South Korea-U.S. Economic Relations

South Korea-U.S. Economic Relations
Updated February 12, 2007
Mark E. Manyin
Analyst in Asian Affairs
Foreign Affairs, Defense, and Trade Division

South Korea-U.S. Economic Relations
South Korea is a major economic partner for the United States. In 2006, trade
between the two countries surpassed $75 billion, making South Korea the United
States’s seventh-largest trading partner — ahead of France and Italy — and its
seventh-largest export market. In 2006, the U.S. was Korea’s third-largest trading
partner, second-largest export market, and its second-largest supplier of foreign direct
investment (FDI).
Bilateral economic relations have advanced to the point that the two sides in
February 2006 announced their intention to negotiate a bilateral free trade agreement
(FTA), which they hope to complete in 2007. If an agreement is reached, it would
be the United States’s largest FTA since the completion of the North American Free
Trade Agreement. To go into effect, FTAs must be approved by Congress and the
Korean National Assembly. The FTA negotiation and ratification processes are
likely to politicize bilateral trade disputes and produce spillovers between the
economic and strategic aspects of the relationship, particularly if there are dramatic
developments in the crisis over North Korea’s nuclear weapons program.
Increased U.S.-South Korean economic interaction has been accompanied by
numerous disagreements over trade and economic policies. The intensity of the
disputes has diminished considerably since the late 1980s and early 1990s, in part
because South Korea has enacted a set of sweeping market-oriented reforms as a quid
pro quo for receiving a $58 billion package from the International Monetary Fund
(IMF) following the near collapse of the South Korean economy in 1997. In recent
years, the United States and South Korea appear to have become more adept at
managing their trade disputes, so that they tend to be less acrimonious than they were
in the 1980s and 1990s. This is due in part to the quarterly, working-level bilateral
trade meetings that have been held since early 2001. Strategic factors, including
South Korea’s increased economic integration with North Korea, have become issues
on the bilateral U.S.-South Korea economic front. In the FTA talks, South Korean
officials are attempting to secure preferential tariff treatment for goods made by
South Korean firms in the Kaesong industrial zone, located inside North Korea. In

2003, China surpassed the United States as South Korea’s largest trading partner.

Many South Korean exports to China are believed to be intermediate goods that are
incorporated into products sent to the United States.
This report summarizes the main issues in U.S.-South Korean economic
relations, including South Korea’s economic prospects and economic reforms, and
major bilateral economic disputes. Details of the Korea-U.S. Free Trade Agreement
(KORUS FTA) talks are left to CRS Report RL33435, The Proposed South
Korea-U.S. Free Trade Agreement (KORUS FTA), by William Cooper and Mark
This report will be updated periodically.

Overview of U.S.-South Korean Economic Relations......................2
Relative Economic Importance...................................2
Diminishing Friction over Trade Disputes...........................3
The KORUS FTA Negotiations...................................3
South Korea’s Economy............................................4
The 1997 Financial Crisis and IMF-Directed Reforms.................4
Economic Events from 1999-2006................................5
Economic Reforms.............................................7
Financial Sector and Chaebol Reforms.........................7
Foreign Direct Investment Reforms............................9
South Korea’s Increased Economic Integration with China............11
Improved Inter-Korean Economic Relations .......................13
Major U.S. Trade Disputes with South Korea...........................15
Major Agriculture Issues.......................................16
South Korea’s Beef Ban....................................16
Rice ...................................................17
Other Issues.................................................18
Automotive Trade........................................18
P h arm aceut i cal s ..........................................21
South Korea’s “Screen Quotas”..............................22
South Korea’s Alleged Currency Manipulation..................23
Intellectual Property Rights Issues............................24
Telecommunications ......................................25
Steel ...................................................26
Assistance to Hynix Semiconductor..........................27
South Korea’s Performance in the Doha Development Agenda.....28
Korea’s Complaints Against U.S. Anti-Dumping and CVD
Practices ............................................28
U.S. Visa Policies........................................28
Legislation in the 109th and 110th Congresses...........................30th
109 Congress...............................................30
110th Congress...............................................30
List of Figures
Figure 1. ROK Real GDP Growth, 1995-2005...........................5
Figure 2. Foreign Direct Investment in the ROK, 1996-2006................9
Figure 3. ROK Trade with China, U.S., and Japan, 2001-2006.............11
Figure 4. ROK Trade Balances with Major Partners .....................12
Figure 5. South Korean Exports to China, U.S., Japan, 2001-2006..........12
Figure 6. North-South Korea Trade..................................14
Figure 7. Won-Dollar Exchange Rate, 1997-2007........................24
Figure 8. Steel Imports from Korea, 1997-2006.........................26

Table 1. Annual U.S.-South Korea Merchandise Trade....................2
Table 2. Asymmetrical Economic Interdependence (2005)..................3
Table 3. Reciprocal U.S.-ROK Automotive Sales.......................19
Table 4. Increased Sales from Hyundai’s Alabama Plant..................19

South Korea-U.S. Economic Relations
The United States and South Korea (known formally as the Republic of Korea,
or ROK) have been allies since the United States intervened on the Korean Peninsula
in 1950 and fought to repel a North Korean takeover of South Korea. Over 33,000
U.S. troops were killed and over 100,000 were wounded during the three-year
conflict. In 1954, a year after the parties to the conflict signed an armistice
agreement, the United States and South Korea signed a Mutual Defense Treaty,
which provides that if either party is attacked by a third country, the other party will
act to meet the common danger. The United States maintains about 34,000 troops
in the ROK to supplement the 650,000-strong South Korean armed forces.1 In recent
years, strategic differences between Washington and Seoul — particularly over the
optimal policies toward North Korea — have caused some in the United States to
question the benefits of the alliance.
Beginning in the 1960s, rapid economic growth in South Korea propelled it into
the ranks of the world’s largest industrialized countries. For over a decade, South
Korea has been one of the United States’s largest trading partners. Economic growth
also has helped transform the ROK into a mid-level regional power that can influence
U.S. policy in Northeast Asia, particularly the United States’s approach toward North
South Korea at a Glance
Head of State: President RohFertility Rate: 1.27 children
Moo-hyunborn/woman (U.S. = 2.09)
Population: 48.8 millionLiteracy Rate: 98%
Size: slightly larger than IndianaEthnicity: 100% Korean
Arable Land: 19% Nominal GDP: $769 billion (2006);th
Life Expectancy: 77 years (’s 12-largest economy
= 78 yrs.)GDP Per Capita (Purchasing Power
Infant Mortality: 6.16Parity): $24,200 (2006)
deaths/1,000 live birthsExports: $326 billion (2006)
(U.S. = 6.43)Imports: $309 billion (2006)
Source: CIA, The World Factbook, February 18, 2007; Trade figures are
from the ROK Ministry of Commerce, Industry, and Energy

1 In October 2004, the U.S. and South Korea agreed to a phased withdrawal of 12,500 U.S.
troops in South Korea, reducing U.S. in-country troop strength from 37,000 to about 24,000
by September 2008.

Overview of U.S.-South Korean
Economic Relations
Relative Economic Importance
Since 2000, South Korea has been the United States’ seventh-largest trading
partner, ahead of Western European countries like France and Italy. Trade flows in
2006 exceeded $75 billion, an all-time high for U.S.-Korea bilateral trade; South
Korea was the United States’ seventh largest export market and its seventh largest
source of imports. (See Table 1 and Table 2.) For some western states and U.S.
sectors, the South Korean market is even more important. Major U.S. exports to
South Korea include semiconductors, machinery (particularly semiconductor
production machinery), aircraft, and agricultural products. South Korea is among
United States’s largest markets for agricultural products and beef. U.S. exports for
2006 registered an all-time high, over $30 billion, in part due to the weakening value
of the U.S. dollar, which fell by over 5% against the Korean won in 2006. The export
growth occurred despite the continued South Korean ban on U.S. beef shipments.
Table 1. Annual U.S.-South Korea Merchandise Trade
(Billions of U.S. Dollars)
Year U.S. ExportsU.S. Importsbalancetrade
1990 14.40 18.49 -4.09 32.89
1995 25.38 24.18 1.20 49.56
2000 26.30 39.83 -13.53 66.13
2003 22.52 36.93 -14.41 59.45
2004 24.99 45.06 -20.07 70.05
2005 26.21 43.15 -16.94 69.36
2006 30.79 44.71 -13.92 75.50
Major U.S. ExportSemiconductor circuits; aircraft & aircraft parts; chemical vapor
Itemsdeposition (cvd) equipment; corn
Major U.S. ImportCars & motor vehicle parts; cellular phones; semiconductor
Itemscircuits and products; petroleum products
Sources: 1990 & 1995 data from Global Trade Information Services. 2000-2006 data from U.S.
International Trade Commission.
South Korea is far more dependent economically on the United States than the
United States is on South Korea. In 2006, the United States was Korea’s third-largest
trading partner, second-largest export market, third-largest source of imports, and its
second-largest supplier of foreign direct investment.
However, the United States’ relative economic importance to South Korea is
decreasing. In 2003, China for the first time displaced the United States from its
perennial place as South Korea’s number one trading partner. In 2005, Japan
overtook the United States to become South Korea’s second-largest trade partner.

