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Trade Policy ReviewRepublic of Korea

DDA Negotiations

Erdem Tokmakoglu

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Appendix• Korea DDA• Tiered Reduction formula• Swiss Formula• Mode 4• Natural Members• Movement of Natural Persons• Multilateral Environmental Agreements• Observer status• Trade facilitation• Single-window System• SDT Treatment• Capacity Building

General Picture

S Higher level of market access through the DDAS Large number of countries participation

S Minimizing transaction costs

S Predictability and transparency

S Tiered reduction formula for agriculture

S Flexibility

S Swiss formula

S Liberalization of key infrastructure services

General Picture

S Improvements on Mode 4

S Misuse or overuse of antidumping measures

S Avoid negative effects of fisheries subsidies on fish resources

S Financial and administrative burdens of negotiations

S Information exchange between MEA Secretariats and WTO committees

General Picture

S Criteria for the granting of observer status

S Liberalization of environmental goods and services

S Multilateral rule on trade facilitation

S Submitting and co-sponsoring on many specific measures on trade facilitation

S Differentiated treatment, technical assistance, capacity Building for LDCs

Paragraph 41Since the lunch of the DDA, Korea has played an active and constrictive role in the negotiations.Korea fully recognizes the importance of trade and development.

Paragraph 41In international trade;üOpen MarketsüNon-discriminationüGlobal competitionConductive to global and national welfare.

Paragraph 42

S Utmost importance for Korea; achieving higher level of market access1

though the DDAS Market access for

goods in the WTO means the conditions, tariff and non-tariff measures, agreed by members for the entry of specific goods into their markets.

S Korea supports ambitious approaches to;

ü Market access negotiations

ü Fully engages in all negotiating theatres.

Paragraph 42Substantial expansion of global market can also be achieved through participation of a large number of countriesKorea believes;üAppropriate flexibilities within negotiating framework to each member country

•Specific Concerns•Sensitivities

ØThis will encourage deeper engagement

Paragraph 43

S Korea has also worked, together with other like-minded Members on;ü Minimizing Transaction Costs1;

ü Market access issuesü Non Tariff barriers

1. In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange (restated: the cost of participating in a market).

Trade environment

Consumer welfare

Transparency

Predictability

Returns in business

Paragraph 44 AgricultureKorea believes;• Reduction in trade-

distorting domestic support• Substantial improvements

in market accessWill be achieved through a tiered reduction formula.

Paragraph 44 Agriculture

S Korea believes that the full modalities should take into occur Member’s individual agricultural realities duly and fairly,

S And, reflect the concerns and interests of both exports in a equitable and balanced manner

S Considering the different tariff structures among members and vulnerabilities.

S Especially in food security, a sufficient level of flexibility should be given to members

Example Tiered Reduction Formula

S Tiered Reduction Formula for Albania, Armenia, Georgia, Kyrgyz Republic and Moldova.

S (a) where the base level of OTDS is greater than US$60 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be [75][85] per cent;

S (b) where the base level of OTDS is greater than US$10 billion and less than or equal to US$60 billion, or the equivalents in the monetary terms in which the binding is expressed, the reduction shall be [66][73] per cent;

S (c) where the base level of OTDS is less than or equal to US$10 billion, or the equivalent in the monetary terms in which the binding is expressed, the rate of reduction shall be [50][60] per cent.

Paragraph 45 Marker for Non-Agricultural Products

Outcome in the NAMA

The most commercially

meaningful benefits

WTO members

Korea believes;

Korea supported a Swiss Formula with dual coefficients on a line-by-line basis.

Swiss Formula

S Greatly narrowing the gap between high and low tariffs is called harmonizing the tariffs. The “Swiss formula” is a special kind of harmonizing method. It uses a single mathematical formula to produce:ü a narrow range of final tariff rates from a wide set of initial

tariffsü a maximum final rate, no matter how high the original tariff was.

S A key feature is a number, which is negotiated and plugged into the formula. It is known as a “coefficient” (“A” in the formula below). This also determines the maximum final tariff rate.

Swiss Formula

S The formula

S Z = AX/(A+X)

S whereX = initial tariff rateA = coefficient and maximum tariff rateZ = resulting lower tariff rate (end of period)

Swiss Formula

Example, How a Swiss formula with a coefficient of 25 works over six years. The coefficient of 25 also defines the maximum tariff at the end of the period.

Swiss FormulaMathematically speaking How the Swiss formula coefficient defines the maximum final tariff:From the formula, Z=AX/(A+X),as the initial tariff X rises to infinity, X/(A+X) approaches 1,resulting in Z=Ax1.

Paragraph 45 Marker for Non-Agricultural Products

S Korea is participating in discussions of electronics and electrical products sectoralinitiatives as a co-sponsor.

S With regard to NTBs, in 2004, Korea submitted a proposal related to the vertical approach for addressing NTBs of the electronics industry.

S In 2005, Korea led plurilateral discussions on NTBs of the electronics industry.

Paragraph 46 Services

Key Infrastructure Services

Construction Telecommunications Distributions Financial Services

Maritime Transportation

Korea has been focusing on the further liberalization of;

Beneficiary not only to services themselves but to economic development and overall economic competitiveness.

Paragraph 46 ServicesKorea has also tried to respond to the interests of other Members including those of developing countries.In May 2005, Korea tabled the first offer, which adds improvements, in the areas of entry and temporary stay of natural persons, Mode 4, among others, to it’s ambitious initial offer.

