Speeches and Transcripts

U.S.-Korea Relations – 2007 and Beyond

Remarks to Members of the American Chamber of Commerce in Korea

Alexander Vershbow,
U.S. Ambassador to the Republic of Korea

Grand Hyatt Hotel, Seoul
February, 15, 2007

Vice Chairman David Ruch, President Tami Overby, members of the AmCham Board, AmCham members and guests, I would like to thank you for inviting me to offer some insights on the current state of U.S.-Korea relations.  2007 has already been a very active period and I look forward to updating you on developments, including significant events from what has been an historic week.

Before I start, let me express my appreciation to AmCham.  When facing serious issues of critical importance, such as the Korea-U.S. Free Trade Agreement, we could not have a more supportive or dedicated partner than the American Chamber of Commerce in Korea in helping us to reach our common goal of strengthening trade and commercial ties with Korea.  Active out in public as well as behind the scenes, you have helped clarify sensitive issues, provided balance, and brought real insight to the FTA debate.

You have also been generous hosts for cabinet-level officials, countless senior government visitors, and even a few presidential hopefuls.  We are privileged to have such high-caliber support from the private sector.  Keep up the good work as we still have much work ahead of us.

This week, the United States and Korea have been pursuing important negotiations on several fronts.  We have had the breakthrough agreement in the Six-Party Talks announced in Beijing on Thursday and significant progress during the seventh round of the FTA talks, which just concluded in Washington a few hours ago.  With the FTA, we are in the home stretch to meet the March 31st deadline.  Last week, we held senior-level discussions on reopening the Korean market to U.S. beef exports, as well as an important round of talks on the future of our defense alliance.  In addition, there have been some new developments in Washington regarding the Visa Waiver Program.

Today I would like to provide a brief update on all of these issues and then conclude with a more in-depth discussion of our trade and economic relations, and in particular the road to completion of the FTA.

The beginning of the year is traditionally a time to reflect upon the events of the year that has just ended and to take stock of prospects for the year ahead.  Looking forward as well, I added to the title of my remarks the phrase “2007 and beyond.”  When events unfold as rapidly as they have in recent days, it’s important to keep a perspective on our longer-term goals and a clear compass heading during these dynamic times.

Speaking of the long term, in a few days we will be entering the Year of the Golden Pig according to the lunar calendar, an observance that occurs only once every 600 years.  I must admit that we were hoping that this might also be the Year of the American Beef Cow!

The Year of the Golden Pig, as many of you may already know, is supposed to bring abundance and exceptional luck for children who are born this year.  I know that many Korean couples are already working to grow their families in time to meet the Golden Pig year-end deadlines – and we thought the FTA negotiators were working under time pressure!

Six-Party Talks

Let me start with an issue that is not only of fundamental importance to the U.S. and Korea, but to countries around the globe – the international community’s efforts to achieve a denuclearized North Korea.

I’m sure, like me, you were glad to learn that the latest round of Six-Party Talks in Beijing ended with an agreement on initial actions that all of the concerned parties have agreed to take to implement the commitments they made in the September 19, 2005 Joint Statement, which is still the baseline for these talks.  The Untied States’ chief negotiator, Assistant Secretary Christopher Hill, his South Korean counterpart Chun Young Woo, and all the other participants deserve the heartiest possible congratulations for their tireless efforts – into the early-morning hours on Tuesday – in hammering out this agreement.

Our government sees the Beijing “action plan” as an important first step toward the complete, verifiable, and irreversible denuclearization of North Korea.  More broadly, we see the potential for this process to lead to a more stable, peaceful and prosperous Northeast Asia.

In case you haven’t had a chance to read the text of the agreement, let me highlight a few important points:  This agreement on initial actions establishes tight deadlines – months, not years – for the parties to act.

Within the next 60 days, or by April 14, North Korea has committed to shutting down and sealing the Yongbyon nuclear facility, including the reprocessing plant; inviting International Atomic Energy Agency inspectors back in; and discussing with the other five parties a list of all DPRK nuclear programs and materials that are to be abandoned in accordance with the September 2005 Joint Statement.

Also within the next 60 days, the Five Parties will provide an initial shipment of emergency energy assistance, equivalent to 50,000 tons of heavy fuel oil, to the North.

During this period, five working groups will be established to focus on the concrete details of denuclearization, the normalization of U.S.-DPRK relations, the normalization of Japan-DPRK relations, economic and energy assistance, and on Northeast Asian peace and security.  These groups will meet within the next 30 days.

