ANNUAL POSITION PAPER: 2002
Agenda to Strengthen U.S.-Korea Economic Relations
here to download the Presentation
PDF of the KOCHAM Position Paper)
Overview and Mission
Korean Chamber of Commerce and Industry in the USA, Inc. (KOCHAM)
is a not-for-profit business organization headquartered in New
York City. As the most prominent representative of U.S.-based
Korean firms, KOCHAM works to build awareness and good will between
the people, governments and business communities of Korea and
the U.S. This includes an annual trip to Washington, D.C. and
participation in the annual Korea-U.S. Business Council meeting.
is a non-for-profit private business organization headquartered
in New York City. Founded in June 1992, KOCHAM now serves
over 450 U.S.-based Korean companies located across the U.S.
Our members include most major Korean corporations operating
in the U.S., as well as locally-based Korean financial institutions,
attorneys, CPAs and other service professionals.
- As the
most prominent representative of U.S.-based Korean firms,
KOCHAM fulfills a multi-faceted role. In addition to raising
the management skills of its members, KOCHAM is active in
a range of "corporate diplomacy" initiatives to
build greater awareness and goodwill between the people, governments
and business communities of Korea and the United States. KOCHAM
is also dedicated to building closer relationships between
Korean and U.S. firms.
as the voice of its members in the U.S., KOCHAM participates
in a wide range of organizations and forums that focus on
relevant bilateral and multilateral issues. This includes
undertaking an annual trip to Washington to brief U.S. government
and other officials on the views of the Korean business community.
It also includes playing a major role within the Korea/U.S.
Business Councils and Korea/Southeast U.S. Economic Committee.
- The following
document represents a summary of the current views and positions
of KOCHAM on the occasion of its annual visit to Washington
on May 212-22,2002 and its participation in the annual Korea/U.S.
Business Council meeting in Seoul in June of 2002.
New York City, May 15, 2002
in the Global Economy: Overview & Current
the past year Korea has been a star performer leading Asian
nations in efforts to restructure and reform their economies.
Measures adopted in response to the 1997 IMF crisis have helped
to liberalize its financial system and to introduce transparency
and the new technologies and business practices needed to create
a knowledge-based society. International investors, analysts and
executives have endorsed these achievements through ratings upgrades
and asset purchases that have made Korean capital markets among
the best performing in the world.
is moving to rapidly introduce the reforms needed to create
a market-driven economy. This is necessary to deliver sustainable
growth. Substantial progress has been achieved in four areas,
including: a) corporate sector, through enhanced corporate
governance and profitability; b) financial sector, through
disposal of non-performing loans and consolidation; c) labor
sector, through more flexible labor market and peaceful dispute
resolution; and d) public sector, though privatization and
success is reflected in the dramatic change of its external
position. Korea was a net debtor country with obligations
totaling $54 billion in 1997. Earlier this year, it achieved
a net credit of $41.6 billion. Foreign exchange reserves also
declined to less than $4 billion in 1997. Today, Korean reserves
stand as high as $108 billion higher than the U.S.,
Germany or France.
- In a
rare move, Moody's Investors Service raised Koreas sovereign
rating by two notches on March 28, 2002. This allowed the
nation to regain the "A" rating it possessed before the 1997
crisis. Korea's foreign currency country ceiling for bonds
and notes has risen from "Baa2" to "A3".
impressive is the dramatic change of investor sentiment. On
the equity side, Koreas main stock market index has
risen by almost 80% since last September constituting
one of the best performances in the world.
- The Financial
Times and New York Times have both recently contrasted
Koreas achievements with those of Japan. Both publications
praised Korea and observed that while the nation has traditionally
looked to Japan for guidance, in some cases the reverse is
now true. Many Korean firms and the efforts of its government
now serve as a model for other countries that are looking
to upgrade and expand their economic potential.
the voice of the Korean business community in the U.S., KOCHAM
applauds the efforts of our government and colleagues back
in Korea. We look forward to redoubling our efforts to maintain
and expand on the tremendous progress that has been achieved
over the past few years.
in the Global Economy: Dynamic Hub of Asia
today is very different from only a few years ago. An increasingly
efficient and open market, Korea is attracting an onslaught of
foreign investment in recent years totaling nearly $52
billion from corporations and investors who recognize the
effects of empowered consumers and a radically different corporate
environment. Additionally, taking advantage of its strategic geographical
location, Korea has made a substantial investment into the air,
marine and other infrastructure facilities that will enable it
to effectively position itself as the "Dynamic Hub of Asia".
