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The US-Korea FTA The US-Korea FTA

The US-Korea FTA - PowerPoint Presentation

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The US-Korea FTA - PPT Presentation

1 2 Preview Chapter 2 general free trade clauses Chapter 13 financial services Chapter 19 labor Chapter 20 environment 1 2 Free trade clauses The KoreaUS free trade agreement uses principles from the broader World Trade Organization WTO ID: 524751

financial country institutions services country financial services institutions article laws clause fta environmental restrictions trade products nation treatment national

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Slide1

The US-Korea FTASlide2

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2

Preview

Chapter 2: general free trade clauses

Chapter 13: financial servicesChapter 19: laborChapter 20: environment

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2Slide3

Free trade clausesThe Korea-US free trade agreement uses principles from the broader World Trade Organization (WTO):

non-discrimination clauses:

national treatment clausemost favored nation clausebind and reduce clausereplace quantitative restrictions with price restrictionstransparent information1-3Slide4

National treatment clauseThe

national treatment clause

, in article 2.2., uses Article III of the WTO, which prohibits discrimination between domestic products and foreign products after the foreign products have been imported. This agreement prevents governments from using regulations such as sales taxes to punish foreign products more strictly than domestic products after the foreign products have crossed the domestic border.1-4Slide5

Most favored nation clause

The

most favored nation clause, in article 2.3, uses Article I of the WTO, which stipulates that each country must give the other country same regulatory treatment as it gives to its most favored nation: the nation to which it gives the best regulatory treatment.In other words, Korea may not be treated less advantageously than the nation which the US treats most advantageously.the US may not be treated less advantageously than the nation which Korea treats most advantageously.1-5Slide6

Bind and reduce clauseThe FTA, in article 2.3, also uses the

bind and reduce

clause of the WTO:Korea and the US agree “to bind” tariffs at their existing levels and not to impose any new tariffs or to raise existing ones.Korea and the US agree to reduce tariffs over time according to a schedule that both have agreed to,but each party may unilaterally reduce tariffs faster than scheduled if it desires.1-6Slide7

No quantitative restrictions

The FTA, in article 2.8, also generally prohibits quantitative restrictions of imports, as does the WTO, in favor of price restrictions:

Price restrictions (tariffs) are believed to be a more efficient, transparent and fair way to restrict imports. They do not prevent buyers from buying imports at a high price.They allow governments to earn additional tax revenue.Their cost is easy to understand, as a tax on the base price.Because they apply to all buyers, they are considered more fair.Because import licenses can be obtained by all sellers, they are considered more fair to sellers and better for avoiding corruption.1-7Slide8

No quantitative restrictionsThe FTA, in article 2.8, also generally prohibits

quantitative restrictions on exports or “voluntary export restraints”.

export and import price controls: required prices set at an artificially high or low level.Instead tariffs are set as a surcharge on the base price (which can vary according to market conditions), either as ad valorem (percent of price) tariff or a specific (fixed amount per unit) tariff.import licenses conditional on a “performance requirement” when producing and selling a product.1-8Slide9

Rescinding of free trade clauses

However, either party may rescind these clauses if the WTO allows action

to settle a dispute that it has ruled upon.to address a “market disruption” according to the broader WTO principles that allows a country to protect domestic sellers temporarily in some cases.1-9Slide10

TransparencyImport licensing requirements should be transparent, and each country needs to notify the other of the requirements, as stated in articles 2.9 and 2.10.

Fees and other charges besides tariffs for the importation or exportation of goods must approximately equal the cost of these services at the border, as stated in article 2.9.

1-10Slide11

Special productsNegotiators negotiated tariffs and other regulations for special products to obey existing laws and trademarks, as discussed in article 2.12, article 2.13 and annex 2-A:

automobiles and automobile engines

liquorlumber from the USshipping transportation from the US1-11Slide12

Financial services: non-discrimination clauses

National treatment

clause in article 13.2:each country must regulate foreign financial institutions/individuals no less favorable than domestic financial institutions/individualsMost favored nation clause in article 13.3:each country must regulate all foreign financial institutions/individuals no less favorable than the financial institutions/individuals from the nation with the most favorable regulation.1-12Slide13

Financial services: market access

Neither country may limit the total

number of financial institutionsvalue of transactions or assetsnumber of transactions people employed in financial services industry or at a financial institution Neither country may require specific types of a legal entity or joint venture through which a financial institution may supply a service.1-13Slide14

Financial services: cross-border trade

Each country shall permit financial institutions from the other country to provide a few kinds of insurance and banking services within its territory, as described in Annex 13-A.

Each country shall permit its residents and its nationals wherever located to purchase financial services from financial institutions located in the other country.But each country is not required to permit these foreign institutions to do business or to solicit business within its territory, with the exception of those described in Annex 13-A.1-14Slide15

Financial services: cross-border tradeEach country shall permit financial institutions from the other country to provide

new financial services within its territory, according to the national treatment clause.Domestic regulation of foreign institutions is permitted, but each country may not require specific types of a legal entity or a joint venture. 1-15Slide16

Financial services: cross-border trade“Prudential” regulation—regulation intended to promote sound and safe banking practices—shall not prevented by the FTA.

For example, the government is allowed to impose regulations on banks to protect the interests of the depositors, other creditors, trust holders, stock holders of a financial institution.

However, the regulation must obey the national treatment clause.1-16Slide17

Financial services: government exemption

However, national, state and local governments that purchase financial services for non-commercial uses are exempted from these clauses, as stated in article 13.1.4.

But as stated in annex 13-B.H, each country shall allow financial institutions from the other country to sell, purchase, redeem central government debt and to provide deposits for the central government.1-17Slide18

Financial services: transparency

The FTA requires that both countries publish in advance (prudential) regulations of financial services so that each is well informed.

