Joint Statement of Korean lawmakers, labor unions, farmers and civil society groups on the proposed Korea-U.S. FTA

Korean National Assembly Members’ Caucus Against the Korea-US FTA
Korean Alliance Against the Korea-US FTA

For Immediate Release Jan. 27, 2011
Contact: Heesob Nam - +82-10-9981-1180, hurips@gmail.com
Mi-kyung Ryu - +82-10-9279-7106, inter@kctu.org

Joint Statement of Korean lawmakers, labor unions, farmers and civil society groups on the proposed Korea-U.S. FTA

We, the Korean National Assembly members’ Caucus Against the Korea-US FTA and the Korean Alliance Against the Korea-US FTA, a coalition of over 300 labor unions and civil society groups, have organized a delegation to Washington, D.C. this week, January 24-28, 2011. We have come here to tell American policymakers and civil society that many Korean people oppose the proposed Korea-U.S. Free Trade Agreement (KorUS FTA). During our visit, we were shocked to hear that many U.S. politicians believe that the KorUS FTA is a gift to the Korean people and will be beneficial to the relationship between both countries. In reality, many Korean people consider that the KorUS FTA will be detrimental to the lives of the Korean people, is biased in favor of the narrow interests of multinational corporations and contains numerous damaging provisions that would destroy our jobs in both countries and undermine our rights as citizens, the environment and health, and the practice and principles of democratic governance.

We came to Washington to share our strong view that the proposed KorUS FTA should not enter into force for the following reasons:

First, the proposed KorUS FTA shrinks the policy space available to our governments to promote the public interest and endangers our governments’ ability to protect public services and advance public health, food safety, workers’ and small farmers’ rights, and environmental preservation. Numerous provisions contained in the KorUS FTA conflict with the public interest policies upon which the general public relies while providing new rights and powers to a narrow class of large multinational corporations in each of our countries. While there could be a good agreement between our countries, this agreement undermines the broad interests of the people of the U.S. and the people of Korea in favor of promoting the interests of a narrow band of big corporations. In particular, the investor-state dispute procedure allows private corporations, even third-party corporations doing business either in Korea or the U.S., to bring our government to the foreign arbitration tribunals to demand compensation over public policy standards, even those that apply to domestic and foreign corporations alike. We do not understand why such a provision would be included in the KorUS FTA, given both countries have well-established rules of law and well functioning courts. Such provisions were not included in the U.S.-Australia FTA.

Second, we do not support a deal that only encourages growth-without-employment in both countries. The proposed deal pursues the North American Free Trade Agreement (NAFTA)-plus model. Yet, the U.S.’s experience with NAFTA is instructive and should not be repeated. Since NAFTA went into effect, the U.S. has experienced massive job loss in the manufacturing sector and numerous laws were challenged before foreign tribunals. Provisions of the proposed FTA will weaken the social safety net in both countries and strip crucial safeguards in a time of global economic instability and high unemployment. In addition, the proposed KorUS FTA, with its low Rules-of-Origin standards, incentivizes the off-shoring of manufacturing—and jobs. Up to 65% of products can be produced in foreign countries and exported as U.S. or Korean products, killing jobs and destabilizing the labor market in both countries.

Third, the proposed agreement promotes reckless deregulation. This agreement was negotiated prior to the financial crisis that hit the world several years ago. It promotes the very practices of financial deregulation that have so damaged the U.S. and Korean economy. The agreement conflicts with regulations that our two governments have put in place to stabilize their financial markets, posing a threat to our countries, our economic partners, and eventually to the global economy. In the aftermath of the global economic crisis, certainly we must ensure that all policies, including our “trade” agreements must preserve our governments’ authority to control and regulate investment and financial markets. However, both governments simply ignored the lessons we learnt a few years ago even when they re-negotiated the deal last year and did not alter these provisions to reflect the post-crisis lessons.

Finally, the proposed agreement has the potential to bring about an unintended harmful effect on the relationship between the U.S. and Korea. While proponents claim that the proposed agreement will strengthen our countries’ relationship, it carries the potential to have the opposite effect. Many in Korea view the agreement as having been pushed not only for economic relations. Geopolitics played a great role. The supplemental deal of the last year was struck when the military tension between the South and North Koreas was at its highest since the 1950s’ Korean War. The vast majority of Korean people believe that the outcome of the supplemental deal is an unacceptable humiliation and an overly high price to pay for the Americans’ role in providing national defense. Furthermore, if the KorUS FTA results in restricted to access to public service, job loss, deterioration of quality of life and intensified social polarization as we have seen the detrimental effect of the NAFTA model in operation in North America, the anger over the damage will be directed at the other country. When this happens, the KorUS FTA would bring conflict rather than strengthening the sense of friendship towards the other country among the ordinary people of both countries.