If this sounds like a busy schedule, it is, and that’s intentional.  These initial actions, while important, are just the first steps in what will be a lengthy process.  The ROK and U.S. governments, as well as Japan, China and Russia, have worked together throughout this process and we intend to continue our close cooperation.  We want to move quickly to the next phase, in which North Korea will be expected to provide a full declaration of all of its nuclear programs, and to take steps to disable all its existing nuclear facilities – which will represent the first steps toward the eventual dismantlement of all the DPRK’s nuclear weapons and programs.  Additional energy assistance will be provided to the North as it fulfills these additional commitments.  Assistance, in short, is tied to performance, in keeping with the principle of “action for action.”

Secretary Rice said a few months ago that we would like to complete the denuclearization of North Korea before the Bush Administration leaves office, and preferably even sooner.  In light of the February 13 agreement, we think that this is achievable if North Korea acts seriously.

For a long time, North Korea has insisted that it can only denuclearize when the United States changes its so-called “hostile policy” and agrees to coexist with the DPRK.  Although we have many concerns about North Korea’s conduct in the world and the way it treats its people, the United States is prepared to exist peacefully with the DPRK, and we don’t have a “hostile policy” toward the North in any case.  In fact, we have offered to go beyond coexistence and establish a peace regime to replace the 1953 Armistice and to normalize our bilateral relations, if the North Koreans fulfill their pledge to denuclearize.  It’s now up to the DPRK to implement the initial actions that they agreed to in Beijing, so that we can then move on to the next phase.

U.S.-ROK Strategic Alliance

North Korea dominates the headlines these days, and deterring against the North Korean threat remains the foundation of the alliance between the United States and the Republic of Korea.  But our alliance has also been changing with the times.  Indeed, the U.S.-ROK alliance is at, perhaps, the most dynamic point in its history.  Korea’s vote to extend the Zaytun unit’s deployment in Iraq for another year is a symbol of the continuing strength of our strategic relationship, and the important role it plays – not just on, but off the Korean Peninsula.

The United States is grateful for Korea’s continued support for stabilization and reconstruction in Iraq, and welcomes Korea’s increasing activism on the global stage. I am also pleased at the progress we have made in the last 3-4 years in modernizing our defense alliance to make it not only more capable in military terms, but a more balanced partnership.

We still have some sensitive issues to address – for example, agreeing on a precise date for the transfer of wartime operational control, and avoiding any inordinate delay in the transfer of U.S. forces from Yongsan Garrison in Seoul, and from other installations north of the Han River, to our planned new hub in Pyongtaek.  But I’m confident that we will be able to find mutually acceptable solutions, given the importance both sides attach to the alliance.

In fact, we are making progress in these issues.  During the meetings of our senior defense officials last week as part of the Security Policy Initiative (SPI), we agreed to accelerate work on Yongsan relocation.  We appreciate the personal engagement of Defense Minister Kim Jang-soo in giving the process new momentum.  The first fruits are in:  I saw in the press earlier this week that the Korean government had signed an agreement for the last remaining 59 households to move out of the Pyongtaek site.  This will make it a lot easier to make early progress on construction.  Defense Minister Kim is headed for Washington next week for his first meeting with Secretary of Defense Robert Gates.  I expect this will be a very useful opportunity for resolving a lot of the remaining issues on the alliance agenda.

Visa Waiver Program

As I noted in my introduction, there have been developments regarding the Visa Waiver Program.  President Bush asked Congress to modify Visa Waiver Program requirements to permit certain countries – particularly countries supportive of U.S. counterterrorism efforts – to enter the VWP even if that country’s visa refusal rate might be above the 3% level previously required to enter the program.  This refusal rate flexibility will most likely be tied to a requirement that the participating country agrees to additional bilateral information sharing about passengers traveling to the U.S., especially with reference to those with a record of serious criminal activity or links to terrorists.

No one can predict how quickly Congress will act, or what will be the final shape of the legislation.  But Korea is clearly a leader among the several countries being considered as potential early candidates for admission to the Visa Waiver Program under the proposed new guidelines.  However, between now and when that pending legislation might become law, there is still much to do.  For example, Korea must begin to produce its new e-passport, designed to include an electronic chip containing the bearer’s identity information.  In the meantime, I know that Consul General Julia Stanley and the Consular Section are working diligently with Korean authorities to discourage people from using dishonest visa brokers, to reduce the number of fraudulent visa applications, and, thereby to help further reduce the refusal rate for Korean visa applicants.