If an individual or institution is not allowed to provide financial services, regulators must inform it of the reasons.1-18Slide19

Financial services: transparency

In addition, unwritten customs

and administration practices should be written and published on websites for institutions from the other country to read and to comment on.1-19Slide20

Financial services: supervisory cooperation

Regulators from each country should assist regulators from the other country

to enhance consumer protection and to prevent, detect and prosecute unfair and deceptive practices.1-20Slide21

Financial services: dispute settlement

The FTA also allows an investor to dispute an action and to submit that dispute to arbitration, as described in Chapter 11 and article 13.19.

1-21Slide22

Financial services: payment settlement systems

Each country shall grant financial institutions of the other country that operate with its territory access to payment settlement systems, as described in article 13.13.

Each country shall grant official funding and refinancing facilities operated by the government and central bank to facilitate normal settlement of payments in the financial system.But neither country is required to act as a lender of last resort (central bank) for the other country’s institutions.1-22Slide23

LaborAs stated in article 19.2, each country shall

allow workers the freedom of association.

recognize the right to collective bargaining.eliminate forced labor.“effectively” eliminate child labor and prohibit the worst forms of child labor.eliminate “discrimination” among workers.1-23Slide24

LaborIn each country, disputes about labor laws shall be heard before impartial tribunals which

comply with due process of law.

are open to the public.allow parties in the dispute to support or defend their position by presenting evidence.do not use unreasonable fees or delays.settle the disputes based on evidence that both parties have submitted and then submit reports of the settlement to both parties and the public record. allow settlements to be appealed and reviewed.1-24Slide25

EnvironmentEach country shall enforce domestic environmental laws, as well as international agreements listed in annex 20-A:

Convention on International Trade in Endangered Species of Wild Fauna and Flora

Montreal Protocol on Substances that Deplete the Ozone LayerProtocol of 1978 Relating to the International Convention for the Prevention of Pollution from ShipsConvention on Wetlands of International Importance Especially as Waterfowl Habitat 1-25Slide26

EnvironmentEach country shall enforce domestic environmental laws, as well as international agreements listed in annex 20-A:

Convention on the Conservation of Antarctic Marine Living Resources

International Convention for the Regulation of WhalingConvention for the Establishment of an Inter-American Tropical Tuna Commission1-26Slide27

EnvironmentEach country retains the right to enforce its environmental laws, but neither country shall fail to effectively enforce its environmental laws.

Each country must enforce laws in ways that are reasonable, articulable (to the other country) and bona fide.

1-27Slide28

EnvironmentEach country shall accept and consider requests from interested individuals or institutions to investigate alleged violations of its environmental laws.

These individuals and institutions shall have access to remedies for violations of environmental laws, such as rights

to sue for damages.to seek injunctive relief (from a cease and desist order).to seek monetary compensation or orders to mitigate the consequences of the violations.1-28Slide29

EnvironmentEach country shall ensure that judicial, quasi-judicial or administrative proceedings are available to remedy violations of environmental laws.

These proceedings must

be fair, equitable and transparent.comply with due process of law.be open to the public, except where administration of justice requires otherwise.Tribunals that review such proceedings must be impartial and independent.1-29Slide30

EnvironmentEach country should encourage the use of voluntary and incentive-based mechanisms to protect the environment:

partnerships

among private sector commercial firms, non-profit organizations, scientific organizations and governments.voluntary guidelines for environmental performance.voluntary sharing of information.public recognition (and rewards) of superior protections.trading of permits, the rights to pollute up to a certain amount.1-30Slide31

EnvironmentEach country should promote public awareness of its environmental laws,

and respond to written requests from individuals or institutions from either country about how it implements the environ-mental clauses of the FTA.

1-31Slide32

EnvironmentWhen actions under the FTA conflict with an international agreement listed in annex 20-A, both countries can try to settle the conflict with a dispute resolution panel,

that consults with an entity authorized to address the issues of the international agreement, as

discussed in Chapter 22. 1-32Slide33

Summary

Under the national treatment clause, each country promises to treat foreign products in the same way as domestic products within the domestic country.

Under the most favored nation clause, each country promises to treat all other countries as well as the country that it treats most favorably in terms of import restrictions.Under the bind and reduce clause, each country promises to bind (lock) import restrictions at their current level and reduce them over time.1-33Slide34

Summary

Under free trade agreements, countries often promise to replace quantitative restrictions on imports with price restrictions,

because the latter are viewed as more efficient, more transparent and more fair to buyers and sellers.Under free trade agreements, countries often promise to make information about tariffs and other regulations transparent to increase efficiency.1-34Slide35

Summary

Under the FTA, neither Korea nor the US

may limit the number of financial institutions.the value of transactions or assets.the number of transactions.the people employed in financial services industry or at a financial institution.1-35Slide36

Summary

Under the FTA,

both Korea and the US shall permitfinancial institutions from the other country to provide a few kinds of insurance and banking services within its territory.its residents and its nationals to purchase financial services from financial institutions located in the other country.Prudential regulation is not prevented by the FTA as long as it conforms to the national treatment clause.In addition, regulators from each country should assist regulators from the other country and should make financial information transparent.1-

36Slide37

Summary

Each country shall grant financial institutions of the

other country that operate with its territory access to payment settlement systems, including official funding and refinancing facilities operated by the government and central bank.Workers are still allowed to freely associate and to collectively bargain under the FTA, as they are allowed under national laws.1-37Slide38

Summary

Each

country retains the right to enforce its environmental laws, but neither country shall fail to effectively enforce its environmental laws and to adhere to international environmental treaties.1-38