Table 2. Asymmetrical Economic Interdependence (2005)
Total TradeExport MarketSource of ImportsSource of FDI
For U.S.,#7#7#7#28
ROK ranks(2004)
For ROK, #3#2#3#2
U.S. ranks
In 2003, China surpassed the U.S. as the ROKs largest trading partner. In 2005, Japan surpassed
the U.S. to become the ROK’s second-largest trading partner.
Diminishing Friction over Trade Disputes
The bilateral economic relationship has been accompanied by numerous
disagreements over trade policies. The intensity of the disputes has diminished
considerably since the late 1980s and early 1990s, in large measure because South
Korea has enacted a set of sweeping market-oriented reforms as a quid pro quo for
receiving a $58 billion package from the International Monetary Fund (IMF)
following the near collapse of the South Korean economy in 1997. In particular, as
a result of the reforms, South Korea has opened its doors to foreign investors,
ushering in billions of dollars of foreign portfolio and foreign direct investment
(FDI). The result is that foreign companies, including U.S. firms, now are significant
shareholders in many prominent industrial conglomerates (chaebol), own an
estimated 40% of the value of the shares traded on South Korea’s stock exchange,
and at one point owned about one-third of the Korean banking industry. After his
election to one five-year term in 2002, South Korean President Roh Moo-hyun said
that more extensive reforms were needed to help accomplish his goals of raising per
capita gross domestic product (GDP) to $20,000 and of transforming South Korea
into a major economic hub in Northeast Asia. In essence, for nearly a decade, most
U.S. trade-related complaints are echoed by voices within the South Korean
The United States and South Korea appear to have become more adept at
managing their trade disputes, so that they tend to be less acrimonious than they were
in the 1980s and 1990s. This may be partly due to the quarterly, working-level “trade
action agenda” trade meetings that were initiated in early 2001. Both sides credit the
meetings, which appear to be unique to the U.S.-South Korean trade relationship,
with creating a more constructive dialogue by serving as “action-forcing” events.
The KORUS FTA Negotiations2
U.S.-ROK economic relations advanced to the point that the two sides on
February 2, 2006, announced their intent to launch negotiations to form a bilateral
free trade agreement (FTA). South Korea and the United States have completed six

2 For more on the FTA, see CRS Report RL33435, The Proposed South Korea-U.S. Free
Trade Agreement (KORUS FTA), by William Cooper and Mark Manyin.

rounds of negotiations and were, as of February 12, in the midst of the seventh round,
which began in Washington on February 11 and was scheduled to end on February
14, 2007. The two sides have reported progress in some areas such as industrial
tariffs, customs administration, anti-corruption measures, and foreign investment, but
sharp differences remain over trade in autos, pharmaceuticals, and agricultural
products and over antidumping procedures. Both sides are still aiming to complete
the negotiation before the end of March to comply with TPA deadlines.
If an agreement is reached, it would be the United States’s largest FTA since the
North American Free Trade Agreement (NAFTA). To go into effect, FTAs must be
approved by Congress. The U.S.-South Korea FTA (KORUS FTA) negotiations are
being conducted under the trade promotion authority (TPA) that the Congress granted
to the President under the Bipartisan Trade Promotion Act (TPA) of 2002 (P.L. 107-
210). The President’s TPA is scheduled to expire on July 1, 2007; that is, an
agreement must be signed before July 1, 2007, if it is to receive expedited
congressional consideration under that authority. In addition, the TPA requires a 90-
day presidential notification to Congress of intent to sign the agreement; therefore,
the KORUS FTA would have to be completed before April 2, 2007.3
The decision to launch the FTA is regarded by some as a high-risk, high reward
move by both governments. The economic side of the U.S.-ROK relationship has
been a source of strength and stability in recent years, even as the diplomatic and
military sides have been frayed by differences between Seoul and Washington over
how best to deal with North Korea and how to adapt the U.S. troop presence in
Korea. The launch of the FTA talks has brought to the surface a number of long-
standing, deep-seated differences in trade and investment relations that remained
below the surface for years. If South Korean and U.S. negotiators can successfully
address them, the relationship would strengthen. If not, and the negotiations fail, the
bilateral relationship could be seriously harmed for some time as failure may be a
sign of the lack of trust.
South Korea’s Economy
The 1997 Financial Crisis and IMF-Directed Reforms
South Korea’s 1997 financial crisis was a seminal event in the country’s history.
During the autumn of 1997 — spurred in part by the bankruptcy of six of the
country’s top thirty industrial conglomerates (chaebol) and a sharp increase in
repayments required on short-term foreign debt — investors lost confidence in the
economy and capital fled the country. The Korean won lost half its value in the space
of a few days, tumbling from 900 to 1900 won to the dollar. In a futile attempt to
prop up the currency, the government’s foreign currency reserves dropped to $4
billion, an amount insufficient to carry the country through another day. In
December 1997, barely a year after joining the Organization for Economic

3 Because the agreement would have to be translated and legally “scrubbed” before given
April 2, 2007, the negotiations would probably have to be completed as much as a month
before then.

Cooperation and Development (OECD), Seoul turned to the IMF for economic
assistance. At virtually the same time, South Koreans elected longtime democracy
activist Kim Dae Jung to the presidency, the first time since the early 1960s that an
opposition leader had won the country’s highest office.
After negotiating for weeks over the details, on December 4, 1997, South Korea
and the IMF agreed to a $58 billion support package. In return, Seoul agreed to
tighten its fiscal and monetary policies and engage in far-reaching, market-oriented
reforms of its financial and corporate sectors and of its labor market policies. South
Korea also agreed to open its economy further to foreign goods and investors. The
newly-elected Kim government adopted most of the structural reforms as its own.
Figure 1. ROK Real GDP Growth, 1995-2005
10 . 9
8. 9 9. 310
6. 8 6. 3
5 4. 6 4 55
3. 1 3. 1
-6. 7
199619982000200220042006 est.
199 5 1997 199 9 2001 2003 200 5
Source: Bank of Korea.
Following the financial crisis, South Korea entered into a severe recession. In
1998, gross domestic product (GDP) contracted by 6.7% and unemployment nearly
quadrupled, rising to 7.6% in 1998. The slowdown generated substantial anti-IMF
and anti-American sentiment among many South Koreans.
Economic Events from 1999-2006
The economy rebounded in 1999 and 2000, growing by over 10% and 9%,
respectively, and enabling the South Korean government to rapidly retire many of the
debts it incurred in 1997.4 In 2001, however, growth slowed considerably, dragged
down by a combination of internal and external developments, including a decline
in consumer and business confidence, the bursting of Korea’s stock market bubble,

4 In August 2001, Seoul paid off the last of the $19.5 billion it had borrowed from the IMF.

rising oil prices, and a sharp falloff in exports to the United States and Japan, which
entered economic downturns of their own. The government responded by lowering
interest rates, unveiling an economic stimulus package, and easing the rules on the
use of credit cards. These measures boosted consumer spending, which helped to
double the growth rate from 3.1% in 2001 to 6.3% in 2002. Growth also was boosted
by rapid economic integration with China. Domestic investment, however, remained
In 2003, overuse of personal credit cards led to the near-collapse of many
financial firms and a sharp slowdown in economic growth, which fell back to 3.1%.
Until the late 1990s, the consumer sector of the economy had been largely untapped,
with Korean lenders focusing on the corporate sector. Thus, when the government
liberalized financial regulations and forced Korea’s giant conglomerates to curtail
their borrowing in the aftermath of the 1997 crisis, banks and other financial
institutions turned to consumers — at times recklessly — as a new source of profit.
The number of credit card holders behind in their payments increased sharply, with
an estimated 8% of the population in default in March 2004.5 In 2003 and 2004, all
eight of Korea’s specialized credit-card issuers registered massive losses that
collectively were more than double their assets. In most cases, insolvency was
avoided only through bailouts and takeovers by affiliated members of the companies’
respective chaebol groupings. Most of these moves appear to have been engineered,
regulatorally enabled, and/or encouraged by the government, which feared a collapse
of the financial system if the firms were allowed to fail. The government responded
to the household debt crisis by tightening restrictions on credit card use and issuance,
and by initiating a refinancing and forgiveness program for individual debtors.
For 2004, South Korea’s economy grew by 4.6%, below the 6% growth rate the
government had expected.6 Much of the growth was driven by a surge in exports —
particularly to China — which rose by over 30% from 2003. A sharp rise in oil
prices (South Korea imports all of its oil) and lackluster domestic demand
contributed to the slower-than-expected growth rate.
In 2005, economic growth slowed to around 4%, due in part to a slowdown in
export growth early in the year. The government responded by unveiling a $6.5
billion fiscal stimulus policy. Beginning in the late spring, South Korean domestic
production and demand began to increase, indicating an improvement in the credit
card problem; despite rising energy prices, private spending rose by 3.2% in 2005,
compared to a 0.5% contraction the year before. Toward the end of the year, the
South Korean stock market and the won sharply appreciated in value, the latter
against both the U.S. dollar and the Japanese yen. Despite this trend, South Korean
exports continued to rise, albeit at a slower rate; exports rose by just over 12% in

5 Hye-Seung Seo, “South Korea Unveils Program To Help Ease Consumer Debt,” The Asian
Wall Street Journal, March 11, 2004.
6 Gordon Fairclough, “South Korea Forecasts Growth Of Near 6% on Export Strength,” The
Asian Wall Street Journal, April 26, 2004.

