1 October 1996
POLICY REVIEW BODY: REVIEW OF KOREA
TPRB'S EVALUATION Back to top
The Trade Policy Review Body of the World Trade
Organization (WTO) conducted its second review of Korea's trade policies on 30 September
and 1 October 1996. The text of the Chairman's concluding remarks is attached as a summary
of the salient points which emerged during the two-day discussion.
The review enables the TPRB to conduct a collective
examination of the full range of trade policies and practices of each WTO member country
at regular periodic intervals to monitor significant trends and developments which may
have an impact on the global trading system.
The review is based on two reports which are
prepared respectively by the WTO Secretariat and the government under review and which
cover all aspects of the country's trade policies, including: its domestic laws and
regulations; the institutional framework; bilateral, regional and other preferential
agreements; the wider economic needs and the external environment.
A record of the discussions and the Chairman's
summing-up, together with these two reports, will be published in due course as the
complete trade policy review of Korea and will be available from the WTO Secretariat,
Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon
(1995), Canada (1990, 1992 & 1994), the Czech Republic (1996), Chile (1991), Colombia
(1990 & 1996), Costa Rica (1995), Côte d'Ivoire (1995), the Dominican Republic
(1996), Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992),
Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993),
Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995), Kenya (1993),
Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico
(1993), Morocco (1989 & 1996), New Zealand (1990), Nigeria (1991), Norway (1991 &
1996), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania
(1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South Africa
(1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996),
Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992
& 1994), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe
TRADE POLICY REVIEW BODY: REVIEW OF
CONCLUDING REMARKS BY THE CHAIRPERSON Back
Over the past two days, the Trade Policy Review Body
has conducted the second review of Korea's trade policies and practices under the WTO
framework. These remarks, intended to summarize the salient points, are made on my own
responsibility and do not substitute for the Body's collective evaluation and
appreciation. Details of the discussion will be reflected in the minutes of the meeting.
The discussion developed under four main themes: (i)
macro-economic developments and the implications of rapid economic expansion; (ii)
policies related to tariff and non-tariff measures; (iii) TRIPS, TRIMs, industrial and
competition policy issues; and (iv) sectoral issues.
Macro-economic developments and the implications
of rapid economic expansion
Korea's rapid economic growth and continued trade
liberalization since its initial Trade Policy Review in 1992 were strongly commended. The
positive lessons for developing countries were highlighted. Members noted, however, the
export promotion efforts adopted in response to the recent rise in the current account
deficit, and sought confirmation that no public or private "anti-import"
campaigns or other restrictive policies would be undertaken. Korea was asked the
consequences of its rapid development and its expected OECD membership for its claims of
"developing country" status, its implementation of WTO agreements, and the
effects on its own GSTP and development co-operation schemes. Interest was also expressed
in commitments undertaken under APEC, and their expected effects on trade with WTO
The representative of Korea responded that trade
expansion through consistent market opening, trade liberalization and deregulation was at
the root of Korea's recent economic growth. The expansion of social overhead capital,
manpower development, R&D assistance and increased domestic and international
competition in the financial sector were fundamental to strengthening competitiveness.
Inward and outward foreign direct investment were promoted; and new financial instruments
had been created to increase national savings, stabilize price levels and improve the
current account. He confirmed that the Korean Government would not resort to or encourage
"anti-import" campaigns or import discriminating policies.
The representative emphasized that active
participation in the multilateral trading system was crucial for Korea's future growth.
Although Korea had participated in the Uruguay Round as a developing country in
consideration of its economic and political environment, Korea was making utmost efforts
to expedite the implementation process. OECD membership was seen as a springboard for
further liberalization, rather than an affirmation of fully developed country status.
Within APEC, Korea was strongly committed to furthering open regionalism.
Policies related to tariff and non-tariff
Members commented favourably upon Korea's
"Five-Year Plan for a New Economy", with its emphasis on the elimination of
unnecessary regulations, promotion of industrial co-operation with foreign countries and
increased assistance to less-developed countries. Concern was expressed over the Import
Diversification Programme, including local content provisions, as well as apparent import
substitution aspects of the capital goods "localization" programme. Korea was
requested to clarify various aspects of subsidy programmes and to explain the criteria
used for sector-specific support granted under policy-based lending, including government
guarantees for shipbuilding and support for small and medium-sized enterprises.
Members welcomed the tariff reductions implemented
both autonomously and in connection with WTO commitments, as well as the greatly increased
level of bindings for agricultural and industrial products. However, questions were raised
over the lack of binding coverage for fishery and various strategic industrial products.