structural reform has helped to transform the Korean economy,
which achieved near 3% growth in 2001. This is a year when
most economies contracted. Investors now express great optimism
driving Asias 4th largest economy
to new heights.
attracted nearly $52 billion in foreign direct investment
from 1998-2001. This is more than twice the $25 billion it
gained in the 36 years prior to the crisis. Ninety-eight percent
of all industrial sectors are now unrestricted. Power-generation,
telecom and broadcasting are being deregulated and real estate
and foreign exchange transactions have been fully liberalized.
now own about 37% of listed Korean shares. Among Koreas
most competitive and widely-held companies such as Posco,
Samsung Electronics and Kookmin Bank foreigners hold about
66% of listed equity. This is an extraordinary change from
a few years ago.
non-performing loans have been reduced from 13% of banking
assets in 1999 to 3.4% last year, Korean banks, which recorded
a 4 trillion won loss four years ago, now earn net profits
totaling 5.2 trillion. Performance is expected to further
improve through the introduction of a new system allowing
rather than regulatory agencies to monitor the health
of corporations and to lead restructuring efforts when necessary.
top 30 firms in 1997, 16 have been closed or significantly
reorganized. Companies that remain have downsized and sold
assets. Debt/Equity ratios of the top four business groups
have declined from 473% to 162% in the three years since the
crisis. Today, nonviable companies can be dealt with easily
and quickly, due to new laws that facilitate bankruptcy, reorganization
and M&A. Corporate governance has also improved dramatically.
A system requiring outside directors has been established
as well as new rules that increase the ability of shareholders
to exert control.
has also placed itself on the cutting edge of new technology.
More than one of every seven Koreans now has broadband access.
That is nearly five times greater than the U.S. Over half
the population uses the Internet and the ratio of people using
online stock transactions overtook the U.S. over two years
ago. Korea is also a world leader in mobile communications.
It was the first country to commercialize CDMA technology
and remains the worlds leading maker of CDMA phones.
Out of a population of 47 million, there are 30 million mobile
phone subscriptions. That is more than one subscription for
every adult -- far ahead of the U.S., Japan and most European
has discovered the important role that domestic spending can
play in stabilizing its economy. As the nation begins to reduce
its traditional focus on savings in favor of consumption,
it is providing additional diversity to an economy that has
traditionally relied upon exports and capital investment.
firms, including Samsung Electronics, Kia, Hyundai Automotive
and LG have made significant progress in launching high-end
proprietary brands that have been positively received by U.S.
and other foreign consumers.
has also begun to take advantage of its strategic location.
It has made significant investments to develop the expanded
physical infrastructure needed to position the nation as the
business and financial hub of Northeast Asia. This includes
the new Inchon Airport, which possesses the capacity to carry
27 million passengers and 1.7 million tons of cargo annually.
Over the next two decades, the airport will grow in phases
to handle 100 million passengers. It is the largest infrastructure
project ever undertaken in Korea. Additional infrastructure
includes a renovation of Inchons seaport and the resumption
of rail traffic through North Korea.
is not to suggest Korea has overcome all obstacles or that
no problems lay ahead. Korea remains extremely dependent on
international trade, which contributes up to 73% of its GDP.
Many external factors remain beyond its control. Much will
depend on a stable world environment and the ability of the
U.S. to emerge from recession. Other concerns include the
need for Japan to regain its economic footing and for Korea
to meet the competitive challenge presented by a rising China.
stands ready to assist in Koreas ongoing transformation.
It dedicates itself to helping Korea realize its vision of
developing a North Asian business and financial hub and to
promote a unified and prosperous economy. By serving as an
outpost and facilitator for Korean firms in the U.S., it seeks
to help Korean and U.S. executives to develop the business
and personal relationships they need to achieve success in
each others markets.
and the United States: Commercial, Political and Strategic
remains Americas most loyal and staunchest ally in Asia
maintaining close commercial, political and strategic relations
throughout its entire post-war history. Trade between the economies
more than doubled over the past decade. Politically, the South
Korean people have learned much from the U.S. and now enjoy a
strong democracy and dedication to market-oriented economic principles.