2005, compared with a 31% growth rate in 2004. South Korea’s merchandise trade
surplus in 2005 was about $23 billion.7
In 2006, South Korea’s economic growth increased to an estimated 5%.
Significantly, the rebound appeared to be more balanced than in previous years, when
rising exports had been the primary driver of South Korea’s economic growth; for
most of 2006, private consumption continued its upward trajectory, though its rate
of growth dipped in the final months of the year. While exports were up, rising
energy imports caused the merchandise trade surplus to decline considerably. South
Korea’s soaring housing prices — particularly in the greater Seoul area, where
around 40% of the population lives — became a dominant political issue in 2006,
exacerbating concerns about increasing economic inequality. The issue is likely to
figure prominently in the run-up to the December 2007 presidential election. The
government has taken a number of steps designed to rein in real estate speculation,
leading some to fear that more government action could cause the housing sector to
experience a hard landing in 2007.
Economic Reforms
Financial Sector and Chaebol Reforms. Assessing Korea’s economic
reforms to date depends on one’s perspective. If the point of comparison is the
Korean economy in 1997, then the government’s progress has been impressive.
South Korea’s economy today is far more transparent, open to foreign investors, and
efficient than it was seven years ago. Progress has been particularly notable in
opening the country to foreign direct investment (see below) and in reforming the
financial sector. In the years following the crisis, the government spent about $140
billion to bail out ailing banks and mutual funds.8 This amount is approximately
25%-30% of the country’s GDP, nearly twice the level required to save Mexico’s
financial system during its crisis in 1995. Notably, predictions that the government
would have to spend substantially more funds have not come to pass, and Korea’s
banking sector as a whole has returned to profitability. By the end of 2001, non-
performing loans (loans which are unlikely to be repaid) had fallen to 2.4% of total
loans, compared with 16.4% in 1998. (In 2001, the percentage of non-performing
loans for large banks in the United States was 1.5%.)
The Roh government has accelerated South Korea’s efforts to re-privatize the
banks that were nationalized in the aftermath of the 1997 crisis. By 2000, the
nationalization program had brought about one-third of the banking industry’s assets
into government hands, and state ownership of the banking sector formed the crux
of a major trade dispute with the United States and European Union, in which state-
owned and state-controlled banks were accused of illegally subsidizing Hynix
Semiconductor Inc., the world’s third-largest producer of dynamic random access
memory (DRAM) semiconductor chips. By the spring of 2004, however, sales of
many of formerly state-owned banks had given foreign companies collectively a

7 Ministry of Finance and Economy and the Korea Development Institute, Republic of Korea
Economic Bulletin, Volume 28, No. 1, January 2006.
8 Francesco Guerrera, et al., “Seoul Plans to Sell Most of Stake in Hana Bank,” Financial
Times, January 28, 2004.

major stake in South Korea’s financial sector, notwithstanding occasional statements
by Korean politicians expressing misgivings about excessive non-Korean ownership.
By 2005, foreigners owned about one-third of the assets in the Korean banking
sector, including majority stakes in four of Korea’s eight nation-wide banks.9 In
March 2004, Korea’s Financial Supervisory Commission approved a $1.7 billion bid
from Citigroup for a controlling stake in KorAm, Korea’s seventh-largest bank.
Through 2006, the Korean banking sector continued to be increasingly profitable.10
If the yardstick used to assess South Korea’s reforms is the U.S. economy,
however, it becomes clear that Seoul has far to go if it is to make the economy truly
responsive to market-oriented pressures and incentives. Progress has been
particularly difficult in the government’s attempts to pressure the chaebol to correct
the problems revealed by the 1997 crisis, including excessively high debt levels, a
heavy reliance on short-term debt, the lack of transparency, weak corporate
governance, and corporate structures dominated by individual families rather than
professional business managers. Although two of the largest chaebol — Daewoo and
Hyundai — have been dismantled and debt-equity ratios for most of the top
conglomerates have been reduced, corporate governance and cross-shareholdings
within chaebol groupings remain major problems. The bailouts of struggling credit
card affiliates in 2003 and 2004 seemed to many to indicate that the chaebol had not
reformed their past practices of forcing their profitable enterprises to rescue failing
ones. Also in 2003, a massive accounting scandal at SK Global, the trading unit of
the country’s fourth-largest chaebol, SK Group, revealed similar structural
Additionally, the reckless credit card lending activities of Korean credit card
firms in 2003 and 2004 exposed the continued weaknesses in risk management and
due diligence by Korean financial interests. One of the government’s responses has
been to accelerate plans to further restructure the financial industry by passing new
laws allowing the consolidation of banking, insurance, asset management, and
brokerage services. Some critics, however, worry that this cross-sectoral
consolidation will accentuate the problem of cross-shareholding within chaebol
groupings. Also, bailouts of the two largest credit card companies, LG Card and
Samsung Card, in 2003, have raised fears that the “too big to fail” dynamic continues
to persist in South Korea.

9 Foreigners also are significant shareholders in many prominent chaebol and own an
estimated 40% of the value of the shares traded on South Korea’s stock exchange.
10 Economist Intelligence Unit, South Korea Country Report, February 2007.
11 SK Global (now SK Networks)was found to have window-dressed its financial statements
by over 7 trillion won (around $5.8 billion), for which several senior level executives,
including SK Corp’s chairman were convicted of breaching fiduciary responsibilities. The
chairman served a three-month prison term. Following SK Global’s restatement of its
earnings, SK Corp led a rescue of its subsidiary despite the objections of most of SK Corp’s
foreign shareholders, led by Dubai-based Sovereign Asset Management. SK managers
ultimately defeated Sovereign’s efforts, and in July 2005, Sovereign sold its 15% stake in
SK Corp.

Figure 2. Foreign Direct Investment in the ROK, 1996-2006

15. 5 15. 716 . 018 . 0
11 . 9 12. 8 11 . 6 11. 212 . 014 . 0
8. 9 9. 110 . 0llions Bi
4. 76. 0$
3. 2 3. 2 3. 0 3. 8 3. 9 4. 5 2. 7 1. 72. 94. 0
0. 9 1. 02. 0
0. 0
6 9 7 9 8 99 00 0 1 0 2 03 04 0 5 0 6
199 19 19 19 20 20 20 20 20 20 20
Source: ROK Ministry of Commerce, Industry, and Energy.
Foreign Direct Investment Reforms. As part of its commitment to the
IMF in December 1997, Seoul pledged to eliminate most restrictions on foreign
firms’ long-term investments in local subsidiaries and controlling interests in local
companies. The government of President Kim Dae Jung, who was elected during the
nadir of Korea’s financial crisis, moved aggressively to liberalize Korea’s foreign
investment regime. Partly as a response to Kim’s reforms, and partly in response to
the lower prices of Korean assets following the 1997 crisis, FDI flows increased
markedly, soaring from $3.2 billion in 1996 to a peak of $15.7 billion in 2000. FDI
fell off significantly from 2001-2003, before rising to $12.8 billion in 2004, the same
year President Roh Moo-hyun’s government began a policy of boosting FDI as a12
source of domestic growth. Since the 1997 crisis, FDI commitments by U.S.
companies have totaled nearly $20 billion. (See Figure 2.) A number of high-profile
Korean companies have been taken over by foreign interests, notably General
Motors’ purchase of Daewoo Motors in 2002.13 Citigroup’s $2.4 billion purchase of
KorAm Bank in March 2004 was the largest foreign direct investment in Korean
history and Citigroup’s largest investment outside North America.
The Daewoo Motors Case. Despite the increased openness to foreign
ownership, a number of high-profile acquisitions by foreign companies have been
either delayed or cancelled, due to nationalistic objections to the sale, disagreements
over the sales price, and/or the discovery of previously undisclosed debts owed by
the target Korean company. These delaying actions often have backfired, resulting
in far lower eventual sale prices. A case in point was the protracted sale of Daewoo
Motors. In June 2000, Daewoo Motor’s creditors, many of them government-owned
or controlled, reached a tentative agreement with Ford, which bid nearly $7 billion
12 In a March 4, 2004 speech to the American Chamber of Commerce of Korea, Minister of
Finance and Economy Lee Hun-jai announced the new policy, saying, “foreign direct
investment is important not just for short-term recovery of the Korean economy, but also for
supporting longer-term growth potential.” Andrew Ward, “Korea Moves to Win Back
Foreign Business,” Financial Times, March 5, 2004.
13 Since then, GM Daewoo has become GM’s manufacturing platform in Asia.

for the company. Negotiations became difficult, and after discovering billions of
dollars in previously hidden liabilities (and taking a large loss from the Firestone tire
recall), Ford withdrew its offer. General Motors, which initially had bid $4 billion,
remained the only viable suitor. Negotiations with creditors and the government
dragged on for over a year and a half, however. Finally, in May 2002, GM and
Daewoo’s creditors signed an agreement, by which GM acquired a controlling stake
in Daewoo Motors for $400 million.
Thus far, the GM-Daewoo partnership has been hailed as a success story. The
combined company has become a global production base for GM; GM-Daewoo’s
sales have quadrupled since the purchase, making the affiliate one of GM’s most
profitable. Sales have been particularly strong in China, and GM has chosen to house
its global mini and small car development teams in the Korean company.14
The Newbridge Capital Case. Many Koreans, however, have reacted with
alarm to foreign investment and there has been growing discussion of restricting the
takeover of Korean companies by foreigners. For instance, when Newbridge Capital
sold its 50% stake in Korea First Bank in early 2005 at a high profit, it was accused
of being a “foreign exploiter.” The South Korean government attempted to limit or
eliminate an investment treaty with Malaysia, Newbridge’s home, that allowed the
company to avoid paying Korean taxes on its gains. Newbridge bought Korea First
Bank in 1999 and is credited in many circles with turning around the bank’s fortunes.
Part of the Korean government’s apparent ambivalence to foreign investment,
particularly in the financial sector, is that foreign multinationals often are more
resistant to government pressure. Newbridge, for instance, reportedly resisted efforts
by the South Korea’s Financial Supervisory Commission to advance loans to two15
failing companies, Hynix and LG Credit.
The Lone Star Case. In 2006, the government’s moves against Lone Star,
a Texas-based private equity fund, again raised fears among foreign businesspeople
that high-profile investments remain vulnerable to politically-charged investigations.
Earlier in the year, Lone Star announced a preliminary agreement to sell its
controlling stake in the Korea Exchange Bank (KEB), Korea’s fifth largest, to the
country’s largest bank, Kookmin Bank, for $7.4 billion. Lone Star purchased KEB
in 2003 for $1.2 billion. Shortly after the announcement, which sparked an outcry
against foreign “predators” in South Korea, South Korean prosecutors launched an
investigation of the 2003 purchase arguing that the sale price was set too low by KEB
and the government, which managed the sale. Separately, prosecutors also have
issued arrest warrants for Lone Star executives for alleged illegalities stemming from
a number of Lone Star’s transactions after it took control of KEB. Korean authorities
reportedly are seeking the extradition from the United States of two Lone Star

