh Administration to finally come to terms with this question because it was hanging out there for such a long time, which is not good for the bilateral economic relationship.

Ambassador Portman, after the screen quota decision was announced, issued a statement basically accepting and welcoming the decision that was made. My understanding is that there will now be a comment period based upon the rule change, a Presidential Decree change, and once the comment period is completed then the rule change will be executed and implemented. There will be implementing guidelines, and I believe July 1st was the date, right, for implementation. So that hopefully puts that question [of the screen quota] to bed.

As Ambassador Portman said, we do think that this was a good decision. It is good for Korean movie-goers, they are going to have more choice. It’s probably good for the entire film industry as well, just to not have this policy in place.

I think that this is a point that you have heard made many times, but the Korean film industry is very competitive and is producing good product and it really didn’t need that policy anymore. So I don’t think anyone will really miss it.

Sorry, I’m taking too long, I’ll speed up. Kaesong, basically the view on Kaesong is the following, that the FTA negotiation is between the United States of America and Republic of Korea. We want to focus on that, get a good FTA, and not distract from that primary goal which is a really good FTA between the two countries.

To be real clear about this, the provisions of the FTA in our view will apply to goods originating within the territories of the two parties.

That is the exact term of art that lawyers in the US would like me to use.

At the same time, I want to make another point, which is the US does support South Korean economic engagement with North Korea. This is a demonstrable fact, and we get a lot of people saying that we don’t, but we do. We are happy to see North Korea and South Korea engaging economically.

I think we have demonstrated that support in a lot of ways, and one of them is in making sure that the export controls clearances that were needed for items to go to Kaesong under US law were achieved, and they were achieved, and Kaesong is operating and it has telecommunications, and it required a lot of hard work on our part. We had one of our officers staying up until midnight for a week translating things. But it was achieved, so we really do want the Kaesong Complex to be successful.

In saying that, let me define successful. Successful means a couple of things; it means that the companies that invest in Kaesong make money. That’s their expectation and more power to them; I hope they make a profit. It also means that North Korea learns something from Kaesong, that having good, well-run, market-oriented factories in their borders teaches them something and they learn some lessons about how to operate in the 20th-21st century, hopefully those lessons are being conveyed. That’s the definition of successful.

Back to the FTA. What’s the most important issue? Gosh, if I single out one, then all the other negotiators will be angry. An FTA is this big book, right, and inside there are chapters, there is an IPR chapter, there’s a Market Access chapter, there’s a Rules of Origin chapter, there’s about 20 odd (roughly) chapters. So if I choose one of those, all the other ones would get angry. I think the safe way for me to answer that question is that the most important thing is that all of those things be good. That’s really the kind of opportunity Korea has been preparing itself for in other FTA negotiations, building up to a real comprehensive FTA with the US, is the ability to do all of it. So the most important issue is having a comprehensive agreement that really realizes the full potential of what an FTA can produce.

QUESTION: I am from Maeil Kyungje. During the process of announcing the beginning of FTA negotiations there have been some differences in position between the US and Korea. The US has been emphasizing comprehensive and complete opening of the market, while Korea has been insisting there are sensitive areas in agriculture, etc. My question is, does comprehensive agreement mean that the US will not allow any sensitive items in Korea and in return does the US have any sensitive items of its own?

EMBASSY OFFICIAL: Good questions. We believe the shared goal of the two sides in negotiating this, I mean, I can’t speak for the Korean government but my understanding of what they’ve said both publicly and privately is that we share the same goal, which is a comprehensive agreement because that’s what a good FTA is.

At the same time we’re well aware of Korea’s sensitivities. I mean, they’re being expressed to us all the time and the US, like all countries, also has areas of sensitivity.

So, the goal is to achieve comprehensive liberalization, that’s what a free trade agreement is. Free, f-r-e-e. That’s the idea. Within that context then you negotiate.