We appreciate the time and effort the citizens of both countries are giving to make this visit successful in preventing the negative consequences that the Korea-US FTA will have on both of our countries.

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• Jung Bae Chun, Jong Kul Lee, and Ki Kab Kang, representing the Korean National Assembly Members’ Caucus Against the Korea-US FTA
• Heesob Nam, Hae-Young Lee, and Won Suk Park, representing the Korean Alliance Against the Korea-US FTA
• Hui-seong Jung, Mi-kyung Ryu, Ja-O Koo, Sang-je Kim, and Joo-ho Lee, representing the Korean Confederation of Trade Union
• Kwang Seok Lee and Hye Sook Kim, representing the Korean National Small Farmers’ Group

Labor Union's Position Paper on the Korea-US FTA

Why We Oppose the KORUS FTA - KCTU Position Paper on KORUS FTA

January, 2011 

General Principle 

1. Korean Confederation of Trade Union (KCTU) has great concerns about the bilateral and regional FTAs which are currently expanding in number across the world. We believe that the analysis that FTAs are bad for some industries while good for others is a somewhat narrow perspective. This is because they reduce or greatly remove the ability of governments from relatively less developed countries to pursue independent policies to meet economic and social needs and sustainable social and economic development. In addition while the provisions of FTAs systematically strengthen the rights and privileges of corporations they do not include provisions which support the democratic control of foreign investors. 

2. The KORUS FTA privilege the rights and benefits of transnational corporations over the rights of workers, consumers and the general public. We believe that the proposed KOR-US Free Trade Agreement is harmful not only for the Korean workers and working families, but for the workers and working families in the U.S. as well, since the KORUS FTA follows the ‘failed model’ of NAFTA. And it is highly likely that the agreement will have huge negative impacts on small and medium-sized manufacturing enterprises (SMEs) in the two countries, damaging the manufacturing base and worsening already unsecure employment. 

3. The KORUS FTA will systematically encourage offshoring, or global outsourcing. The “Rule-of-Origin” provisions of KORUS FTA allow up to 65% foreign content of the value of vehicles eligible for tariff-free treatment, using the Net-Cost- Method. Thus, the agreement will encourage transnational corporations(TNCs) to outsource their production to neighboring low-wage countries such as China and Mexico. This will eventually result in the breakdown of domestic manufacturing industry and unsecure employment. 

4. The experience of NAFTA demonstrates the negative impact of FTA on employment. We know that when NAFTA was being negotiated, the US, Canada and Mexican governments made many promises to their citizens - such as creation of jobs and better living standards, just as the Korean and US governments are promising today. However, 15 years of NAFTA has shown that the reality is far from what was promised. In the course of 15 years, NAFTA has eliminated more than 1 million jobs in just the US and increased irregular part-time jobs particularly in service sectors, which pay 23% to 77% less than the jobs that were replaced. 

5. Like the NAFTA, KORUS FTA also includes the notorious Investor-State Dispute provision in the Investment Chapter, which ensure private foreign investors to demand cash payment from governments for actions that could be seen to violate privileges endowed by the agreement. This is one representative example of the way KORUS FTA dramatically protect the rights of industries in a way that undermines the ability of governments to carry out policies for public interest including public services, the environment, public health and education. 

6. The American subprime mortgage crisis in 2007-09 demonstrates once more the danger of financial deregulation and urgent need of financial control. However, KORUS FTA allows all types of financial instruments including financial derivatives which are considered to trigger financial crisis in 2007-09. It will limit governments from prudently regulating financial sectors to avoid another economic crisis. 

7. The KORUS FTA will be also harmful for the sustainable relations between two nations. Many ordinary people in the South Korea believe that the US government put political pressure for getting more economic interests and concessions from the South Korean government during the FTA negotiations, even using very difficult times for South Korea when military tension of Korean peninsula highly increased in 2010. Therefore it will rise ‘anti-US sentiment’ and result in dealing negative impact on Korea US relations. We are also concerned that the agreement will promote confrontation between geographical forces and result in increasing military tension in our region between US-Japan-South Korea and China-North Korea-Russia. 

8. Therefore we call upon elected representatives, citizens and workers to oppose the KORUS FTA. We do not need NAFTA-style FTA. We need more equitable and fairer trade agreement to create decent jobs and ensure the authority of each government to carry out policies to meet social and economic needs. 

The Impact on the Manufacturing Industry and Employment 

KORUS FTA is a “Job-Killing” Pact, NOT a “Job-Creating” one. 