14 Gina Chon, “Growth Engine: Daewoo Works Through its Woes to Give Floundering GM
a Boost,” The Wall Street Journal Asia, April 5, 2006; “As GM Daewoo Soars, Kia
Crumbles,” Chosun Ilbo, February 10, 2007; see also CRS Report RL33317, China’s Impact
on the U.S. Automotive Industry, by Stephen Cooney.
15 Edward Graham, “South Korea Should End its Corporate Xenophobia,” Financial Times,
August 4, 2005.

officials.16 The combination of the two sets of investigations has stalled Lone Star’s
sale of KEB to Kookmin.
South Korea’s Increased Economic Integration with China
As mentioned earlier, in 2003 China surpassed the United States as South
Korea’s number one trading partner (see Figure 3). South Korea has run trade
surpluses with China for a number of years, in contrast to the increasingly large trade
deficits it has run with Japan (see Figure 4). For several years, China has also been
the number one destination for South Korean overseas direct investment, by a large
margin. Many South Korean exports to China are intermediate goods used in the
production of finished goods that ultimately are exported from China to other
countries, including the United States. A growing number of Koreans are studying
the Chinese language and traveling to China, and public opinion polls show that a
growing number of Koreans have favorable views of China. These developments,
combined with a sharp decline in favorable views of the United States, have led many
American observers to worry that Chinese influence over South Korean policy is
likely to rise in the future, at the expense of the United States.
Figure 3. ROK Trade with China,
U.S., and Japan, 2001-2006

14 0
China (includes Hong Kong)
12 0 U. S.
10 0
20 01 20 02 20 03 20 04 20 05 20 06
Source: Korea Customs Service.
Many South Koreans, however, have ambivalent views of China’s growing
economic importance. Increased imports from China has increased competitive
pressure on South Korean farmers and manufacturers. The increased competitiveness
of many Chinese manufacturers has caused some consternation in some South
Korean firms, pushing them to search overseas for lower-cost production bases.
There are also concerns that jobs, particularly in the manufacturing sector, will be
lost to Chinese workers as South Korean foreign direct investment in China
16 Laura Santini and Lina Yoon, “Lone Star Probe Engulfs Fund’s South Korea Chief,” The
Wall Street Journal Asia, January 29, 2007.

Figure 4. ROK Trade Balances with Major
20 0 1 20 0 2 20 0 3 20 0 4 20 0 5 20 0 6
Source: Bank of Korea
Figure 5. South Korean Exports to China,
U.S., Japan, 2001-2006

2001 2002 2003 20 04 20 05 20 06
total ChinaUSA

Improved Inter-Korean Economic Relations
In the past three years, South Korea has emerged as North Korea’s second-most
important economic partner, after China. Inter-Korean trade has more than doubled
since 2000, to over $1.3 billion in 2006 (see Figure 5).17 For the past two years,
about 40% of this trade (approximately $550 million in 2006) was conducted on a
commercial basis. The rest is associated with inter-Korean cooperation projects
($370 million, or 27% of bilateral trade, in 2006) and non-commercial transactions
such as humanitarian assistance projects (about $420 million, or 30%, in 2006).
Overall, South Korea runs a trade surplus with North Korea, though if only
commercial transactions are considered, Seoul runs a deficit.18
From 1994-2006, Korea provided over $3 billion worth of economic and
humanitarian aid to North Korea, most of which has come since the June 2000
summit between North Korean leader Kim Jong-il and then-South Korean President
Kim Dae Jung. Since the summit, the two Koreas have reconnected inter-Korean
roads, are close to reconnecting two rail lines, have expanded a tourism site in Mt.
Kumgang (North Korea), and have completed construction of a pilot industrial zone
in Kaesong (North Korea) for South Korean companies to erect factories using North
Korean labor. Kaesong is 40 miles north of Seoul, just across the demilitarized zone
separating the two countries. By the end of 2006, a pilot site at the Kaesong
industrial complex (KIC) had expanded to include 15 South Korean firms employing
over 10,000 North Korean workers. Following North Korea’s missile tests in July
2006 and nuclear test in October 2006, the South Korean government announced
some restrictions on its economic cooperation projects with the North, including the
suspension of new applications from South Korean firms seeking to invest in the
second phase of the KIC. In January 2007, the South Korean Unification Minister
announced that an additional 40 firms, which had been selected prior to the
suspension, would open operations in Kaesong in 2007. Additionally, as part of the
six-party talks on North Korea’s nuclear weapons programs, Seoul has proposed
sending large amounts of electricity to North Korea, in exchange for concessions
from Pyongyang.

17 South Korean National Statistical Office; Korean Ministry of Unification.
18 South Korean National Statistical Office; Korean Ministry of Unification.

Figure 6. North-South Korea Trade

Millions of Dollars
2000 2001 2002 2003 2004 2005 2006
Source: Unification Ministry
Some analysts worry that improved inter-Korean economic relations are
undermining the Bush Administration’s policy of constricting the inflows of foreign
currency that are thought to go to the North Korean elite, providing a critical base of
support for North Korean leader Kim Jong-il. Alternatively, coordinated U.S. and
South Korean policies could use economic leverage to pressure North Korea. In
broad terms, the Bush Administration has stated that it supports South Korea’s
economic engagement with North Korea, including the Kaesong industrial zone.19 In
2004 and 2005, the United States approved several export controls clearances that
were required by U.S. law for South Korean firms to bring items — such as computer
and telecommunications equipment — to Kaesong.20
Since the KIC opened, it has been South Korean policy to request that its FTA
partners allow exports from Kaesong to be considered as “Made in Korea” (meaning
South Korea), thereby enabling these products to receive the preferential status
conferred by the FTA. The United States has refused to consider Kaesong as part of
the KORUS FTA. Two important issues for the United States in considering South
Korea’s demand are the conditions for North Korean workers and the income the
KIC provides for the North Korean government. Some U.S. labor and human rights
advocates have argued that North Korean workers in Kaesong are being exploited.
South Korean officials, as well as other analysts, counter by saying that conditions
19 See, for instance, Joint Declaration on the ROK-U.S. Alliance and Peace on the Korean
Peninsula, White House Office of the Press Secretary, November 17, 2005.
20 U.S. Embassy in Korea, “Questions and Answers from Economic Press Roundtable with
Embassy Official,” February 8, 2006; January and February 2006 conversations with
officials familiar with the Kaesong export control discussions.

— including wage conditions — at Kaesong are far better than those in the rest of
North Korea.
The North Korean government derives hard currency from several sources in the
KIC project, including leasing fees and surcharges levied on North Korean workers’
wages, which are paid to an arm of the North Korean government agency before
being passed on to employees (in the form of North Korean won).21 To date,
according to information provided by the South Korean government, these streams
likely total less than $20 million in hard currency. However, if the South Korean
government realizes its most ambitious goals for the Kaesong project, by the middle
of the next decade the North Korean government would likely derive hundreds of
millions of dollars annually from tax revenues and its slice of North Korean workers’
wages, assuming the KIC’s current tax and wage structures remain in place.22 Some
South Koreans caution that the uncertainties over the future course of the KIC project
make such projections highly speculative.
Major U.S. Trade Disputes with South Korea
Given the disparities in size and economic dependence, it is not surprising that
the United States typically sets the agenda of U.S.-ROK trade talks. Since the 1997
financial crisis, these complaints have tended to be directed at regulations
promulgated by “domestic” ministries, such as the Ministry of Health and Welfare,
the Korean Food and Drug Administration, and the Ministry of Environment, that
traditionally have had little contact with foreign governments or firms. One element
of the U.S. strategy toward Korea appears to be attempting to raise the pressure on
these ministries by pushing for the Korean Cabinet to focus on the issue.
In general, U.S. exporters and trade negotiators identify the lack of transparency
of Korea’s trading and regulatory systems as the most significant barriers to trade
with Korea, in almost every major product sector. In 2004, the transparency issue
became a stand-alone item in the quarterly trade action agenda meetings. Many U.S.
government officials also complain that Seoul continues to use government
regulations and standard-setting powers to discriminate against foreign firms in
politically sensitive industries, such as automobiles and telecommunications.

21 North Korean workers in Kaesong receive a base monthly salary of $50 for a 48-hour
work week. In 2005, the average workweek (including overtime) at Kaesong was 55 hours,
bringing the average gross monthly salary to $67 per month. South Korean officials say
they are unsure of precisely how much is taken by the North Korean government, but from
conversations with workers and other sources, they estimate the government takes an
estimated 30% “social services fee” from the wages to pay for housing and other services
that are to be provided the North Korean state. If these figures are correct, the average
Kaesong worker’s take-home monthly pay in 2005 was just under $37, paid in North Korean
won. Presumably, payments are made at the official rate of exchange, which is much lower
than black market rates. The North Korean government also levies a 15% social insurance
surcharge, which is paid by the South Korean employer, to pay for unemployment and
occupational hazards.
22 Moon Ihlwan, “Bridging the Korean Economic Divide,” Business Week, Mar 8, 2006.