QUESTION: Previously, you said that Korea’s film industry is very competitive and no longer needs the screen quota. Does that mean there is a possibility that the US will continue to press for complete abolishment of the screen quota system?

EMBASSY OFFICIAL: Press…will we press? I mean, we’re really happy with the decision and I think Ambassador Portman expressed that. If Korea were to go to zero days, I must confess we’d probably be even happier than 73 days because that would show complete confidence in the fact that it’s an irrelevant and unnecessary policy. But whether we’ll press or not, I’m not sure what you mean by press. I mean, our preference would be, since we don’t have a screen quota in the States, our preference would be that Korea wouldn’t have one at all. Whether we’re going to press for more, I’m not under instructions to press for more.

I don’t know if that was clear or not but basically we welcome the decision that was made. That decision, I think, probably helped us decide to go forward with FTA talks. That’s sort of the situation.

QUESTION: I have three questions. First, could you give us some of the items the US considers sensitive on the US’s part. Second question is the head delegate of the Korean delegation mentioned that in order to promote trade and promote investment in the US, there should be a discussion about a possibility of a visa waiver for business people going to the US, so I’d like to ask your opinion on that. Third, in the financial service sector what is the regulation that the US considers to be the greatest irritant in Korea?

EMBASSY OFFICIAL: The US sensitivities, I think we’ll just let that one sit for now until we start the negotiations themselves and explore the texts together and see what areas pop up that Korea’s requested and we find difficult. It’s kind of hard to predict. I mean, our intention, as I‘ve stated probably too many times already, is to go into this with a goal of comprehensive coverage. And we’re ready to entertain requests for changes in US trade policy, in order to achieve that. But we kind of need to wait and see what Korea suggests to the United States before we react to what areas of sensitivity are.

On visa issues, the US Congress has been quite clear on their view of how the Executive Branch should handle issues related to immigration law, in the context of FTA negotiations. The very firm instruction from the US Congress has been that immigration law is over here and trade law, trade-related issues, are over here. And please don’t mix them. To be honest we did that a couple of times and Congress did not like that. They wanted to keep immigration in the immigration box and trade in the trade box.

At the same time, I think people are aware that when President Bush and President Roh met in Gyeongju in November, they announced that we would be conducting a roadmap discussion bilaterally to figure out what needs to be done so that Korea can be included in the Visa Waiver Program, which wouldn’t be just for businesses, it would also cover tourism, tourist visitors. My colleague, the Consul General, I think, has talked about this. There are certain requirements that need to be met and the idea of that roadmap discussion, which will be happening over the next months and couple of years, is to figure out how to meet those requirements. So I think that we’re kind of comfortable, frankly, with the way things are set up. We’ve got a dialogue on visa issues, which is a good dialogue, and we’ve got FTA negotiations, which is a good negotiation. We’re ready to do both but our real preference is not to mix them up.

In financial services, again I’m reluctant now to single out, you know, this one’s number one, because then all the others feel like they’ve been left out. The goal generally, is to make sure both sides are confident that the system for financial services regulation is transparent and efficient and allows for the freest possible investment and design of financial products within sensible, prudent limits. So, there have been concerns expressed by foreign financial firms that it still takes awhile to get new financial products approved and that the process of getting those approvals is not as transparent as they would like. I think that will be a major part of the discussion along with a lot of other aspects as well. Maybe I can highlight that as an area of concern.

One thing, I’m a little concerned about pointing this out because my expertise is not great enough to know whether we will be able to address this issue in the FTA negotiations or not, but one concern we’ve had expressed from US financial firms, is that in the regulation of insurance in particular, but also to some extent banking, there are institutions which are not regulated by the Financial Supervisory Service, for example the post office system. That creates an un-level situation and I think it’s a concern shared by a lot of Korean financial institutions as well. That is an area we have been giving increased attention to lately.