The KORUS FTA is advertised for the solution of employment crisis by both governments. The President Orbama announced that the Korea deal will create more than 70,000 jobs in the U.S. just after concluding supplemental agreement on December 3rd, 2010. Also, the Lee Myung-bak Government also argued that the Agreement will create around 335,000 jobs in South Korea for the next 10 years after its taking effect. However, in contrast to the expectation of both governments, the concluded KORUS FTA will not solve the employment crisis in both countries. The Korea US Free Trade Agreement(KORUS FTA) is meant to prioritize the protection of the rights and benefits of transnational corporations. Therefore, it is highly likely that the agreement will have huge negative impacts on small and medium-sized manufacturing enterprises (SMEs) in the two countries, damaging the manufacturing base and worsening already unsecure employment. FTA to Encourage Overseas Outsourcing and Damage Domestic Manufacturing Industry The KORUS FTA will systematically encourage offshoring, or global outsourcing. The “Rule-of-Origin” provisions of KORUS FTA allow up to 65% foreign content of the value of vehicles eligible for tariff-free treatment, using the Net-Cost- Method. Thus, the agreement will encourage TNCs to outsource their production to neighboring low-wage countries such as China and Mexico. This will eventually result in the breakdown of domestic manufacturing industry and unsecure employment. 

The majority of Korean manufacturing companies are small-scale businesses, and the subcontracting practices between small manufacturing companies and large conglomerates in Korea are disadvantageous to SMEs. Moreover, productivity gap between small and large companies is rising. In this context, the KORUS FTA is expected to aggravate already vulnerable Korean manufacturing sector, dealing damages to domestic small and medium-sized parts and materials manufacturers. Therefore, there is a high chance that small businesses become smaller, while resources are concentrated in a few large companies. The Agreement will cause not just a trade imbalance between the two countries in a short term, but also a devastating impact on the manufacturing basis, forcing small and medium-sized manufacturers to go bankruptcy and resulting in massive restructuring. 

In addition, the Investment Chapter of the KORUS FTA bans performance requirements. Examples of performance requirements include a technology transfer, obligation to use a certain percentage of local products, succession of employment, succession of collective agreements and obligation to hire a certain percentage of local people. This means that if the FTA increases foreign direct investment, the government cannot implement policies aimed at promoting domestic employment. Moreover, most of the global investment has recently been carried out via portfolio investment such as acquiring corporations or buying stocks. Therefore, foreign investment has come to have little to do with employment. In contrast, corporate acquisition is likely to result in massive restructuring, thus decreasing employment. 

Export Increase does not Guarantee Employment Increase 

So-called “Growth without Employment” is one of the distinctive features that characterize the era of financial globalization. The US and Korean governments have been arguing that the FTA will increase bilateral trade and create employment in both countries. However, it has already become a myth that increase in export and trade lead to a rise in employment. As for Korea, the added-value inducement coefficient of export has continuously decreased from 0.711 in 1993 to 0.600 in 2007. Meanwhile, the import inducement coefficient of export has risen from 0.367 in 2000 to 0.400 in 2007, as the Korean economy has become growingly dependent on imported parts and materials. This means that an increase in export leads to a rise in import, while employment remains relatively unchanged. The cause of this phenomenon is that large export companies have raised overseas outsourcing, while the inter-industrial effects of export industries have been reduced. As of 2005, export industries accounted for only 20 percent of overall jobs. The FTA provisions regarding Government Procurement, Rules of Origin and Investment will accelerate the trend of “Growth without Employment.” 

The U.S. is no exception for the trend of “Growth without Employment”. Under the North American Free Trade Agreement(NAFTA), more than a million U.S. jobs were displaced from 1993 to 2004. And according to Economic Policy Institute economist Rob Scott, the implementation of the KORUS FTA will eliminate around 159,000 American jobs.

In Conclusion, the KORUS FTA is not a “Job-Creating” FTA, but “Job-Killing” Pact. It should be emphasized that the experiences of NAFTA shows us that employment crisis cannot be solved through trade and export increase to overseas market. 

Basic Labor Rights Guaranteed Poorly in both Countries 

The guarantee of basic labor rights by the two governments is poor and many key international labor standards have not been observed. Even though stable, decent-wage jobs are replaced with temporary, precarious ones, the governments are overlooking these problems. Thus, working conditions for workers in the two countries are worsening. Workers are being forced to work more with less pay, and many of working families are thrown under the poverty line. Moreover, migrant workers are facing severe exploitation, as they are deprived of their rights. The two governments have not ratified the ILO Conventions Nos. 87 and 98, which are core international labor standards for the freedom of association. This shows that labor rights are poorly guaranteed in these countries. Labor laws of the US and Korea must be revised to guarantee workers basic labor rights widely, including right to collective bargaining and right to collective action, so that workers of both countries can equally enjoy the potential benefits of trade.