Another major cross-sectoral complaint is that restrictions in the Korean labor
market, such as mandatory severance pay, raise the cost of investing and doing
business. Finally, the United States and other countries have pressed South Korea
to open further its agricultural market, which is among the most closed in the
OECD. 23
Below are brief descriptions of several major sector-specific disputes between
the U.S. and South Korea. In cases where an issue is a significant subject of the
KORUS FTA talks, that fact is mentioned, but more detailed discussion is left to
CRS Report RL33435, The Proposed South Korea-U.S. Free Trade Agreement.
Major Agriculture Issues
Despite South Korea’s place as one of the top destinations for U.S. agricultural
exports, U.S. government and agricultural industry officials contend that Seoul
retains a number of tariff and non-tariff barriers that have stunted U.S. bilateral
exports. South Korean agricultural tariffs are particularly high compared to the
United States and most OECD members; according to USTR, South Korea’s average
applied agricultural tariffs are 52%, more than four times the U.S.’s average.24 The
completion of a comprehensive FTA therefore is to dramatically expand U.S.
agricultural exporters’ access to the Korean market; by one estimate, U.S. agricultural
exports will increase by more than 200% within four years after a hypothetical FTA
is implemented.25 South Korea’s farmers, while shrinking in terms of population and
contribution to GDP, remain a politically powerful force in South Korea. At the
February 2006 launch of the FTA, ROK Hyun-chong Kim said Seoul plans to spend
over $100 million in adjustment assistance to South Korean farmers over the coming
decade. At one point during the FTA talks, Korea reportedly requested that a total
of 284 agricultural tariff lines be excluded from market access commitments.26
In recent years, the number and intensity of agricultural disputes on the U.S.
trade agenda with South Korea appear to have diminished, as manufacturing and
service sector issues have been emphasized. Two of the most contentious
agricultural trade disputes over the past two years have involved beef and rice.
South Korea’s Beef Ban. A major political trade issue on the bilateral
agenda is South Korea’s ban on imports of U.S. beef, which the South Korean
government essentially re-imposed in late December 2006 after partially lifting it
earlier that year. The issue originated in December 2003, when South Korea (along
with Japan and other countries) banned all U.S. beef imports after the United States

23 OECD, Economic Survey - Korea 2004.
24 USTR, FTA: United States & Republic of Korea Economic & Strategic Benefits, February

2, 2006.

25 United States International Trade Commission (ITC), U.S.-Korea FTA: The Economic
Impact of Establishing a Free Trade Agreement (FTA) Between the United States and the
Republic of Korea. (Washington, DC, 2001) pp. 5-1 - 5-2.
26 “Korea Seeks Total Exclusion of Rice from Bilateral FTA,” Inside U.S. Trade, September

22, 2006.

reported the discovery of a cow with bovine spongiform encephalopathy (BSE or
“mad cow disease”). South Korea formerly was the third-largest foreign buyer of
U.S. beef; the United States exported nearly $800 million worth of beef to South
Korea in 2003.27 Throughout 2004, USTR official said that FTA negotiations were
unlikely to begin with South Korea while the ban was in place. During bilateral talks
in January 2006, South Korea agreed to partially lift its ban “toward the end of
March” 2006 by allowing imports of U.S. boneless beef from cattle less than 30
months old. Boneless beef constituted about half of U.S. bilateral beef exports in


Korea did not announce it would start resuming imports of boneless beef from
the United States until September 2006. Then, when the first three shipments of U.S.
beef arrived in South Korea in December 2006, South Korean meat inspectors
prohibited the entry after they found bone fragments. A senior official from the
Korean Agricultural Ministry stated that U.S. and Korean negotiators were unable to
come up with a mutually acceptable definition of “boneless beef,”among other issues,
and therefore had failed to resolve the dispute as of February 12, 2007.28 U.S.
officials and beef producers have argued that the fragments are so small as not to be
a potential cause of mad cow. A number of Members of Congress have called for the
suspension of the KORUS FTA negotiations until the matter is resolved or have
indicated they would not approve an FTA with Korea as long as it continued to stop
U.S. beef imports.
Rice. The South Korean government controls the purchase, distribution, and
end-use of all imported rice. During the Uruguay Round of multilateral trade
negotiations (1986-1993), South Korea was granted a 10-year grace period before
opening its rice market to imports. In return for receiving this concession, South
Korea agreed to allow minimum access for rice through the use of quotas. The grace
period ended on the last day of 2004. Prior to that date, South Korea notified the
WTO that it wished to extend the minimum access quota system rather than convert
to tariffs. Under the Uruguay Round agreement, Seoul could do this only if it
obtained the consent of other WTO members, which could demand concessions to
expand their quota. The United States availed itself of this right, and on December
30, 2004, U.S. and South Korean officials announced an agreement, under which
Korea will double the amount of rice it imports over the next 10 years, provide
guaranteed access for 50,000 MT of U.S. rice each year, and make imported rice
available directly to Korean consumers. In November 2005, after months of delay
and acrimonious debate, the Korean National Assembly ratified the rice deal. China
and Thailand, two other parties to the rice negotiations, reportedly wished to see an
end of the quota system in favor of tariffication, which presumably would be more

27 USTR, FTA: United States and Republic of Korea Opportunities for Agriculture, February


28 Washington Trade Daily, February 12, 2007. In December 2005, Japan lifted its ban,
only to reimpose it the following month after Japanese government inspectors found bone
material among the first U.S. beef shipments to arrive. U.S. Secretary of Agriculture Mike
Johanns expressed regret that the prohibited material had entered the shipments. After
months of bilateral talks, in August 2006 Japan resumed imports of U.S. beef from cattle 20
months old or younger.

advantageous to lower-cost rice producers such as themselves. In 2006, U.S.
exporters sold over 60,000 metric tons to South Korea.29 In the KORUS FTA
negotiations, the United States is pressing South Korea to open its markets on rice,
a position that the South Korean negotiators have strongly resisted.30
Other Issues
Automotive Trade.31 Automotive trade is perennial issue in trade talks
between the United States and South Korea, the world’s fourth-largest producer of
automobiles. For years, U.S. officials have argued that Korean tax and “Korea
unique” certification practices discriminate against imports. According to press
reports and conversations with the author, throughout 2005, U.S. officials included
automobiles as one of the major outstanding bilateral issues on which progress would32
be needed before the United States would agree to launch an FTA. In announcing
the intent to launch talks, Portman alluded to the South Korean Ministry of the
Environment’s decision in the fall of 2005 to grant auto makers with a low share of
the Korean market an exemption, until 2009, from Korea’s regulations on ultra-low
emissions. Previously, the regulations would have applied in January 2007. South
Korean government officials say that changes made in the auto sector were unrelated
to the negotiations over launching an FTA.
South Korean imports of foreign automobiles totaled around 37,000 in 2006 —
including about 6,500 U.S. vehicles — just over 4% of the South Korean market, up
from less than 0.5% five years earlier (see Table 3). Most of the foreign cars sold
in South Korea are luxury models, though in 2006 Japanese manufacturer Honda
began to have some success marketing its Accord and CR-V models. In contrast,
South Korean auto manufacturers sold nearly 750,000 cars to the United States in
2006, capturing over 4% of the U.S. market. Almost all of these vehicles were
produced by Hyundai Motors, including vehicles produced by its subsidiary Kia,
formerly Korea’s second-largest independent manufacturer. One significant change
in 2006 was that over one-quarter of the “Korean” cars sold in the United States were
produced at Hyundai’s plant in Montgomery, Alabama (see Table 4).

29 U.S. Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics.
30 Washington Trade Daily. February 12, 2007.
31 This section written with Stephen Cooney, CRS Industry Analyst. For more on the United
States auto industry, see CRS Report RL32883, U.S. Automotive Industry: Recent History
and Issues, by Stephen Cooney and Brent D. Yacobucci.
32 Inside US Trade, “Portman Says U.S. Not Ready to Launch FTA Talks with Korea,” June
10, 2005; Edward Alden, et. al., “South Korean Film Concession Paves Way for Free Trade
Talks with the US,” Financial Times, January 27, 2006; conversations with U.S. officials
in June 2005, September 2005, and December 2005.

Table 3. Reciprocal U.S.-ROK Automotive Sales
Vehicular Units, including Light Trucks
2000 2001 2002 2003 2004 2005 2006
Korean Auto Companiesa473,400618,300650,300637,700688,670730,863a749,821a
Sales in the United States
Market Share2.7%3.6%3.9%3.8%4.1%4.3%4.6%
Total Foreign Autob4,4007,70016,10019,50023,34530,90136,962d
Companies’ Sales in Korea
Market Share0.3%0.5%1.3%1.9%2.1%3.3%4.2%d
Sales ofU.S. Brands” inc1,7002,0004,7004,1005,4155,7956,576d
Ko rea
Market Share0.1%0.1%0.4%0.4%0.5%0.7%0.8%d
Source: U.S. Department of Commerce.
a. Figures include vehicles manufactured in Hyundai’s plant in Montgomery, Alabama (see Table 4).
b. Figures for foreign and U.S. companies sales in South Korea do not include the sales of GM Daewoo
Automotive Technologies, which has captured between 12% and 13% (104,000-128,000) of the Korean
market since GM took over Daewoo in 2002.
c. “U.S. brands” includes Cadillac, Chrysler, Ford, Jaguar, Land Rover, Saab and Volvo.
d. January - November 2006.
In 2006, the United States ran a trade deficit with South Korea in auto parts
shipments of over $1.7 billion, up from a deficit of nearly $1.4 billion in 2005.
Between those two years, U.S. parts exports essentially remained stagnant,
registering $515 million to $517 million in 2005 and 2006, respectively.33
Table 4. Increased Sales from Hyundai’s Alabama Plant
Total Hyundai Sales in U.S. 455,012455,521
- Of which, Hyundai Alabama Production65,747195,361
% of Hyundai’s U.S. Sales14.4%42.9%
% of Total Sales of Korean Autos in U.S.9.0%26.1%
- Of which, Hyundai Imports 389,265 260,159
% of Hyundai’s U.S. Sales85.6%57.1%
Kia Sales (Imports)275,851294,301
Total Sales of Korean Autos in U.S. 730,863749,821
Source: U.S. Department of Commerce.