Americans are unaware of the full depth of the Korea-United
States relationship and the important role Korea plays as
a major commercial, strategic and political partner. Trade
between the two economies more than doubled over the past
decade -- reaching an all-time high level of $67 billion in
2000. Since the 1997 financial crisis, the U.S. has overtaken
Japan as Korea's largest import supplier. South Korea is now
the sixth largest U.S. export market and its seventh largest
trade partner. Major U.S. exports to Korea include aircraft,
semiconductors and machinery. South Korea is also the fourth
largest market for U.S. agricultural products and third largest
market for U.S. beef.
- The U.S.
has been Korea's largest export market for several decades.
In recent years it has accounted for about 20% of total exports
-- approximately 5% of Korea's GDP. Major U.S. imports from
South Korea include semiconductors -- accounting for nearly
20%, electrical and general machinery, cell phones, autos,
textiles and steel.
and the U.S. share many political values. Democracy and market-oriented
principles are firmly entrenched and the nation has come a
long way since direct presidential elections were restored
in 1987. Its well-educated work force is quickly transforming
itself into a sophisticated consumer society -- with increasingly
diverse perceptions and preferences. Consumption of goods
and services is growing at a rapid rate making Korea
an increasingly attractive market for foreign consumer and
luxury goods manufacturers.
also serves as a firm strategic ally of the U.S. Its firm
commitment is based on historic reasons as well as a general
affinity with the American people. Most importantly, the South
Korean people have not forgotten the sacrifice of the American
people and military in the face of communist aggression over
50 years ago. They appreciate the 37,000 U.S. troops that
remain stationed in South Korea to this day. This force serves
to ensure Korean security, while acting as a stabilizing force
in the world at large.
endorses these trends and looks forward to continuing and
expanding its efforts to maximize the benefits of this important
Koreas Commitment to Free Trade:
Restraining Protectionist Pressures
has moved rapidly in recent years to abandon its traditional reliance
on trade barriers as a means to protect its domestic economy.
It has come to understand the essential need to open its markets.
Intensive reform has helped to change Korean business practices,
however, it is feared that U.S. moves to impose prohibitive tariffs
on steel could invite a domino effect of protectionism from other
nations, which would threaten to weaken and undermine the international
trading system at large.
has been moving rapidly to open its economy. This is helping
to facilitate market access, protect intellectual property
rights, liberalize labor practices and rectify a range of
other issues that once constrained the free flow of goods,
services and capital. The result has been the most rapid recovery
in Asia and rising domestic consumption.
initiated these changes -- with more on the horizon
Korea was disturbed to see the U.S. seemingly waver from its
own commitment to free trade. This was evidenced in President
Bush's March 6th decision to impose prohibitive
tariffs on most U.S. steel flat-rolled product imports, along
with a tariff rate quota on slab steel imports of up to 30%.
that the present problems of the global steel industry are
due to global overcapacity, unilateral trade-restrictive measures
will not serve as a solution for the difficulties faced by
U.S. domestic industries. Furthermore, U.S. imposed safeguard
measures do not take adequate account of current OECD-sponsored
efforts to address global overcapacity and may hinder future
prospects to achieve significant progress on this issue.
- The problems
faced by the U.S. steel industry is the result of insufficient
restructuring, not increased imports. In fact, imports of
flat-rolled steel products has declined substantially since
1998, and the volume of total steel imports in 2001 was lower
than in previous periods. Therefore, the imposition of U.S.
safeguard measures cannot be justified on these grounds.
is concerned that U.S. safeguard measures will provoke a global
proliferation of protectionism, resulting in a detrimental
effect on a world economy that is gradually showing signs
of recovery. The imposition of a staggering 30% tariff rate
on top of other restrictive measures such as anti-dumping
duties essentially blocks the ability of Korean steel to enter
the U.S. steel market.
strongly requests that the U.S. government withdraw it's safeguard
measures in their entirety, or at a minimum, modify them at
the earliest possible date to comply with relevant WTO agreements.
Toward a U.S.-Korea Free Trade Agreement (FTA)
U.S.-Korea FTA would enrich both nations. KOCHAM urges Korean
and U.S. opinion leaders to join us in pushing to accelerate the
completion of this initiative so that both countries can enjoy
the benefits in coming years.
interest in bilateral trade initiatives can be attributed
to the need to reconstruct and rationalize its domestic economy.