QUESTION: I have two questions. First, is on the Kaesong Complex. You previously said the FTA applies to products that originate in the territories of ROK and the US, so does that mean that there is no room for negotiation on what is included in the definition of “territories”? Second, is that we believe that the US exporters, big exporters, are rather unhappy by the January 13th decision by the Korean government and the USTR has been saying there needs to be a re-negotiation, so if there is another negotiation when do you think that will be?

EMBASSY OFFICIAL: On Kaesong you’re exactly right, the FTA will apply to goods originating within the territories of the United States and the Republic of Korea. We think this issue can be resolved. The negotiations themselves will be an opportunity for the US to explain our point of view on this. Again, we just don’t think this issue should distract from the primary goal of the negotiation, which is to concentrate on having a good comprehensive FTA, which is beneficial to both economies.

To clarify in technical terms, what qualifies as an originating good is something that will be settled in the chapter called Rules of Origin.

QUESTION: The Korean government’s position is that the issue of Kaesong Industrial Complex should be included in the provisions of the FTA. How do you think the US will respond to the Korean government’s position?

EMBASSY OFFICIAL: Well, I’ve given a fairly careful answer on this, so I think I’m happy with what I’ve said and I’m just going to stick with that. Like I said, we’ll be explaining our point of view in the discussions themselves.

On beef, the US exporters, they were glad that Korea did take the step to decide to reopen its market to boneless cuts of beef. You know, boneless beef is good too. But they were, like you said, yes, unhappy that in particular that the bone-in Kalbi, which is really tasty, and sold well in Korea, was not included in the January 13th agreement. So, we’ll continue to work on it. I’m not aware of a specific time table for discussion of that question. You know, as I said early, one factor in this is discussions that take place multilaterally as well in the OIE. I think for now we’ve got probably, for a few weeks a least, our hands full dealing with the technical aspects of implementing the January 13th decision and then, hopefully as soon as possible we’ll be able to turn to the question of the other kinds of beef products. You know, I get hungry. It’s good stuff so we’re going to hope to get it into the market.

QUESTION: This is just an innocent question, you said that previously the OIE is reviewing its rules and that could contribute to the import of other parts of US beef to the Korean market. By reviewing, do you mean, they are planning to change the rules related to boneless beef?

EMBASSY OFFICIAL: You probably need to go to the OIE to find out exactly what’s going on because, unfortunately, I’m not a super expert on this. But my understanding is that there’s a continuing dialogue in the OIE about what the science supports in terms of what are 100% absolutely safe beef products. So that dialogue influences the bilateral dialogue and it could create opportunities for us to talk about yummy Kalbi.

A couple of clarifications, my colleague here asked me to note that you had asked on the beef question whether we would look to re-negotiate. I don’t think that’s the right term for what we’re looking for. Because we’re not saying that there was anything wrong with the January 13th agreement to the extent of what it covered. What we’re looking for is to have a continuing technical dialogue on other kinds of beef, which we think are scientifically shown to be safe. So we’ll continue to try and demonstrate to the Korean side that those types are safe too. We're not going to try and change what has already been done. This is our scientists showing that US beef is safe to your scientists.

One other point of clarification on Kaesong. Our very able interpreter today, who I think we can all agree is doing a really good job, interpreted one thing that I said about Kaesong is that the Kaesong issue would not present an obstacle to the FTA talks. I think the exact phrase that I used was: “We hope that the Kaesong issue will not distract from the primary goal of a comprehensive FTA.”

QUESTION: I’m from Yonhap News. There are opinions that the US is trying to sign an FTA with Korea in order to stand off China and to expand US influence in the Northeast Asia region. What is your opinion?

EMBASSY OFFICIAL: I don’t see that logic. I’m not quite sure I understand the premise of the question. Hopefully this is something, you know, from the Chinese perspective that they would see as a good thing as well. The US is really interested in deeper economic engagement with the Northeast Asian region. So I would kind of hope that they would also be enthusiastic that we’re devoting time and attention to deepened economic relations with a close neighbor of China.