33 U.S. Commerce Department.

For years, USTR has pushed South Korea to lower its 8% tariff, which is more
than three times the U.S. level of 2.5% on imported cars. Moreover, the United
States continues to protest that South Korea’s tariff, tax and regulatory structure
unfairly penalize automobiles with larger-sized engines. Specifically, the Bush
Administration has called on Korea to move from engine displacement taxation to
a value-based taxation system, because the former assesses higher taxes on larger
vehicles.34 Periodically, some Members of Congress have introduced legislation
calling on South Korea to end the practices that impede foreign market access and
requesting various U.S. executive agencies to monitor Korea’s progress on this issue.
Two initiatives were H.Con.Res. 144 and S.Con.Res. 43, introduced in the 107th
Congress, in May 2001.
For much of the post-Korean War era, South Korea’s market was closed to the
import of automobiles. It banned all automobile imports prior to 1989, and the ban
on importation of automobiles from Japan was eliminated only in 1999. Gradually,
the industry has opened up to foreign investment, though almost all cars sold in
Korea are still locally produced.
In its October 1997 Super 301 report to Congress, the Clinton Administration
designated Korea as a “Priority Foreign Country” for its barriers to foreign motor
vehicles.35 USTR subsequently initiated an investigation under Section 301 of the
U.S. Trade Act of 1974, as amended, and issued a call for bilateral consultations to
provide fair market access for foreign autos in Korea.36 In 1998, the United States
and South Korea signed a Memorandum of Understanding (MOU) on foreign access
to Korea’s auto market, which led the USTR to terminate the Section 301
investigation. Under the MOU, Seoul agreed to reduce its tariffs on motor vehicles
from 80% to 8%, proactively address instances of anti-import activity in Korea, lower
or eliminate many automobile taxes, create a new financing system to make it easier
to purchase automobiles, and streamline its standards and certification procedures.
Many of these steps — including lowering tariffs — have been implemented.
Furthermore, Seoul has largely abandoned its policy of allowing only
Korean-owned auto companies to operate in South Korea. With Hyundai’s purchase

34 USTR, 2004 National Trade Estimate Report on Foreign Trade Barriers, p. 313.
35 Super 301 (Section 310 of the 1974 Trade Act) requires the USTR to report to congress
on “priority foreign countries” that practice unfair trade and “priority practices” that have
the greatest effect on restricting U.S. exports. If agreement is not reached on the priority
practices, the USTR is required to initiate a Section 301 case (see the following footnote).
For more information, see CRS Report 98-454, Section 301 of the Trade Act of 1974 , as
Amended: Its Operation and Issues Involving its Use by the United States, by Wayne
36 Section 301 (sections 301-309 of the Trade Act of 1974) authorize the USTR to initiate
investigations of foreign trade practices that allegedly discriminate against U.S. commerce.
If a settlement with the foreign country is not reached following the initiation of the
investigation, the USTR decides whether or not to retaliate, usually in the form of 100%
tariffs on selected imports from the offending country. See CRS Report 98-454, Section 301
of the Trade Act of 1974, as Amended: Its Operation and Issues Involving its Use by the
United States, by Wayne Morrison.

of Kia, Korea’s second-largest producer, there is now only one Korean-owned motor
vehicle manufacturer left, although it is dominant in the home market. In 2002,
General Motors purchased the Daewoo Motor Company from the bankrupt Daewoo
conglomerate. Two other smaller vehicle producers, Samsung and Ssangyong, have
also come under the control of foreign investors.
Meanwhile, Korea’s top automotive manufacturer has renewed an earlier effort
to build cars in North America, as well as to import them. In May 2005, Hyundai
Motors opened a new $1.1 billion plant in Montgomery, Alabama. In 2006, the new
plant produced nearly 200,000 cars that were sold in the United States, over 40% of
Hyundai’s total sales in this country. (See Table 4.) The facility is expected to
produce 300,000 vehicles annually and will employ approximately 2,000 workers.37
The plant’s suppliers are expected to employ approximately 5,500 workers. In
Korea, Hyundai Motor experienced significant legal and labor troubles in 2006. In
January 2007, South Korean regulators levied a $24 million fine on the company for
violating competition rules. Its chairman, Chung Mong-koo, is on bail facing
corruption charges. And, in 2006, Hyundai Motor union members staged walkouts
on 32 days last year, incurring production losses of 115,683 units.38 Hyundai’s legal
troubles have cast a cloud over the construction of a new plant in West Point,
Georgia, by Kia Motors. Groundbreaking on the plant was held in October 2006.
Production is due to begin in 2009.
Pharmaceuticals. Pharmaceutical trade has been one of the most contentious
issues in the KORUS FTA talks. Korea is ranked in the world’s top 15
pharmaceutical markets, with annual sales in the $4 billion range. In 2001, imports
comprised approximately 30% of the total market, compared with an average of
50%-70% for other countries that do not have a significant research-based domestic
industry. Korea’s expenditures on pharmaceutical products is about $115 per person
per year, less than half the $240 average for OECD countries.39 The country has a
nationalized health insurance system, which began to experience a negative cash flow
in 1995. For years, the U.S. government has complained that a number of Korea’s
pharmaceutical policies are designed to protect the domestic Korean industry, which
predominantly produces generic drugs.
Criticisms have mounted since 2001, when the Korean government
implemented a series of emergency measures to fill the national health insurance
fund’s mounting deficit, estimated at the time to be over 4 trillion won ($3.3 billion).
Recent complaints include the lack of transparency of the Korean Ministry of Health
and Welfare, particularly the Ministry’s allegedly poor record on consulting with and
notifying companies about regulatory changes; the reimbursement scheme of the
health insurance system, which allegedly gives price incentives for doctors to
prescribe and patients to use Korean-made products; poor protection of intellectual

37 May 20, 2005 letter from Hyundai Motor Co.’s Washington, DC, office.
38 Kyong-Ae Choi, “Korean Car Sales Increase,”The Wall Street Journal Asia, January 3,


39 American Chamber of Commerce in Korea, Improving Korea’s Business Climate 2002,
p. 148.

property rights for medical patents; and the discriminatory nature of Seoul’s
requirements that foreign drugs must be retested on Koreans living in Korea, rather
than on other ethnic Asians, as the United States has insisted. In a sign of
pharmaceuticals’ growing importance on the bilateral trade agenda, in January 2002,
the two sides established a bilateral private sector health care reform working group.
Both sides cited progress in 2005 in managing some of the most persistent
disagreements — for instance, South Korea agreed to consult with the multinational
pharmaceutical industry (as well as the domestic industry) in setting up an
independent mechanism under which pricing and reimbursement decisions could be
appealed — though there are conflicting reports about details of some of the
negotiations.40 According to press reports and conversations with the author,
throughout 2005, U.S. officials included pharmaceutical regulations as one of the
major outstanding bilateral issues on which progress would be needed before the
United States would agree to launch an FTA.41 South Korean government officials
say that changes made in the pharmaceuticals sector were unrelated to the
negotiations over launching an FTA.
South Korea’s “Screen Quotas”. Since 1966, South Korea has sought to
protect its domestic film industry by mandating that movie theaters devote at least
146 days per year (or 40% of the calendar year) to showing domestic films. The
issue was a major reason the United States and South Korea were unable to finalize
negotiations over a bilateral investment treaty (BIT), which were initiated in the late
1990s but were suspended in 1999.42 Each country’s motion picture industry has
significant political clout; during South Korea’s 2002 presidential elections, Roh was
backed by several prominent South Korean actors. Nonetheless, for years Roh’s
administration pledged that it would reduce, if not eliminate, the quotas. For U.S.
trade officials, the issue became a symbol of the Roh government’s ability and
capacity to make the difficult political concessions that would also come in FTA
negotiations. On January 26, 2006, the day after the beef ban was partially lifted,
South Korea’s Prime Minister announced that the screen quotas would be cut in half,
to 73 days a year. The following week, the two countries announced their intent to
launch FTA talks. The growing popularity — both in South Korea and abroad — of
South Korean films undoubtedly made Roh’s concession more palatable.

40 For instance, in describing the proceedings of the October 2005 quarterly trade meeting,
USTR’s annual report states that the Korean government “assured the United States that it
has no immediate plans” to implement proposals that would change the calculation
methodology of its triennial re-pricing mechanism. However, the USTR’s NTE reports that
the Korean government said it would “take a ‘cautious’ approach toward this matter.”
41 Inside US Trade, “Portman Says U.S. Not Ready to Launch FTA Talks with Korea,” June
10, 2005; Edward Alden, et. al., “South Korean Film Concession Paves Way for Free Trade
Talks with the US,” Financial Times, January 27, 2006; conversations with U.S. officials
in June 2005, September 2005, and December 2005.
42 BITs are designed to improve the climate for foreign investors — typically by committing
the signatories to prohibit discrimination against foreign investors — by establishing dispute
settlement procedures and by protecting foreign investors from performance requirements,
restrictions on transferring funds, and arbitrary expropriation. The United States has signed
over 30 BITs, primarily with countries undergoing significant economic reforms.

