Scuffle likely Monday as parties fail to bridge gap on investor-state disputes


Rival political parties braced for physical clashes over whether to ratify the free trade agreement with the U.S., signed in 2007 and revised late last year, after failing to narrow differences Sunday on the contentious clauses on investor-state disputes.

Floor leaders Hwang Woo-yea of the ruling Grand National Party and Kim Jin-pyo of the main opposition Democratic Party held a closed-door luncheon meeting Sunday in which the two finalized their positions and urged each other to come to terms.

The government made an official request to the GNP to pass the FTA on Monday so it can take effect on Jan. 1 as agreed with Washington. While agreeing on the need to expedite the FTA ratification, the GNP, however, said it will negotiate with the DP to the last minute rather than setting a deadline.

A debate on ISD planned by the GNP, the DP and government officials for Sunday afternoon at the National Assembly was canceled as opposition lawmakers refused to attend. 

The DP insists that the clauses on ISD should be removed because they could damage small domestic businesses and retailers by allowing U.S. investors to file suits against Seoul’s policies with the International Centre for Settlement of Investment Disputes, a Washington, D.C.-based institution of the World Bank Group.

The governments of Korea and the U.S. can recommend one person each on a three-member ICSID arbitrary panel, and the ICSID secretary general gets to name one.

Due to such way of organizing the arbitrary panel, the DP argues that the U.S., which has produced multiple World Bank chiefs, has an advantage in the suits against Seoul’s measures to protect small firms.

In order to discard the ISD clauses, a renegotiation with the U.S. would be necessary, something the GNP is adamant is impossible. The ISD clauses have been part of the FTA since it was signed in 2007 under former President Roh Moo-hyun and are in Korea’s FTAs with all other countries as well.

The National Assembly committee on foreign affairs, trade and unification last week passed a bill that reinforces the parliament’s supervision of trade pacts with foreign countries, one of the opposition’s three major preconditions for ratification. The two others are removal of the ISD clauses and recognizing products manufactured in South Korean-run factories at North Korea’s Gaeseong industrial park as South Korean-made.

The government has accepted 14 of the additional measures demanded by the DP to increase state support of domestic agriculture, fisheries and livestock farms, but has frowned upon its three “priorities” on compensation for farmers’ losses from price cuts of produce due to increased imports under the FTA. The government payoffs apply when the price of a produce falls below 85 percent of a standard price, under current rules which were last revised from 80 percent in the ratification process of the FTA with the European Union. The DP is now calling for a revision to 90 percent, which is highly unlikely. It is also demanding compensation for dry-field farm produce and fisheries, and extension of low electricity rates for farming purposes.

The GNP is more willing to accept the DP’s demands than the government.

The U.S. Congress ratified the bilateral FTA earlier this month during President Lee Myung-bak’s state visit.

By Kim So-hyun (sophie@heraldcorp.com)