Mode 4

S The movement of natural persons is one of the four ways through which services can be supplied internationally under GATS

S Otherwise known as “Mode 4”, it covers natural persons who are either service suppliers or who work for a service supplier and who are present in another WTO member to supply a service.

S It does not concern persons seeking access to the employment market in the host member, nor does it affect measures regarding citizenship, residence or employment on a permanent basis.

Mode 4

S Overall, the degree of Mode 4 access that has been bound is quite shallow.

S In most instances, members have scheduled an initial “unbound” and then qualified it by granting admission to selected categories of persons, with a marked bias towards persons linked to a commercial presence and highly skilled persons.

S Duration of stay; quotas, including on the number or proportion of foreigners employed; “economic needs tests” or “labor market tests”, generally inscribed without any indication of the criteria of application; pre-employment conditions; residency and training requirements.

What Natural MembersNatural persons who are service suppliers of a Member

Self-employed

Natural persons of a Member who are employed by a service supplier of a Member

At home, and sent abroad to supply a serviceIn the host country

The AnnexThe GATS does not cover;

Natural persons seeking access to the employment marketMeasures regarding citizenship, residence or employment on a permanent basis.

Governments are free to regulate entry and temporary stay, provided these measures do not nullify or impair the commitments.

Movement of Natural Persons

S Mode 4: “supply of a service by a service supplier of one Member, through presence of natural persons of a Member, in the territory of any other Member”S Independent foreign natural persons as service suppliersS Foreign service suppliers through foreign natural persons

S Annex on movement on natural personsS Exclusion on access to labor market, citizenship, employment on

permanent basisS Mode 4 covers only temporary entry and stay in a Member’s territory to

supply servicesS Does not interfere with government policies regarding entry and temporary

stay of natural persons, flexibility in application of visa restrictions

Paragraph 47 RulesConcerning rules on antidumping measuresUrgent task; to prevent the misuse or overuse of antidumping measuresKorea strongly argued for the prohibition of zeroing altogether in dumping margin calculations.

Paragraph 47 RulesConcerning the disciplines on fisheries subsidies, while actively engaging in the talks so as to preserve the sustainability of fish resource, Korea cautions against unnecessary adverse effects the prohibition of subsidies may bring on the fisheries sector, particularly to socially and economically vulnerable groups.In this context, Korea stresses the importance of properly working fisheries management systems that would help avoid negative effects of fisheries subsidies on fish resources

Paragraph 48 TRIPSWhile Korea supports the strengthening of intellectual property rights protection, it prefers a pragmatic approach when it comes to negotiation on the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits.Korea believes that any system to be established should not impose undue financial and administrative burdens on Members.

Paragraph 49 Trade and Environment

Korea recognizes;

S That the relationships between WTO rules and MEAs needs to be defined in order to enhance the mutual supportiveness of trade and environment

S The importance of establishing procedures for information exchange between MEA Secretariats and the relevant WTO committees, and the criteria for the services granting of observer status.

S Korea continues to believe that liberalization of environmental goods and services could result in substantial benefits to Members and will commit to working toward a positive outcome in the negotiations

Multilateral Environmental AgreementsThese negotiations aim to reaffirm how important it is for trade and environmental policies to work together for the benefit of both. They focus on how WTO rules are to apply to WTO members that are parties to environmental agreements, in particular to clarify the relationship between certain trade measures taken under the environmental agreements, and WTO rules

Observer Status

S Observer status is a privilege granted by some organizations to non-members to give them an ability to participate in the organization's activities.

S Observer status is often granted by intergovernmental organizations (IGO) to non-member states and international nongovernmental organizations (INGO) that have an interest in the IGO's activities.

S Observers generally have a limited ability to participate in the IGO, lacking the ability to vote or propose resolutions.

Paragraph 50 Trade Facilitation

S Korea supports the introduction of a multilateral rule on trade facilitation. Trade facilitation benefits

Trade Facilitation

S Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximize efficiency while safeguarding legitimate regulatory objectives.

S WTO defined trade facilitation as: “The simplification and harmonization of international trade procedures” where trade procedures are the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade”.

Paragraph 50 Trade Facilitation

S Korea has actively engaged in the negotiations by submitting and co-sponsoring proposals on many specific measures of trade facilitations

ü Inter-aliaü Single-windowü Release time of goodsü Risk management

Single Window System

S The Single Window System is a trade facilitation idea.

S As such, the implementation of a single window system enables international (cross-border) traders to submit regulatory documents at a single location and/or single entity.

S Such documents are typically customs declarations, applications for import/export permits, and other supporting documents such as certificates of origin and trading invoices.

Paragraph 50 Trade Facilitation• Korea considers

• Differentiated treatment• Technical assistance• Capacity building for developing and LDC

to be important

• Supports the current horizontal approach to these areas.

SDT Treatment in the WTO Agreement

S Developing countries could opt to establish their initial bound tariff levels using ceiling bindings at whatever level they chose, rather than being required to convert their existing border protection measures into tariffs.

S They had lower reduction percentages and longer implementation periods for their tariff reduction, export subsidy reduction and domestic support reduction commitments (and least developed countries were not required to make any reduction commitments).

S Greater flexibility was provided in the use of certain policy instruments such as investment subsidies or export subsidies.

Capacity Building

S Capacity building is a conceptual approach to development that focuses on understanding the obstacles that inhibit people, governments, international organizations and non-governmental organizations from realizing their developmental goals while enhancing the abilities that will allow them to achieve measurable and sustainable results.

S UN, World Bank, NGOs