New trade pacts can help to facilitate inflows of foreign
capital and management skills, to provide consumer benefits
and to inject new competition into the Korean market.
a U.S. standpoint, an FTA can provide increased trade and
investment opportunities. In particular, the U.S. can increase
a wide range of exports to Korea. The U.S. could also use
its expanded access to the Korean market as a platform for
increased activity throughout the Asia Pacific Region.
- A U.S.-Korea
FTA also serves as a catalyst to jump-start the next stage
of regional free trade movement within APEC and as a building
bloc to further strengthen the multilateral trading system.
A FTA would also help to strengthen geopolitical ties and
security ties between Korea and the U.S.
- A FTA
would benefit both nations. But to achieve these gains, each
would need to change long-standing policies that protect affected
industries and interests from foreign competition. Both sides
need to bridge the necessary economic and political interests.
- In Korea,
the most vociferous opposition to a FTA with the U.S. would
likely come from agricultural interests. Koreas agricultural
sector is globally uncompetitive -- but still holds considerable
clout in national politics. The farm sector has disproportionate
representation in the National Assembly, even though agriculture,
forestry, and fishing now account for only five percent of
GDP and eleven percent of the Korean population.
- In the
manufacturing sector, Korean support for an FTA depends on
whether a prospective trade pact can deal with problems relating
to antidumping and countervailing duties. Reforms in these
areas are particularly important for the steel and electronics
industries, a frequent target of U.S. cases.
- The views
of U.S.-based Korean companies toward a FTA are highlighted
in a survey undertaken by KOCHAM and FKI in 2001. This survey
interviewed 50 major U.S.-based Korean companies and showed
that 87% of companies surveyed favored FTA negotiations with
the U.S. and 60% expect trade between Korea and the U.S. will
expand and become more balanced.
- One major
sign of progress toward completing an FTA over the past year,
which was viewed very positively by Korean companies, was
the release of the ITCs report on a Korea-U.S. FTA to
the U.S. Senate finance committee last fall. The positive
nature of the ITC report gives Koreans confidence the U.S.
government also sees the benefits of a FTA with Korea.
to the report, trade between Korea and the U.S. has risen
to $69 billion, yet substantial benefits are lost because
both countries put relatively high tariffs onto selected products.
The report estimates if a FTA would allow for all economic
sectors to be fully liberalized with zero tariffs, U.S. exports
to Korea would increase by $19 billion and Korean exports
to the U.S. would increase by $10 billion at the same time.
- One immediate
task that must be overcome is passage of the Bilateral Investment
Treaty (BIT) now under consideration.
urges Korean and U.S. opinion leaders to join us in making
common efforts to facilitate FTA negotiations. This includes
working to pass the BIT. In view of the growing commercial
ties and importance of our bilateral relationship, U.S.-based
Korean companies think it is time to more aggressively discuss
the prospects of a U.S.-Korea FTA. This will help to accelerate
the completion of this initiative so that both countries
can enjoy the benefits in coming years.
Koreas Support for the Global
War on Terrorism
affront to moral decency, the terrorist actions of September 11,
2001 can be seen as an attack on all civilized nations. The Republic
of Korea expresses its sincerest concern and regrets as both a
nation and a people. It stands ready to join together with the
U.S. in its efforts to promote global security. This is recognized
as an essential prerequisite and foundation for a stable, growing
and prosperous world economy.
- The South
Korean people especially abhor the deplorable terrorist actions
of September 11, 2001. This attack caused untold damage and
the tragic deaths of thousands of U.S. and foreign citizens
including 18 Koreans. It also served as an invasion
into the homeland of the courageous U.S. soldiers and families
who had sacrificed to save the South Korean people during
the Korean War.
- The Republic
of Korea expresses its sincerest concern and regrets as both
a nation and a people. Joining together with the U.S. and
other civilized nations, South Korea stands ready to do its
part in the critical fight to promote global security. This
is recognized as an essential prerequisite and foundation
for a stable, growing and prosperous world economy.
Korea pledges to make every effort to be a strong, supportive
partner of the U.S. in the global war on terrorism. This has
included an immediate commitment by its government to provide
medical and transport support after the September 11th
tragedy. Military ties between the two nations, already strong
before the attacks, are now even stronger.
