LABOR GIRDING FOR FTA BATTLE

UNCLAS SEOUL 001328 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/K AND EB/TPP/BTA PASS USTR FOR CUTLER, KARESH, ANGEROT AND KI E.O. 12958: N/A TAGS: ECON ELAB ETRD KS PGOV SUBJECT: LABOR GIRDING FOR FTA BATTLE REF: A. SEOUL 507 ¶B. SEOUL 548 ¶C. SEOUL 549 ¶D. SEOUL 963 ¶E. SEOUL 1266 SENSITIVE BUT UNCLASSIFIED -- PLEASE HANDLE ACCORDINGLY SUMMARY -------------- ¶1. (SBU) The U.S. FTA labor negotiating team visited Seoul April 4 to 7 to meet with Korean government, labor and management officials and conduct background research. Korean organized labor representatives were wary of an FTA and feared that it would precede mass layoffs like those experienced after the 1997 "IMF crisis" (the Asian Financial Crisis). A Democratic Labor Party member of the National Assembly said Korean workers would likely stage protests not just in the ROK, but in the U.S. as well. Local management representatives focused on labor flexibility as the main concern in the ROK labor market and expressed concern about anti-FTA sentiment among the public. Government meetings are reported septel. END SUMMARY. DELEGATION IN LISTENING MODE -------------- ¶2. (SBU) FTA lead negotiator AUSTR Lewis Karesh told all interlocutors that the purpose of his trip to the ROK was not to negotiate but to learn. Karesh was accompanied by Department of Labor (DOL) International Economist Carlos Romero and DRL Deputy Director of International Labor Affairs Joseph DeMaria. As with the government meetings, much of the discussion centered on temporary, part-time, or other "irregular" workers and Korea's Labor-Management Roadmap. These issues are discussed in-depth in Reftels A, B, and C. FKTU: LABOR HARBORS STRONG ANTI-FTA SENTIMENT -------------- ¶3. (SBU) The Federation of Korean Trade Unions (FKTU),the less radical of the ROK's two major trade organizations,is planning in consultation with the AFL-CIO to mount strong union opposition to FTA negotiations. FKTU leaders expressed apprehension that an FTA would lead to major corporate restructuring and workplace instability comparable to the aftermath of the 1997 Asian financial crisis. As a result, said FKTU Vice President Jeong Kwang-ho, there was strong anti-FTA sentiment among labor groups. In particular, labor groups believed that an FTA would worsen the social disparity that emerged in 1997 and doubted whether the Agreement would deliver any tangible benefits to Korea. Kang Ik-gu, Director of FKTU's Policy Bureau, added that the social support system in Korea was too weak to support the restructuring and unemployment that would follow an FTA. "The FTA would be worse than the IMF crisis," predicted Korea Financial Industry Union Policy Chief Lee Young-kyu. ¶4. (SBU) The FKTU hinted at strong union opposition to the negotiations. Keeping in mind the social implications of an FTA and the Korean government's apparent commitment, Jeong said the FKTU could not afford to be passive. He said the FKTU was planning its opposition in consultation with the AFL/CIO. ¶5. (SBU) One of the FKTU's concerns was that U.S. labor law, which they considered to be weaker than ROK law, would dilute worker protections in the ROK. The delegation explained that an FTA would not force one country to accept another country's laws. It only obligated each country to enforce its own laws. Answering why the U.S. Congress was concerned about ROK law, the delegation further explained that in entering an FTA, Congress had to be confident that Korea's laws protected fundamental labor rights. ¶6. (SBU) FKTU Executive Director Lee Young-bum pointed to the irregular worker issue as one example of where Korean law was deficient. He said the problem began in 1997 when "speculative capital entered Korea and pursued profitability" by hiring irregular workers at the expense of regular workers. As a result, irregular workers accounted for over 50 percent of the workforce but earned 50 percent of the wages, even though they often performed the same work. He pointed to the example of Hyundai Motors, where, he said, regular workers made automobile front wheels while irregular workers made the back wheels. He said that after companies terminated employees, they would immediately hire irregular workers to replace them. The only way to control this abuse would be to limit the types of work that irregular workers could be employed to perform, guarantee the rights of irregular workers to become regular employees, and eliminate discrimination. ¶7. (SBU) Lee said that besides irregular workers, the emergence of multiple unions and the cessation of company payment to full-time union workers were the most contentious labor issues. He said that neither issue should be legislated, but rather left for labor and management to negotiate between themselves. ¶8. (SBU) Lee said that employer domination of unions, or "paper unions," are not a major issue. On collective bargaining agreements, Lee said that negotiations were too tightly restricted. Whereas in France, workers could negotiate 90 percent of the matters pertaining to their employment, in the ROK, workers could negotiate only 14 percent. Jeong claimed that there were still many cases of workers getting fired for "obstruction," even if they were engaged in legitimate industrial activity. Legal processes to obtain reinstatement were in place, but were tedious and could take 2 to 3 years. LABOR PARTY WARY OF FTA, UNSATISFIED WITH ROKG REFORMS -------------- -------------- ¶9. (SBU) A Representative of the left-of-center Democratic Labor Party (DLP),Dan Byung-ho, previewed his party's opposition to the FTA. He said that workers were wary that if an FTA were passed, there would be an increased chance of labor instability. He said the DLP and FKTU are considering sending demonstrators to the U.S. as well as demonstrating in Korea against an FTA. (NOTE: On April 19, a DLP staff member told poloff that the party was struggling over the practicalities of getting visas and providing travel and lodging expenses for U.S.-bound demonstrators. He predicted that only a few demonstrators would make the trip. Asked about the thousands of Korean demonstrators that went to protest WTO talks in Hong Kong last year, the DLP staff member complained that "D.C. is a lot more expensive than Hong Kong." END NOTE.). ¶10. (SBU) Dan expressed concern over a range of labor problems, many of which could be attributed to the effects of "developmental dictatorship," social injustice, and the misallocation of wealth. He criticized the Roadmap as a regressive measure packaged as labor reform. He said the Roadmap would make layoffs easier while making it more difficult for workers to engage in industrial action. Also, although the Roadmap would allow for multiple unions, it would also require workers to unify their bargaining channel, which would lead to abuse and differentiation of bargaining rights. Likewise, the Roadmap would abolish mandatory arbitration, but would allow for replacement workers. Thus, although there were some progressive measures in the Roadmap, he said, it had so many offsets that it would have no net benefit for worker rights. Dan predicted conflict if the government insisted on passing the Roadmap before January ¶2007. ