Posted on : Jul.11,2006 11:33 KST

Poorly-planned agreement on investment would wreak damage: critics

The investment market is emerging as a new item of contention in the second round of free trade talks between South Korea and the U.S., which started July 10 in Seoul.

At the first round of talks in early June, both sides reached an agreement on the subject of the investment field. However, during the second round of talks, the two nations are expected to mull concessions as to which investment markets should be excluded from the free trade agreement (FTA), as well as how to deal with investment disputes. This is expected to bring differences between the two sides into relief.

Observers say not only disagreements between the countries involved, but also within South Korean ministries, are emerging. While both agree in principle that they are to protect the best interests of the South Korean public, an official at the Ministry of Finance and Economy said it had several problems with the current FTA proposal, whereas an official at the Ministry of Foreign Affairs and Trade said it would split investment-related issues into ones that need protection and ones that should be opened to the U.S., suggesting it had already solidified its plans.


Critics of the FTA have raised the possibility of damaging the public with a poorly executed agreement on investment-related issues.

Lee Hae-young, professor at Hanshin University, said, “The government should prudently review their possible agreement on investment because it could significantly affect financial services, legal and administrative systems, and overall economic policy.” Professor Lee said the government had too easily approached the investment issue from the beginning. Though the government said it would not accept the U.S. requests on privatizing public companies, an agreement during the second round could destabilize that pledge.

An issue that was not resolved during the first round of talks, pointed out by South Korea’s chief negotiator Kim Jong-hoon on July 7, is the need to decide how to handle a dispute between an individual investor and another country. If an individual or a private company from one nation files a lawsuit against the other’s government, an agreement during the first round stated, it would be handled by the International Center for Settlement for Investment Dispute. However, this agreement has been accused of excessively protecting investors and undermining the judicial sovereignty of a nation, especially if that nation has less economic power.

Lawyer Song Ki-ho said, “Many countries with an FTA with the U.S. that used this dispute settlement process have lost control of labor and environmental rights."

The U.S. side is expected to offer a proposal during this round to make public the procedure of dispute settlement between an investor and a nation.

However, South Korea’s chief negotiator Kim opposed the idea, saying that “if the settlement procedure is made public, it will place inappropriate pressure on the deciding jury.”



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