- On November
12, 2001 a private sector delegation of Korean business leaders
led by the Federation of Korean Industries Vice Chairman
Sohn, Byung-Doo traveled to New York and Washington to donate
one million U.S. dollars to two relief organizations aiding
families of September 11th victims. Their
concern and support was further demonstrated by the participation
of Korean business and government leaders during the World
Economic Forum (WEF) which was held in New York City earlier
was especially pleased to see the WEF being hosting in New
York our headquarters and the home of so many Korean
firms. Not only did this event help to demonstrate the essential
vitality and dynamism that underlies New York City -- it also
emphasized the civilized worlds determination to stand
together tall in rejection of mindless terrorism.
Korean Security: North-South
Relations & Support for World Cup
maintaining a constant state of alert for almost five decades,
South Korea has adopted a "Sunshine Policy" that seeks
to enage the North in an economic and policy dialogue. Considerable
progress has been made, with one major achievement being the resumption
of freight traffic from North to South this fall. Next months
World Cup, which will be co-hosted by Japan and Korea, also offers
tremendous promise, providing a vehicle that can help promote
a new spirit of cooperation in North Asia.
Kim Dae-Jungs sunshine policy was implemented in 1998,
marking a new era, in which the South sought to engage the
North in an economic and political dialogue, as opposed to
the open confrontation that existed in the past. This course
has not been easy or without delay -- yet significant progress
has been achieved over the past three years.
trains are expected to begin crossing from North to South
this fall allowing inter-Korean rail traffic and cargo
for the first time in nearly fifty years and South Korean
firms recently opened North Koreas first car assembly
plant. Major South Korean telecom firms plan to visit the
North to compete for a half-billion-dollar cell-phone project
and one entrepreneur hopes to soon begin flying hundreds of
South Koreans to Pyongyang to play at North Koreas only
18-hole golf course. Smaller firms have also begun to conduct
business in the North.
while the South Korean people are making every effort to engage
in a constructive dialogue with the North, it is determined
not to do so in a manner that sacrifices its national security.
One sign of this commitment is the recent purchase of 40 U.S.
F-15K fighter jets reinforcing South Koreas ability
to deal with any conflict that emerges.
years World Cup Soccer Tournament, which will be co-hosted
this June by Korea and Japan offers tremendous promise as
a means to usher in new era of cooperation in North Asia.
Korea and Japan share many economic, cultural and social ties
and this event promises to help both countries to improve
these ties and the prospect of initiating a Korea-Japan bilateral
free trade agreement.
build on the emerging spirit of cooperation and good will,
KOCHAM recently helped sponsor an event organized by the Korea
and Japan Societies in N.Y. Professionals from both countries
and the U.S. united together to commemorate the upcoming World
Cup and to promote closer relations between all three countries.
Issues and Obstacles Toward Greater Economic
Cooperation Between Korea and the United States
Business Cooperation: Promoting Stronger
Alliances and Relationships
ongoing private sector dialogue is essential to complement public
sector communications and to strengthen relationships between
Korean and U.S. firms. The Korea-U.S./U.S.-Korea Business Councils
have been helping for over a decade to promote an exchange of
information among larger companies. Special attention needs to
be paid to building interactions between the small to mid-sized
firms that serve as a dynamic source of growth in both countries.
Korea-U.S./U.S. Korea Business Councils were established in
1988 as bilateral forums. They facilitate an ongoing dialogue
between Korean and U.S. business leaders to promote understanding
and cooperation between Korea and the United States. These
councils have played a unique role in helping to resolve various
trade conflicts by allowing high-level talks among private
sector leaders from both countries. Members are kept updated
and able to interact with their counterparts to develop relationships
and discuss a wide range of critical bilateral economic, financial,
political and security issues
relations between Korea and the U.S. are increasingly important
as Asia recovers and accounts for an ever-greater share of
the world economy. Strengthening these councils and other
business organizations that focus on the Korean-U.S. relationship
is essential to promote a healthier business environment and
closer relationship between Korean and U.S. firms. This will
promote the competitiveness of both economies and help to
raise trade and investment flows, not only bilaterally, but
in third countries as well.
attention, however, needs to be paid to promote stronger relationships
and interactions between small- to medium-sized enterprises
who serve as a dynamic source of growth in both countries.