South Korea’s Alleged Currency Manipulation. In recent years, South
Korea has been criticized for intervening in foreign currency markets by purchasing
U.S. dollar assets to artificially lower the value of the Korean won against the U.S.
dollar in order to boost exports. As of the end of November 2006, South Korea was
the fourth largest foreign holder of U.S. treasury securities, holding $67.7 billion, an
amount that essentially is unchanged from 2005.43 As Figure 4 shows, the won
generally has been appreciating against the dollar since 2001. The won’s rise was
particularly marked in late 2005 and early 2006, when it reached levels not seen since
before the 1997 financial crisis. During the same period, the won has risen even
more precipitously against the Japanese yen. This is particularly worrisome to many
Korean exporters because they compete directly against more Japanese than U.S.
companies and because many Korean manufacturers rely upon imports of
intermediate goods from Japan.
Since the won began its gradual ascent in 2001, South Korean authorities have
intervened episodically to slow the won’s rise, though the scale of the intervention
has been far less than Japan and China’s. The United States made currency
intervention a major issue at the Asia Pacific Economic Cooperation (APEC) Finance
Ministers and G-7 Finance Ministers meetings in September 2003. Shortly thereafter,
South Korea appeared to ease off large-scale interventionist policies; South Korean
government officials say that since early 2004, they have engaged in only minor
intervention to “smooth” excessive currency volatility.44 In response to the won’s
spike since late 2005, although some Korean officials have said that their currency
is overvalued, they did not appear to intervene in currency markets in a large-scale
way until late 2006. Indeed, in February 2006, South Korean Finance Ministry
officials said they would like to loosen restrictions on won-denominated transactions
overseas in order to make the won more widely traded.45 By December of the same
year, however, there were signs that the Bank of Korea resumed its intervention, and
a deputy finance minister, Kim Sung-jin, reportedly stated that “to stabilise the
economy, it is essential to maintain the currency at a certain level and the government
will make its best efforts to achieve that ... if the government consults with the central
bank and intervenes in the currency market, our resources are unlimited.”46

43 Department of the Treasury and the Federal Reserve Board, “Major Foreign Holders of
Treasury Securities,” []. Japan held $683 billion in U.S.
treasury securities, China $250 billion, and the United Kingdom $223billion.
44 Charles Roth, “South Korea to Use Reserves For Local Asset Management,” The Asian
Wall Street Journal, February 14, 2005.
45 Laura Santini, “Won Bulls see Korean Currency as a Proxy for Asia’s Growth,” The
Asian Wall Street Journal, February 7, 2006.
46 Anna Fifield, “Seoul Will Use ‘Unlimited Resources’ to Stem Won Rise,” Financial
Times, December 23, 2006.

Figure 7. Won-Dollar Exchange Rate, 1997-2007

Source: Bank of Korea, average basic rate.
Note: Y-axis is inverted.
In the future, the U.S. dollar and the market for U.S. Treasury securities could
be affected by the South Korean government’s launch of the Korean Investment
Corporation (KIC) to manage a portion of South Korea’s foreign exchange reserves,
in July 2005. The KIC initially is managing $20 billion, and is expected to
eventually manage $100 billion by 2012. The stated goals of the program are to
invest South Korean foreign currency holdings more effectively. The program also
aims to boost President Roh Moo-hyun’s efforts to turn Korea into a major financial
and commercial hub in Northeast Asia by helping boost Korea’s asset management
Some members of Congress have criticized Korea’s currency policy. A “Fair
Currency Act” (Lieberman) was introduced in Senate the last two Congresses (S. 377
in the 109th Congress and S. 1592 in the 108th Congress). If passed, they would
require the U.S. government to monitor and take action against specific countries,
including South Korea, that are “engaged most egregiously in currency
Intellectual Property Rights Issues. Bilateral tensions often have arisen
over U.S. allegations that Korea does not sufficiently protect intellectual property
rights (IPRs). Since becoming a signatory to the World Trade Organization (WTO)
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) in
1994, USTR has moved Korea back and forth between the Special 301 “priority

watch list” and the “watch list.”47 In 2005, USTR downgraded Korea to the “watch
list” because of “significant steps” Seoul had taken to strengthen its IPR regime.
USTR has cited South Korea’s increased protection for recordings transmitted over
the internet and the launch in May 2004 of a “Pan-Government Comprehensive Plan
For IPR Protection” headed by a Han Duk-soo, a prominent official who has a
Cabinet portfolio to promote the initiative. In 2006, USTR kept Korea on the “watch
list,” though it commended Korea’s established of a Copyright Protection Center, as
well as a Standing Inspection Team to increase enforcement against the institutions
using illegal software. USTR also lists several items, such as copyright protection
and DVD piracy, on which it would like to see Korea make additional progress.48
Telecommunications. In recent years, telecommunications has emerged as
one of the most contentious trade issues between the United States and South Korea.
With one of the world’s highest rates of Internet usage, South Korea is often used as
a market for telecommunications companies to test cutting-edge wireless products
and technologies. The Roh government has designated next-generation mobile
communications as one of ten “new growth engines” that will help Korea reach
President Roh’s 2003 goal of nearly doubling per capita GDP to $20,000 by the end
of the decade. Perhaps to this end, the Korean government has attempted to set
mandatory, single-technology standards for wireless telecommunications services.
These efforts led USTR in April 2004 to name South Korea as a “key country of
concern” in its annual report under Section 1377, which requires USTR to assess
U.S. trading partners’ compliance with international telecommunication agreements.
Specifically, for two years, USTR negotiated with the South Korean government
over the Ministry of Information and Communication’s (MoIC) plan to require all
cell phone services to use only the so-called wireless Internet platform for
interoperability (WIPI) for downloading information from the Internet. WIPI is a
new platform developed by a Korean association funded by Electronics and
Telecommunications Research Institute (ETRI), a government-funded institute. The
requirement would have excluded users and developers of other operability
platforms, such as the platform developed by San Diego-based Qualcomm, which is
used by a leading Korean cellular service provider. In April 2004, Seoul and
Washington announced they had reached a compromise that allows MoIC to
implement WIPI, but also permits cellular phones to be made compatible with other

47 “Special 301” refers to Section 182 of the Trade Act of 1974. Since the start of the
Special 301 provision in 1989, the USTR has issued annually a three-tier list of countries
judged to have inadequate regimes for IPR protection, or to deny access: 1) priority foreign
countries are deemed to be the worst violators, and are subject to Section 301 investigations
and possible trade sanctions; 2) priority watch list countries are considered to have major
deficiencies in their IPR regime, but do not currently warrant a Section 301 investigation;
and 3) watch list countries, which maintain IPR practices that are of particular concern, but
do not yet warrant higher level designations. See Wayne Morrison, Section 301 of the Trade
Act of 1974, CRS Report 98-454.
48 USTR, 2006 Special 301 Report, April 28, 2006.
49 “U.S., Korea Reach Deal on Single Standard for Cell Phone Technology,” Inside US

A similar dispute is over MoIC’s issuance of a mandatory standard — to be
located in the 2.3 gigahertz (GHz) bandwidth spectrum — for a new portable
broadband Internet system used to transmit information from the Internet to laptops
and other wireless equipment. USTR and U.S. companies charged that, under the
influence of ETRI, the original, domestically-designed standard was designed to
deliberately exclude foreign companies in favor of Samsung.50 In June 2004, the
Korean government announced that all license holders would have to use one of the
several technologies compatible with a standard designed by the International
Institute of Electrical and Electronics Engineers. USTR has criticized the decision
as excluding companies that have developed other systems. USTR also has asked the
Korean government to revise its restrictions on foreign ownership in the
telecommunications sector.51
Figure 8. Steel Imports fromSteel.52 From 1998 through 2003,
Korea, 1997-2006South Korean steel exports to the
Millions of Metric TonsUnited States were one of the most
2.93politically charged items on the bilateral
2.72.6economic agenda, particularly since the
2.41997 Asian financial crisis. From 1997
22to 1998, Korean shipments of steel tothe U.S. nearly doubled, vaulting South
1.71.6Korea into the top five U.S. sources of
1.5steel imports. In 2003, imports from
1.1South Korea declined below pre-crisis
levels, helping to defuse the issue. In
the preceding five years, a number of
anti-dumping cases were initiated
0against South Korean exporters, and
1997199819992000200120022003200420052006Presidents Clinton and Bush each
Source: U.S. Census Bureaugranted safeguard relief (under Section

201 of the Trade Act of 1974) for U.S.

steel producers.53 Korea and other countries challenged both Section 201 actions at

49 (...continued)
Trade, April 30, 2004.
50 USTR, “Results of 2004 Section 1377 Review of Telecommunications Trade
Agreements,” p. 5.
51 USTR, 2005 National Trade Estimate Report on Foreign Trade Barriers (NTE), p. 394-