The possibility of additional reductions in bound levels was raised, especially in regard
to high rates resulting from tariffication and the substantial gap between bound and
applied rates. Members observed that recourse to adjustment tariffs introduced instability
into the tariff system, and enquired about their justification.
Members commended Korea's efforts to reform customs
clearance procedures, import licensing, standards and inspection procedures, and
government procurement, but expressed significant concern over the pace of implementation
and the adequacy of the measures adopted. Questions were also raised concerning technical
requirements for imports, changes to safeguards procedures, discriminatory taxation of
liquor, and justification for expanded label-of-origin requirements affecting imported
agricultural and other goods.
The representative of Korea indicated that Korea was
faithfully implementing the Uruguay Round Agreements and seeking to expedite this process
where possible. The Import Diversification Programme, introduced in 1978 to relieve the
chronic trade imbalance with Japan, was to be abolished by the end of 1999. Rules of
origin would be applied following WTO recommendations; there was no intention that these
rules should reinforce the Import Diversification System. The representative stated that
Korea had already abandoned its policy of targeting special industries in 1985. Most
import recommendation procedures would be phased out by 1997 and all by 2001. Quantity
undertakings had been excluded from anti-dumping procedures from 1 July 1996. Safeguard
mechanisms were being brought into WTO consistency and would be strictly enforced. The
Localization Scheme for the Capital Goods Industry, introduced in May 1995, sought to
promote industrial demand and attract foreign investment, improve the R&D environment,
and further quality improvements. The system for imports of used goods had been revised,
and further modifications were in train. There were no restrictions on auto parts. The
share of policy-based lending, presented in the Secretariat Report, was over-estimated, as
it included a large proportion of general loans extended by special banks; no policy based
lending was extended to shipbuilding. Assistance for small and medium-sized enterprises
focused on information and technology dissemination.
On tariffs, the representative emphasized that Korea
had made substantial tariff concessions in the Uruguay Round, with an average reduction of
54 per cent on a trade-weighted basis and expansion of bindings to 91.2 per cent of tariff
lines; further reductions would take place under "zero for zero" and
harmonization initiatives. The fact that most bound rates were higher than the currently
applied rates reflected the impact of autonomous tariff reductions between 1989 and 1994;
there were at present no plans for further revision of general tariff rates. While Korea's
Customs Act provided for ten types of flexible tariff rates, countervailing duties,
retaliatory duties and seasonal duties had never been applied; the use of anti-dumping and
emergency duties was based on the relevant WTO Agreements; and price stabilization duties
would be eliminated from 1997. Adjustment duties could be imposed within the limits of WTO
bound rates to prevent import surges from disturbing the domestic market; the six-month
application period was intended to avoid such duties remaining beyond the time necessary.
Lower rate tariff quotas were applied more frequently than adjustment duties. The liquor
tax and education tax were applied differentially to higher-alcohol products for fiscal,
distributional and health reasons, not to discriminate against imports.
The representative indicated that Korea's non-tariff
policies, primarily aimed at ensuring consumer safety, public health and similar
objectives, were implemented in accordance with WTO rules, and were based on recognized
international standards where possible. Recent changes in customs clearance procedures had
reduced storage and processing from an average of 15 to some 2 or 3 days. Import licensing
would be changed from a positive to a negative system in 1997, confining non-automatic
licensing to a limited number of sensitive products. Origin marking, introduced to
discourage counterfeiting, would be reviewed by end-1996; Korea was pursuing a wide range
of actions to facilitate food inspection, including harmonization with international
testing standards; random sampling would be introduced by end-1996. Industrial
standardization and labelling was essentially in the hands of private sector
organizations; where standards were converted into technical regulations, these were in
accordance with the TBT Agreement. Provisions on eco-labelling were still being developed;
no requests had been received from foreign companies to date. For government procurement,
Korea published a short or medium-term plan at the beginning of each year; open
competitive tendering was promoted and Korea's limited tendering procedure was consistent
with the Plurilateral Agreement.
TRIPS, TRIMS, industrial and competition policy
While expressing their appreciation for Korea's
implementation of new legislative measures to expand the protection of intellectual
property, Members sought information on the time-frames for full implementation of WTO
obligations in this area. Questions were raised regarding the lack of retroactive patent
protection, the rôle of the patents court and current border measures for IPR
enforcement. Clarification was also sought on investment performance measures, noting the
lack of a TRIMs notification; current limitations on shareholding levels; and remaining
difficulties in terms of inward foreign direct investment. Various competition policy
issues were also raised, including the rôle of State trading organizations.