Unlike major U.S. firms, who are active and aware of Koreas
attractiveness as a business and investment destination, smaller
firms have remained on the sidelines.
urges Korean and U.S. government leaders to provide what support
they can to enhance the role and importance of these councils
while preserving their independence as private sector-led
organizations. At the same time, we urge Korean and U.S. business
leaders to redouble their efforts to utilize these councils
as mechanisms to enhance commercial cooperation and the ensuing
benefits that can be achieved through an expanding bilateral
Korean Companies: Globalization & Investment
in the U.S.
growing scale and depth of the Korean economy requires that its
corporations adopt a more global focus and Korean firms have moved
rapidly to expand their overseas operations. This includes many
substantial investments in the U.S. by Korean companies and many
new jobs for U.S. citizens have developed as a result.
- As the
Korean economy has developed, its economy has become more
complex. Increased prosperity has raised living standards
and business costs, eroding Koreas competitiveness as
a low-cost manufacturing platform.
complex structures are needed to develop the scale, depth
and market presence that can build brands and sustain Koreas
competitiveness in the face of an emerging China and other
- To achieve
this goal, Korean firms need to assume a more multinational
character. This entails expanding their overseas operations,
internationalizing their business practices and allowing greater
numbers of non-Koreans to enter the boardrooms and management
ranks of Korean firms. As Koreas largest and most important
export and foreign market, substantial attention has been
devoted to upgrading their presence in the United States.
Their activities are having a significant impact, providing
jobs to Americans and enriching local communities. As of 2001,
there were approximately 2800 Korean investments in the U.S.
totaling nearly $9 billion.
Hyundai Motor Co., picked Alabama last month as the site for
a $1 billion investment in its first U.S. plant. When completed
by the end of 2004, it will employ at least 2,000 workers
and by the following year have an annual production capacity
of 300,000 vehicles. Other notable investments by Korean firms
Source: FKI, As of Sept. 2000
Amount of Investment
Ratio of Employees
San Jose, CA
PMX Industries, Inc.
Ceda Rapids, IA
San Diego, CA
Kia Motor Corp.
San Diego, CA
SKC America Inc.
San Jose, CA
As of May 2002
Issues & Obstacles Toward Greater Economic
and the U.S. enjoy greater bilateral trade flows and closer economic
cooperation than ever before, yet there are a number of important
issues that need to be resolved to maximize the potential of the
Korea-U.S. bilateral relationship.
Investment Treaty: The governments of Korea and the United
States have both agreed to make every effort to conclude a
bilateral investment treaty (BIT) during the first half of
this year. Nevertheless, U.S. concern over a range of issues
including autos, movie screen quotas, intellectual property
rights and corporate reform have impinged upon the conclusion
of necessary negotiations.
KOCHAM recognizes the need to address these issues, it concurs
with the view of the American Chamber of Commerce in Korea
(AMCHAM) which urges the U.S. to sign this treaty. In a recent
report containing recommendations for both the Korean and
U.S. governments, AMCHAM noted "This (signing of the
BIT) would have the effect of guaranteeing the continuation
of previously legislated reforms, and send a strong message
of support for future reforms."
Quota: One contentious issue constraining the passage
of the BIT is South Koreas 35 year old screen quota
system in which theatres are required to screen Korean movies.
Ironically, this issue has come to a fore at a time when South
Koreas cinema industry has been enjoying an unprecedented
boom. Its films took a record 49.5% share of the local market
last year and exports have more than doubled. According to
the Korea Media Rating Board, the number of foreign films
screened fell to 355 last year, from 427 in 2000.
notes the concerns of the U.S. film industry and firmly supports
deregulation and reform that promotes free trade. Yet it does
not believe this measure -- which has lost most of its relevance
in any case -- should be allowed to interfere with the full
benefits that can be delivered through the signing of a BIT.
This concurs with the view of AMCHAM, which recently noted
it "recommends de-linking this
BIT from the Screen-Quota issue".
Regional Survey: To assist the Korean government in its
efforts to develop Korea as a regional business hub, AMCHAM
surveyed 2,000 executives in the Asia Pacific region. Seoul
ranked last among the cities surveyed for reasons relating
to taxes, foreign exchange controls, labor flexibility, English-language
capabilities and country image.
shares many of the concerns of the executives that were surveyed.