52 This section written with Stephen Cooney, CRS Industry Analyst. For more, see CRS
Report RL31748, The American Steel Industry: A Changing Profile, by Stephen Cooney.
53 Section 201 relief, often referred to as “safeguard” or “escape clause” relief, is defined
in sections 201-204 of the Trade Act of 1974, as amended (19 U.S.C. 2251-2254).
Safeguard relief provides for temporary duties, quotas, or other restrictions on imports that
may be traded fairly, but that enter in such quantities as to cause or threaten to cause serious
injury to a domestic industry. The relief is intended to give the domestic industry an
opportunity to adjust to the new competition and remain competitive. Within six months

the World Trade Organization, which ultimately ruled that the actions were
inconsistent with global trading rules. In December 2003, President Bush terminated
the safeguard tariffs he had established in March 2002.54 In 2000, Korea also won
a major WTO case involving anti-dumping duties the United States imposed against
Korean exports of stainless steel plate in coils and stainless steel sheet and strip.
Korea remains one of the leading exporters of steel to the United States by volume,
at about 1.5 million metric tons annually in 2004-2005, but is now well behind the
three leading Western Hemisphere suppliers (Canada, Mexico, Brazil), as well as
China. The rise in steel prices since 2003 has to some extent defused this issue.
Assistance to Hynix Semiconductor. In 2001, a major trade dispute
erupted between the United States and South Korea over allegations that the Seoul
government was propping up Hynix Semiconductor, presently the world’s third-
largest producer of dynamic random access memory (DRAM) semiconductor chips.
In 2001 and 2002, Hynix’s leading creditors — most of which were owned by the
Korean government — orchestrated a series of rescue packages that kept Hynix in
business by enabling it to restructure its 8.6 trillion won (over $7 billion) in debt. In
the United States, Micron Technology, the Idaho-based second largest producer of
DRAMs, led a campaign against the support packages, arguing that they amounted
to government-sponsored bailouts that allow Hynix to export at low prices and that
they were a prime cause of the drastic plunge in global chip prices in 2001 and 2002.
Micron, the last U.S.-based DRAM producer, eventually filed a countervailing duty
case, which it won, resulting in a 44% punitive tariff being assessed against Hynix’s
exports to the United States. In a similar case, the European Union imposed a 34%
countervailing duty against Hynix. Korea challenged both rulings in the WTO. A
WTO panel was formed and in February 2005 ruled that the United States had failed
to “properly demonstrate” that the Korean government had subsidized Hynix. The
United States appealed in June 2005, the WTO’s Appellate Body reversed the ruling,
in part by using a definition of what government actions constitute a subsidy that is
broader than the definition used by the panel.55 Because Appellate Body decisions
cannot be appealed, the United States’s punitive tariffs will remain in place.
Meanwhile, Hynix appears to have undergone a turnaround. It sold many of its
non-semiconductor assets, introduced a program to upgrade its efficiency, completed
its debt-workout program (in 2005, a year ahead of schedule), and in 2006 was the
world’s third-largest chipmaker by sales.56

53 (...continued)
after a Section 201 petition has been filed with the International Trade Commission, the ITC
must conduct an investigation, determine if relief is warranted, and recommend appropriate
remedial action from a specified range of options. The President then decides whether to
implement the recommended measure, apply an alternative measure, or take no action at all.
54 For more on the steel Section 201 case, see CRS Report RL32333, Steel: Price and
Availability Issues, by Stephen Cooney.
55 “WTO Appellate Body Finds U.S. Can Keep Duties on Korean DRAMS,” Inside US
Trade, July 1, 2005.
56 Economist Intelligence Unit, South Korea Country Report, February 2007.

South Korea’s Performance in the Doha Development Agenda. In
the current round of multilateral trade talks, the Doha Development Agenda, USTR
officials consistently have praised South Korea for attempting to bridge the
differences between the developed and developing countries, particularly on non-
agricultural market access issues such as industrial tariffs and services. Seoul also
has been criticized consistently for resisting agricultural liberalization in the
negotiations. Korea’s tariffs on agricultural products, except rice, average 66%,
compared with a 7.5% average for tariffs on industrial products.57
Korea’s Complaints Against U.S. Anti-Dumping and CVD Practices.
For over a decade, South Korea has chafed at the United States’s use of anti-dumping
and countervailing duty (CVD) laws to raise tariffs on Korean exports. According
to one study, in July 2000 the five CVD and 18 anti-dumping orders against South
Korean exports covered approximately $2.5 billion, or over 7%, of U.S. imports from
South Korea in 1999. Moreover, these tariff hikes have tended to be concentrated in
a handful of Korean industries — semiconductors, steel, televisions, and
telecommunications equipment — that have considerable political influence in Seoul.
During the Uruguay Round (1986-1993) of the General Agreement on Tariffs
and Trade (GATT, the WTO’s predecessor organization), Korea was one of several
countries demanding revisions to global anti-dumping rules, changes the United
States opposed because of concerns that they would constrain U.S. anti-dumping
investigators. South Korea, joined most prominently by Japan, has taken up this
issue again in the Doha Development Agenda talks, against U.S. opposition, and has
made it a priority issue in the KORUS FTA talks.58
In recent years, Seoul has become more assertive in using the WTO to challenge
United States’s trade practices. In 1999 and 2000, Seoul took the U.S. to the WTO
over allegedly discriminatory U.S. anti-dumping duties placed on Korean exports of
steel and semiconductors. Korea won both of the steel cases it initiated.
U.S. Visa Policies. South Koreans’ complaints about U.S. visa policies tend
to fall into two categories.59 First, some Korean government officials, Korean
businesses, the American Chamber of Commerce in Korea, and Korean-Americans
have questioned why South Korea is not a participant in the U.S. Visa Waiver
Permanent Program, under which foreigners traveling from certain countries are
permitted to travel to the United States for up to ninety days without having the

57 USTR, 2004 National Trade Estimate Report on Foreign Trade Barriers, p.290.
58 In his address at the December 2005 Doha Development Round ministerial in Hong Kong,
South Korean Trade Minister Kim said that a “tangible outcome” in anti-dumping was
“indispensable” for South Korea. Statement by Mr Hyun Chong Kim Minister for Trade,
World Trade Organization Ministerial Conference Sixth Session Hong Kong,
WT/MIN(05)/ST/19 14 December 2005 (05-5992).
59 For more on U.S. visa policies, see CRS Report RL31512, Visa Issuances: Policy, Issues,
and Legislation, by Ruth Wasem.

immigration documents normally required for entry.60 Although South Korea’s status
in the U.S. Visa Waiver Program (VWP) is not formally part of the FTA
negotiations, it is a priority the South Korean government is pursuing with the United
States.61 Any changes made by the United States in this area are likely to play a
political role in selling the agreement in Seoul.
Among the statutory requirements for countries to participate in the U.S. visa
waiver program is that the country must have a low nonimmigrant visa refusal rate
for two years — averaging no more than 2% over both years and not exceeding 2.5%
in any one year. According to State Department officials, South Korea’s visa refusal
rates have consistently been over this threshold. The FY2004 rate was 3.6% and
according to one report, in early 2005 the rate again was below 4%.62 Meeting the
refusal rate is not the only requirement. A country’s participation in the VWP must
also be deemed to be in the economic, law enforcement, and security interests of the
United States. Since the late 1990s, no country has been added to the VWP, an
indication of the difficulty in meeting the participation requirements. For South
Korea to become a participant would likely require significant attention from the
White House. During his November 2005 summit with President Roh in South
Korea, President Bush announced that the United States would work with Seoul to
develop a “roadmap to assist Korea in meeting the requirements for membership” in
the visa waiver program, a move that has been supported by a number of groups in
the United States.63 H.R. 4304, introduced in November 2005 by Representative
James Moran, would designate South Korea as a program country under the VWP.
The second category of complaints is lodged against U.S. visa policies
implemented since the September 2001 terrorist attacks on the United States,
particularly requirements for mandatory interviews, fingerprinting, and greater
scrutiny of business travelers for possible technology transfer risks. Like citizens of
many other countries, Koreans particularly have objected to the fingerprinting, which
some Koreans have likened to requirements imposed upon them during Japan’s
thirty-five-year occupation of the Korean Peninsula in the first half of the 20th

60 For more on the visa waiver program, see CRS Report RL32221, Visa Waiver Program,
by Alison Siskin.
61 For more on the U.S. Visa Waiver Program, see CRS Report RL32221, Visa Waiver
Program, by Alison Siskin. Speech by ROK Ambassador to the United States Lee Tae-sik,
“The Korea-US Alliance - A Partnership for the Future,” February 7, 2006 Korea Economic
Institute forum, The St. Regis Hotel, Washington, DC; Balbina Hwang, “A Bumpy Road for
the U.S. — ROK Free Trade Agreement,” Heritage Foundation Executive Memorandum
No. 995, March 2, 2006. U.S. trade officials say they do not plan to include the VWP in the
FTA negotiations. Spring 2006 conversations with U.S. officials. If the VWP, or any other
immigration issue, is included in the FTA, those provisions could fall under the jurisdiction
of the House and Senate Judiciary Committees.
62 Balbina Hwang, “Including South Korea in the U.S. Visa Waiver Program,” Heritage
Foundation Backgrounder No. 1872, July 25, 2005.
63 “Joint Declaration on the ROK-U.S. Alliance and Peace on the Korean Peninsula,” White
House Office of the Press Secretary, November 17, 2005.

South Korea also has encouraged the United States to open its domestic market
to services delivered by so-called mode-4 delivery, that is by the temporary
movement of South Korean service providers and their workers to the United
S t at es. 64
Legislation in the 109th and 110th Congresses
109th Congress
S. 3830 (Stabenow). The South Korean Fair Trade Act. Declared that the duty
in effect on July 31, 2006, on cars and motor vehicles imported from South Korea
shall remain in effect until 15 days after the date the Secretary of Commerce certifies
to Congress that at least 20% of the total number of cars and motor vehicles sold in
South Korea each year are made in a country other than South Korea. Introduced
August 3, 2006; referred to Senate Finance Committee.
S. 377 (Lieberman). The Fair Currency Enforcement Act of 2005. Required
the U.S. government to monitor and take action against specific countries, including
South Korea, that are “engaged most egregiously in currency manipulation.”
Introduced February 15, 2005; referred to Senate Finance Committee.
H.R. 4304 (Moran). Designated the Republic of Korea as a program country
under the visa waiver program. Introduced November 10, 2005; referred to House
Judiciary Subcommittee on Immigration, Border Security, and Claims.
110th Congress
No bills have been introduced in the 110th Congress.

64 South Korean government report to the National Assembly, “Negotiating Objectives of
Korea-U.S. FTA,” translation provided by the U.S. Embassy.