QUESTION: You previously mentioned the financial service sector, I believe there will also be requests from the US side on the education and medical sector regarding regulations on their sectors, could you comment?

EMBASSY OFFICIAL: That addresses the services chapter of the FTA and our hope, again, would be to achieve the most possible, most liberal terms in opening of the Korean market for both investment and trade in all kinds of services.

I’ve seen that educational services and medical services have been stated as an area where the industries in Korea are kind of viewing the FTA in a defensive sense, that they feel like this is going to be hard for their industry if there were opening in those sectors. I must say I don’t really understand the logic in that because I think that the kind of and scale of investment you would see in education and in medical services in Korea, if there were more liberal rules governing that investment, would be fairly complementary to what is already in place. I don’t anticipate lots of foreigners wanting to come in and provide elementary education on a broad scale to 50 million people. It’s more a kind of thing that would be working together with existing partners in both medicine and education. I would guess that it would be fairly complementary and fairly cooperative entry on the part of foreign investors and service providers. I think to some extent the concerns about market opening in those areas are a bit exaggerated.

For example, I think, you know, in medical services what would be most likely to see under more liberal rules would be some foreign investment in the design and management and provision of medical services, maybe with some new technology provided. What wouldn’t be so likely to see is a flood of American doctors coming to work in Korea because they wouldn’t be qualified. They don’t speak Korean and wouldn’t really fit in as service providers. There might be a few specialists that would come but it wouldn’t be a kind of area where you’d see a lot of that kind of activity. It would be more sort of an investment taking place rather than, take an entire hospital complete with all the doctors from Los Angeles and stick it in Korea. I don’t think that’s very practical.

I’m kind of glad you raised that because it provides a pretty good example of what can be called the intangible benefits of this kind of agreement. Because a lot of the economic studies focus on the measurable increase in trade. You lower the tariffs this far and you get this much more trade. They put numbers in an equation and it comes out with a big number and that’s used to try and access whether the FTA is a good idea. And the numbers always come out positive for trade liberalization. But there’s these intangible aspects as well, including technology transfer and know-how management skills that can go in both directions, that deepening the economic relationship can also provide.

QUESTION: Related to the liberalization of the service industry, regarding the mutual recognition of the certifications, what types of certification is the US prepared to recognize in Korea? In FTAs in other countries, what types of certifications has the US recognized?

EMBASSY OFFICIAL: Those are really good questions, I wish I knew the answer. I’m not sure at that level of detail. I assume you’re talking about which Singaporean or Chilean certifications and I’m not sure what the answer to that is. We could look that up and try and find out.

QUESTION: When and where will the first official negotiation take place?

EMBASSY OFFICIAL: We’re still talking about that. I’ve got a hunch but I probably shouldn’t say. Where? I think you’ll find out soon enough. Our chief negotiators need to talk about that still. They’re still going to figure it out. What they’ll do in the next few days, weeks, is talk and come up with a plan for the schedule of negotiations and who is going to do the different chapters and all the details, how many rooms we need, buses, lunch, everything. When? At the earliest we have to wait 90 days from Feb 2nd, which given that Feb is a short month, means I guess, May 3rd roughly? So sometime soon after that I would expect to see us setting to work.

Hopefully by then it’ll be a little warmer and that’ll make things easier too.

QUESTION: Last year the NTS conducted tax investigations against six foreign funds, including Lonestar, early this year they’ve begun to conduct more investigations. Has the Embassy received any complaints from the US financial companies regarding the investigations?

EMBASSY OFFICIAL: Completely unrelated to the FTA, obviously. We don’t comment on investigations of any kind, tax, criminal, whatever. When there’s an investigation on-going we don’t comment on it directly. I will say that I have had some people in the US, I’m not saying specifically the people from the firms that are involved, but people in the US, wishing that there was less public discussion of the investigations while they were on-going.

Thank you everyone for your time and attention and see you again soon, I’m sure.