It applauds AMCHAM for undertaking this survey, believing
it helps to provide a roadmap for future work in this area.
Furthermore, KOCHAM endorses many of the recommendations that
AMCHAM made to help guide the Korean government in its regional
business hub initiative.
Trade Problem. The Bush Administration has singled out
auto trade as one of the most troublesome aspects of the U.S.-Korea
trade relationship. Administration officials have highlighted
the bilateral auto trade imbalance and have asked the Korean
government to lower tariffs on passenger vehicles as well
as to reduce auto-related taxes. The Office of the U.S. Trade
Representative has specifically asked that Korea reduce its
current 8% tariff for passenger vehicles to a level closer
to the U.S. rate (2.5%).
acknowledges the U.S. position, but would like to emphasize
that the Korean auto market is changing rapidly. Sales of
imported cars in Korea are increasing, due to restored consumer
confidence, a reduction in the special excise tax, and aggressive
marketing. Sales of imported vehicles reached an all-time
monthly high in April and are expected to continue to grow
in the months ahead. More needs to be done to increase the
level of import sales in Korea, which remains low in absolute
terms. Changing consumer perceptions and increasing income
will help address this problem. Moreover, General Motors
acquisition of Daewoo Motor Company promises to dramatically
raise the U.S. share of Koreas domestic market to more
Property Rights (IPR): Korea is generally credited for
having made progress toward improving its legal and regulatory
framework and enforcement mechanisms for protecting intellectual
property rights (IPR). However, concerns remain about consistent,
sustained enforcement of intellectual property laws for computer
software, pharmaceutical patents, proprietary information
and copyrights. This prompted the Office of the United States
Trade Representative (USTR) to maintain Korea on the Watch
List included within its 2002 Special 301 Report.
urges U.S. government and corporate leaders to understand
the growing recognition within Korea that IPR protection is
critical to its efforts to develop a "knowledge-based"
economy. The Korean government is implementing the WTO/TRIPS
agreement, and working to bring Korean IPR laws in line with
international standards. A number of enforcement campaigns
have been initiated, including raids on 2,315 institutions
suspected of software piracy and a Standard Enforcement Team
established to crack down on the illegal reproduction of video
games and sound recordings.
Korean Companies: Obstacles to Doing Business
perhaps the freest and most attractive market in the world, the
U.S. attracts businesses from all over the world that are looking
to expand outside of their borders. Notwithstanding the many real
attractions that it offers, there are a number of real obstacles
that should be addressed.
due to its immigrant tradition, the U.S. allows easy entry
to foreign firms and investors compared to many other countries.
Through its ability to act as a "market of first and
last resort", the U.S. has offered stability to the world
trading system. This has encouraged many nations, including
Korea, to develop their industrial capacity and expand trade
beyond their borders.
firms and investors benefit from this growth, through their
ability to obtain sourcing platforms, customers for their
goods and services and profitable investment opportunities.
- On the
other hand, Korean firms face a number of obstacles that constrain
their ability to operate in the U.S. Many of these problems
are unfortunate byproducts of the heightened security initiated
as a result of the tragic September 11th attacks.
This has created real obstacles in areas including import
restrictions, delays in customs and other logistical clearances
and the ability of firms to obtain necessary visas for their
- In the
financial sector, Korean financial institutions have been
meeting with U.S. regulators to discuss a range of issues.
This includes deposit limitations that have resulted from
the Foreign Bank Supervision Enhancement Act of 1991 as well
as discriminatory practices that result from the different
treatment of U.S. and foreign banks in respect to asset maintenance
and other requirements.
- In addition,
there are a number of other tariff and non-tariff barriers
that constrain the ability of Korean companies in their efforts
to do business in the U.S. These concerns are also shared
by many European firms and others from Asia and include measures
and business practices that relate to unilateralism, and tariff,
customs and technical barriers. In addition, Korean firms
believe that progress can be made to simplify regulations
pertaining to government and defense procurements, anti-dumping
and safeguards, taxes and transfer pricing, and other areas.
understands that heightened surveillance is indeed necessary,
yet believes it would be truly unfortunate if security concerns
imposed a significant "terrorist surcharge", through
the added costs that would accrue to both Korean and U.S.
firms from substantial interference with the free flow of
trade and commerce.