Discussions on Beef

Before I turn to the FTA negotiations, let me say a word about beef.  Although our FTA negotiators have been making slow but steady progress on agricultural issues, we haven’t seen much progress on opening the beef market.  (This is issue not part of the FTA, but it will have a major impact on Congressional attitudes toward the FTA.)  U.S. and Korean officials met for two days last week to discuss how we could resume shipments of boneless beef.   Our negotiators asked the Koreans to abide by scientifically-based and internationally-recognized standards.  Although bone chips are not a food safety risk issue, the Korean side has maintained a zero-tolerance approach to bone chips in shipments of U.S. beef.  We hope to continue the dialogue begun last week and reach agreement on the implementation of Korean beef regulations in  way that would permit commercially viable trade to resume.

Our broader objective with exports of U.S. beef is to have Korea recognize – as some 80 of our trading partners around the globe do – international standards that permit the safe, and I might add, cost-effective, import of American beef.  Over two million Korean-Americans, not to mention most of the other 300 million residents of the United States, eat and enjoy American beef daily.  It is time for safe and delicious U.S. beef to return to the Korean market.

FTA: Round Seven the Best Ever

As I said earlier, our 7th round of negotiations on a Korea-U.S., or KORUS, Free Trade Agreement just concluded in Washington several hours ago.  While I haven't received a full report yet, initial readouts indicate that this was our most productive round since we started FTA negotiations last year.  Chief U.S. Negotiator Wendy Cutler told me she sensed a new energy in the talks.  We reached conceptual agreement on our e-commerce text, including provisions guaranteeing duty-free status and non-discriminatory treatment for electronically traded products such as software, music and movies; both sides improved their tariff offers on industrial goods such as chemicals, cosmetics, industrial machinery and IT; and we made important progress on provisions related to general transparency and competition, two important cross-cutting areas.

While there were no major breakthroughs to announce on some of the most sensitive areas, like autos, pharmaceuticals, agriculture and trade remedies, I understand there were very productive discussions that provided a clearer idea of the path forward.  Our two negotiating teams have agreed to schedule an 8th round of talks to be held in Korea sometime during the week of March 5.

Wendy Cutler noted a few hours ago that while she doesn't underestimate the challenges ahead, the prospects are good for reaching a comprehensive, balanced agreement by the end-of-March deadline.  I share her assessment, and coming out of the negotiating round I am more optimistic than I was at the start of the week.

Recent media polls show that a slight, but growing majority of Koreans favor the conclusion of a KORUS FTA.  At the same time, some critics still raise a lingering concern that the agreement might be one-sided given the size and strength of the U.S. economy.  I’m sure that many portions of the Korean public, like their American counterparts, have a healthy “wait and see” attitude regarding changes that may affect their livelihoods.  Other ideological, and unfortunately, more vocal elements have raised fears regarding open markets or the role that corporations play in a modern economy.

Within this broad and intense debate, we have now completed seven tough negotiating sessions.  Korean negotiators have fought tenaciously to defend some of their nation’s more sensitive industries and as well as their farmers.  Our negotiators have worked with equal diligence to secure fair trade opportunities especially in sectors such as autos, pharmaceuticals and agriculture.  At the same time, both sides understand that the more comprehensive our FTA is, the more significant its economic benefits are likely to be – not just for the exporting country, but for the country opening up previously protected and inefficient sectors of its economy.

As we move toward the final phase of negotiations, it’s important to keep our long-term goals in mind, or as I emphasized at the beginning of my remarks, the period “beyond” 2007.  By thinking about the future of our countries beyond 2007, not only will we be better able to gauge our progress, we can better enunciate the benefits of the FTA to citizens on both sides of the Pacific.

Dispassionate analyses have demonstrated that FTAs enhance trade, promote investment, and improve the standard of living for citizens.  By strengthening trade ties, countries also accrue additional benefits to their domestic economy, such as sharpened entrepreneurial skills, more competitive products, and company-to-company synergies.  Last December, Secretary of Commerce Carlos Gutierrez stated in this room that, as a result of the KORUS FTA alone, Korea’s GNP could increase by as much as 2%, with major increases in both imports and exports, and a rise in per capita income to nearly $30,000.

Yet it’s my belief that we may only be scratching the surface of what our two economies can achieve in upcoming years.  Few of the world’s previous FTA pairings match economies that are so strongly high-tech driven and innovation-oriented as this FTA.   Looking at OECD data, no two countries within that organization are so closely aligned in terms of high-tech exports as are the United States and Korea.  Both countries export virtually the same percentage of high-tech products as a share of their total exports – 36%.  No two OECD countries are as closely matched in R&D spending (as a percentage of GDP) as the United States and Korea – both spend 2.6% of their GDP on R&D.  That is the source of both countries’ economic dynamism, which makes this FTA such an appealing prospect.

