Saturday, July 22, 2006

US ROK FTA - Singapore Suprise

I was interested in doing some research when I found this quote in the Joongang recently:

The government said it made a proposal to the United States yesterday to exclude approximately 100 service businesses, such as broadcasting, electricity, accounting and medical services, from a market opening..."We now have a greater number of areas to be excluded than we did for the free trade agreement with Singapore," said Kim Jong-hoon, Korea's chief negotiator on the free trade talks, yesterday.

Well lets take a look at the Singapore Korea FTA. You can find a copy of it on Singapore Ministry of Trade and Industry Website. Some choice quotes what cannot be done in Korea:

Those who are not Korean nationals shall not be the representative or chief programmer of an electric billboard operator. 

A representative of a foreign legal entity or organization shall not be the representative or chief programmer of an electric billboard operator. 


Those who are not Korean nationals shall not be the representative or member of Board of Directors of Korea Broadcasting Advertising Corporation. 

-Annex 9A

Only Korean citizens may invest in the rice or barley industry in the Republic of Korea 


Foreign nationals or foreign legal entities are permitted to hold less than 50 per cent of the shares or stocks of legal entities engaged in farming beef cattle.  


Foreign nationals or foreign legal entities are permitted to hold less than 50 per cent of the shares or stocks of legal entities engaged in the wholesale of meat 

-Annex 9A

Operators of Movie theaters shall screen Korean movies for not less than 146 days a year in all. 

-Annex 9A

Limitation on stocks held by foreign government or foreigner 
(a) A foreign government or a foreigner shall not hold combined stocks of a facilities-based telecom carrier in excess of 49% of the total issued stocks. 
(b) A legal entity in which a foreign government or a foreigner(including a specially related person under Article 36.3 of the Securities Exchange Act) is the largest shareholder and holds over 15% of its total issued stocks shall be regarded as a foreigners. 
(c) Notwithstanding the preceding paragraph, a legal entity that holds less than 1% of the total issued stocks of a facilities-based telecom carrier shall not be regarded as a 
(d) A foreign government or a foreigner shall not become the largest shareholder of Korea Telecom, However, this provision shall not apply to the case a foreign government 
or a foreigner holds less than 5% of the total issued stocks of Korea Telecom. 


Under the Radio Waves Act, a person who does not hold the nationality of the Republic of Korea, a foreign government or its representative, and a foreign legal entity or a foreign organization shall not be permitted to establish a radio station. 

-Annex 9A

When a general contractor receives an order of construction work exceeding two(2) billion KRW, it shall subcontract (use local companies-DM)  a portion of its work to specialized contractors according to the following guideline : 


- Contract between 2 billion ~ 3 billion KRW : at least 20% of the value of the contract 
- Contract over 3 billion KRW : at least 30% of the value of the contract 

-Annex 9A

Any person who falls under either of the following  41 subparagraphs shall not serve on the board of Yonhap News or the News Agency Promotion Committee: 
a. a person who is not of Korean nationality 
b. a person who has no domicile in the Republic of Korea 


A foreign news agency shall supply news communications through a contract with a domestic agency. Any natural or juridical person or entity that falls under any of the following subparagraphs shall not establish a wireless station 
(a) a person who is not of Korean nationality 
(b) a foreign government or its representative 
(c) a foreign legal entity or foreign legal organization 

-Annex 9A

In order to balance supply and demand of grains and to manage quality of liquors., the types and amount of raw materials for liquors may be designated. (Korean Government may require you to make according to their recipe, not yours -DM)


Sales of liquors on-line is prohibited except for on-line sale of traditional liquors by those manufacturers. (I would love to know how the determine what a 'traditional liquor' is -DM)

-Annex 9A


Any person who falls under the categories stipulated in subparagraphs of Article 6 of the Aviation Act(and listed below) may not provide domestic services, nor international services(scheduled/non-scheduled). 


1. A person who is not a citizen of the Republic of Korea; 
2. A foreign government or foreign public organization; 
3. A foreign corporation or organization; 
4. A corporation in which any of those referred to in sub-paragraph 1 through 3 above either owns 50% or more of the stocks or shares, or yields de-facto control; and 
5. A corporation whose representative is a foreigner, or half or more of whose officers(executives) are foreigners. 

-Annex 9A

Only a Korean national is eligible to be a maritime pilot.  
Only Korean nationals or Korean corporations may be involved in the rescue of wrecked ships or in the ship scraping.     


Only Korean nationals or legal entities are allowed to conduct vessel inspections as delegated by the Korean government.  

-Annex 9A

Now those are just some oddities regarding existing business. Things get beyond able to just quote in the other Annexes of section 9. Among areas that Singpore is forbiden to operate in are normally heavily controlled industries, such as gambling and arms/defense related industries. Arguably unreasonable forbidden services include things like energy distribution, credit reporting, agriculture, and broadcasting. There are also some "phantom" barring, they are listed innocuous diplomatic language that foreigners will follow local laws,  in areas like architecture, legal services, and accounting where it is fine to enter if they are "properly licensed", but arguably those licensing programs by their nature are de facto or de jure decidedly stacked against the foreign firm.

By my count there are a little under 100 markets forbiden, so the headline in the newspaper makes sense. The problem is if Korea's position is Singapore PLUS other areas, the US may eventually just give it up. I am really getting a bad feeling about the success of these talks, and if successful the document should even be ratified.


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