The representative of Korea stressed that his
country had consistently sought to improve intellectual property protection. A series of
legislative reforms was aimed at implementing the TRIPS Agreement as early as possible; on
a voluntary basis, Korea did not resort to the longer implementation period provided for
under the Agreement. The new Patent Law provided for a 20 year protection period from the
date of application. A patents court, to be established by March 1998, would review
IPR-related cases on appeal of decisions taken by the Korean Industrial Property Office.
Recent changes to customs legislation had aligned provisions for border enforcement with
those contained in the TRIPS Agreement. The representative recalled the main provisions of
the 1996 Foreign Direct Investment Liberalization Plan, including an increase in foreign
shareholding limitations to 20 per cent from October 1996; he specified liberalization to
take place in 1997 and stated that these limitations were to be fully eliminated by the
year 2000. Limitations on foreign companies' trading operations would be liberalized from
July 1997. He recalled recent improvements in the status and rôle of the Korea Fair Trade
Commission, made to strengthen competition legislation and support the economic
globalization process in the post Uruguay Round era.
In regard to agriculture, Members again noted the
high duty levels resulting from the tariffication of previous quantitative measures, as
well as potential conflicts of interest in connection with Korea's practice of offering
tariff-quota administration to domestic associations and other directly related entities.
Additional information was requested in regard to statistics on minimum access
commitments, safeguard investigations for recently liberalized "sensitive"
products, inspection and quarantine procedures, and shelf-life regulations. For fisheries,
Korea was asked to explain the reasons for high tariff rates, the low level of bindings
and continued use of quantitative restrictions.
In connection with services, members commented on
Korea's extensive use of horizontal access limitations, including restrictions on
commercial presence, land purchase, foreign equity participation and the movement of
natural persons. Korea was urged to consider more rapid elimination of barriers to foreign
participation in transport, communications and financial services; in this connection,
problems of access for telecommunications equipment were also raised. Problems were also
noted in regard to the certification of foreign service professionals.
The representative of Korea recalled that his
country's agricultural sector, dominated by rice production on small farms, suffered from
low productivity and an underdeveloped infrastructure. However, widespread reforms were
under way in the context of the WTO implementation process, including mechanization and
consolidation of farms. Tariffication was applied in all areas other than rice. The
operation of tariff quotas had generally been a success; some minor problems, such as
unfilled quotas, were attributable to adverse market conditions rather than to problems in
quota management. Safeguard investigations for specific products, such as milk powder
blends, were based on WTO provisions. The possible introduction of measures would be
decided by the Korean Trade Commission. In May 1995, Korea had established an ambitious
plan to improve its sanitary and phyto-sanitary system. Recent reforms included expedited
customs clearance for perishable products, the planned introduction of random sampling,
and the gradual conversion of official shelf-life regulations into a
manufacturer-determined system. Clarification was given on beef tariffication, limits on
game meat, and conditions for imports of wool. In the fisheries sector, Korea did not
currently envisage any tariff reductions; however, imports of close to 50 items were to be
fully derestricted by the end of 1997.
On services, the representative indicated that Korea
had taken important steps to facilitate commercial presence, including the increasing of
ceilings for foreign portfolio investment. Korea was firmly committed to implementing the
concessions offered in the negotiations on financial services in 1995. In maritime
transport, Korea's envisaged reforms went beyond the commitments initially tabled under
the GATS. Korea's draft schedule of commitments in telecommunications was very different
from the status quo, covering international services and satellite telecommunication
services. Foreign equity ownership in basic telephone services would be allowed up to 33
per cent, and no economic needs test would be imposed. Resale of basic telecommunications
services would be permitted, with the exception of voice resale services which were to be
liberalized from 2001. This delay was intended to allow for the establishment a
nation-wide telecommunications infrastructure.
Overall Back to top
Members acknowledged and appreciated the steps taken
by the Republic of Korea over the past few years towards economic reform and market
opening, including in the areas of tariff reduction, internal deregulation and
liberalization of the investment régime. They emphasized the importance of further steps
to improve market access, to increase predictability, transparency and certainty in
Korea's trade practices, and to ensure that Korea's regulatory and administrative régimes
are consistent with the stated aims of increased liberalization and openness. The need for
improved access in the agricultural sector and continued liberalization in various fields
of services was particularly emphasized. Overall, Members offered strong encouragement to
the Republic of Korea to continue and accelerate the reform process in all economic areas
and to be ready to undertake responsibilities within the WTO fully commensurate with the
strength and dynamism of its economy.
We understand that Korea will provide further
written replies to detailed questions, and look forward to receiving these in due time.