Reinforcing these high-tech compatibilities are the high numbers of Korean students that attend American schools and universities – over 85,000.  Their impact on Korea is significant and evident today in the resumes of many of Korea’s private and public sector leaders.  We are proud that American education is supporting an enduring link with Korea, making this country all the more receptive for international business.  These and many other factors make the U.S.-Korea trade partnership an ideal match, by drawing together a major Asian power and the world’s single-largest market, two global technologies, two future-oriented economies, and two communities of like-minded entrepreneurs to form an unprecedented trade dynamic.  As Secretary Gutierrez pointed out here in December, for the United States, this will be our most significant trade agreement in 15 years, and for Korea, the Korus FTA is by a considerable margin the largest FTA the country has ever negotiated.

Let me turn for a moment to recent events closer to home, but with an eye to the win-win premise of the FTA.  Over the past several months I’ve had the opportunity to get first-hand views of U.S. operations here in Korea.  Last week, I toured the GM Daewoo plant that manufactures over a million vehicles, many of them destined for China and other Asian markets.   Five years ago, GM Daewoo’s 20,000 workers weren’t sure if they would have a job.  However, with significant investments from GM, the plant was turned around and is now one of the most successful operations for the company globally.  I was particularly impressed with their design center, where Korean and American design teams work shoulder-to-shoulder on GM’s global mini- and small-car platforms.

Two weeks ago, I participated in a groundbreaking event connected with another major U.S. investment in Korea, New Songdo City, the largest private real estate development project anywhere in the world.  The project is estimated to cost over $20 billion and is a partnership between Gale Corporation and POSCO.  This mixed business and community complex will serve as a flagship development enhancing Korea’s base as a logistics hub and Asian business center.

In mid-December, during the visits of Commerce Secretary Gutierrez and Energy Secretary Sam Bodman, the two cabinet members highlighted a U.S.-Korean partnership responsible for cleaner air over Seoul and other Korean cities.  You’ve no doubt seen the CNG insignia (compressed natural gas) on Seoul buses.  This environmental achievement is the result of U.S. technology married with Korean entrepreneurship.  To date, the efforts of the company NVGI have converted over 11,000 Korean buses, with plans to expand further here and to other parts of Asia.

These examples are noteworthy, but not atypical of the impact that U.S. business is making in Korea – creating jobs, building communities, promoting the environment, and supporting Korea in its economic efforts.  I’m sure that in each of your business endeavors – whether they are in service, manufacturing, or through corporate citizenship – all of you are helping Koreans help Korea.  For the United States, the anticipated FTA payoffs are the same – more jobs, better paychecks, challenging work, and a healthier environment.  This is precisely the kind of win-win proposition that is at the heart of the KORUS FTA.  Through an FTA, we are not only committing to a deep relationship, but setting in motion, dynamic growth patterns and untold synergies able to meet the formidable challenges of global competition.  This is the goal for 2007 and beyond.

As we move closer toward a conclusion of the negotiations, we urge our Korean partners to muster the necessary political will and boldly address the most sensitive tariff and non-tariff issues.  To introduce greater competition into protected markets, we need to reinforce the win-win message to our Korean partners.  For those who harbor lingering doubts, I would ask them to consider the examples I have described, as just a sampling of what two dynamic economies can accomplish on a grander scale under the KORUS FTA.

As many in the room are well aware, the voices of opposition to this FTA, as with most trade agreements, have been far louder than the voices in support.  This creates great challenges for both governments.  Concluding an agreement that satisfies both sides requires political will on both sides.  To ratify this FTA, we require broad political support from both the National Assembly and the U.S. Congress.

Supporters of the KORUS FTA in the Korean and U.S. business communities, particularly those of you here today:  We need to continue and redouble our efforts to help others understand the mutual benefits of the KORUS FTA.  I know AmCham has been leading the charge and I commend all their outstanding efforts.

In conclusion, sometimes we face challenges in reaching our shared goals, whether it’s the FTA, or bringing about the peaceful denuclearization of the Korean Peninsula.  However, given our rich history and the encouraging signs that 2007 is showing us, we can see that the U.S. and Korea have an enduring and unshakeable partnership, which is the hallmark of a healthy and strong alliance.