Conclusion: Key Concerns and Areas of
the most prominent representative of U.S.-based Korean firms,
KOCHAM pledges to do its best to develop mutual understanding,
good will and stronger relationships between the people, governments
and business communities of Korea and the U.S. In this manner
KOCHAM seeks to contribute to this growing bilateral partnership
helping to enrich both sides in a mutually rewarding manner.
- The Korea-U.S.
relationship has shown renewed strength in recent years as
Korea has moved to introduce the dramatic reforms that have
reinvigorated its economy. This has helped bilateral trade
to double over the past decade. It has also led to major direct
and portfolio investment flows in both directions.
dramatic recovery has implications that extend far beyond
its domestic economy. In addition to serving as one of most
rapidly expanding markets in Asia, Korea is now building the
physical and corporate infrastructure that will enable it
to compete as the "Dynamic Hub of Asia". Its achievements
also serve as a model for countries around the world that
are seeking to restructure and reform their own economies.
- As Korea
has come to better understand the benefits that accrue from
maintaining a free and open economy it is feared that U.S.
moves to impose steel safeguard measures threaten to weaken
and undermine the international trading system. KOCHAM urges
the U.S. to acknowledge its critical impact on the trade policy
of other nations and to firmly reject any measures that even
hint of promoting a global spirit of protectionism.
negotiation of a Free Trade Agreement will help to expand
the potential of the Korea-U.S. bilateral relationship. Eighty-seven
percent of U.S.-based Korean companies surveyed by KOCHAM
favor FTA negotiations and 60% expect trade between Korea
and the U.S. to grow and become more balanced should an agreement
be enacted. Support from the private sector will help to overcome
the barriers and accelerate the completion of this initiative
so that both countries can enjoy the benefits in coming years.
strongly supports the U.S.-led war on terrorism understanding
that global security is an essential prerequisite and foundation
for a stable, growing and prosperous world economy. With this
in mind, South Koreas sunshine policy promises to introduce
a new spirit of cooperation with North Korea. This will not
only reduce the tensions that have existed on the Korean peninsula
for almost fifty years, but also to dramatically expand the
potential and investor and business interest in North Asia.
Successfully Initiates Comprehensive Reform Program
1997 financial crisis highlighted the need to restructure the
Korean economy. The government of Kim Dae-Jung, inaugurated at
the onset of the crisis, immediately moved to initiate a wide
reaching program to position Korea for recovery and future growth.
Abolishing outdated practices and regulations in favor of a new
system based upon market principles -- far-reaching reform has
been achieved in four areas including Koreas corporate,
financial, labor and public sectors.
is rapidly moving to create an economy that operates on market-oriented
principles. Ongoing progress is being achieved through measures
designed to reform and revitalize Koreas corporate,
financial, labor and public sector. The results have not been
perfect and further progress needs to be achieved but
undoubtedly, Korean business practices and its underlying
economy operates in a very different manner than a few years
- In Koreas
corporate sector, 95 highly-indebted firms with loans exceeding
50 billion won were forced into bankruptcy, helping to remove
market uncertainty. In addition, corporate transparency has
been improved by empowering minority shareholders, adopting
outside directors on the board and enhancing the lucidity
of accounting practices and public disclosure.
financial system has also been a primary target for reform
initiatives. Several banks were re-capitalized through nationalization
and others were purchased or received capital injections from
foreign financial institutions. As of March 2002, 562 insolvent
financial institutions have been closed.
labor sector has also undergone substantial change aimed at
increasing flexibility and establishing a more productive
environment for labor-management relations. The number of
Korean companies declaring "no-strike" resolutions
has increased dramatically and labor disputes involving foreign
companies have decreased from 31 cases in 2000 to 20 last
- The public
sector has also been targeted for administrative reform measures,
and progress has been achieved through a process of massive
layoffs, management innovation and privatization. A total
of 6,060 administrative regulations have been eliminated or
relaxed over the past four years.
recognizes the importance of reform as an ongoing process to enhance
the efficiency of the Korean economy. To facilitate this effort,
KOCHAM maintains an ongoing effort to familiarize our members
and Korean government agencies with U.S. best practices and regulatory
standards. This will help Korean firms and the public sector to
adopt the global standards Korea will need to maintain and enhance
our competitiveness moving forward.
The preceeding information is provided by:
KWR International, Inc.
New York, NY 10023
Website content © 2002