Despite the National Assembly’s approval of the Korea-U.S. free trade agreement, controversy over so-called “poison pills” in the FTA is expected to linger, observers said.

Opposition party members, civic groups and critics have repeatedly demanded the Korean government renegotiate with the U.S. to remove the Investor-State Dispute settlement system from the FTA, but the deal passed without any change.

ISD system

Critics say the ISD system allows a large-sized, multinational investment capital or corporation to incapacitate the partner country’s smaller counterparts. The system will give U.S. capital an upper hand over Korean companies, they argue.

However, the government says the ISD system is not new and is a standardized international trade measure within more than 2,500 international treaties, including the 85 trade agreements South Korea has signed so far.

Ratchet clause

Another issue is the ratchet clause, which prevents a country from levying new regulations on its trading partner after the FTA takes effect.

Critics say free trade deals among advanced countries do not have the provision. The Korea-U.S. FTA will make Korea’s agricultural sector vulnerable and there will be no way to levy new regulations on the sector, they say. Opening up the market in health insurance and the public sector will have the same result, they say.

However, the government says the ratchet clause applies to services and investment sectors. If it finds it necessary to impose new regulations, it can do so, the government says.

Negative list approach

The negative list approach refers to listing specific procedures or products subject to product filing. Procedures or products not on the list would not require prior product filing.

Critics say Korea’s new services markets, which are not on the list, should be open to the U.S. no matter what. American services markets, which are new to Korea, including gambling houses and the sex industry, will be imported to Korea without much difficulty, they say.

However, the government says the level of openness in the Korea-U.S. FTA is similar to that in the Korea-EU FTA. In the Korea-U.S. FTA, the government has delayed the opening of those sectors that perform a significant public good and major services sectors to maintain necessary regulations, it says.

Gaeseong Industrial Complex

Under the FTA, the two countries are to negotiate whether to treat products made at the Gaeseong Industrial Complex in North Korea equal to those produced in South Korea one year after the FTA takes effect

Critics demand that products from the Gaeseong complex be recognized as products of South Korea.

The government, however, maintains that the agreement with the U.S. allows for related issues to be discussed after its implementation. However, the Trade Ministry has called any attempt to give South Korean status to Gaeseong products while North Korea continues provocations against the South “unrealistic.”

By Kim Yoon-mi (yoonmi@heraldcorp.com)