Investor Dispute Clause Holds Up KORUS FTA

While South Korea’s main opposition Democratic Party (DP) is still blocking the passage of the South Korea–United States free trade agreement (KORUS FTA) in a parliamentary committee, opposition is now centred on the agreement’s investor-state dispute (ISD) settlement clause.

The DP had aready been demanding that the agreement should be re-balanced. The party believes that, following its renegotiation last December, the treaty is now too favourable to the US, and that it should be further renegotiated.

One of the DP’s major demads was that official assistance for South Korean farmers, traders and small- and medium-sized enterprises (SMEs), who would be affected by imports of products following reduced tariffs and by the opening up of the local market to US investments, would need to be augmented.

However, while agreement between the governing Grand National Party (GNP) and the DP appears to have been reached on further support measures, the DP are now continuing to demand renegotiation of the treaty to eliminate the ISD clause.

The DP is, in fact, demanding that the ISD settlement system be dropped from the FTA legislation completely, before its passage through parliament. It is said that the clause would open companies in South Korea, particularly SMEs, to attack from US companies on domestic regulations established for the protection of local industries.

The opposition has confirmed that it will not accept the treaty in its current form, and that they will also provide “strong resistance” to any attempt by the GNP to “railroad” the KORUS FTA through parliament by using its absolute majority.

The government and the GNP have re-emphasized that demands for a further renegotiation of the KORUS FTA remain unrealistic. Given their expressed desire to obtain the treaty’s approval as soon as possible so that it may enter into force early next year, they may now have to by-pass the committee stage and go straight to a plenary parliamentary session, thereby testing the DP’s resolve for confrontation.

November 3, 2011

Source: Tax News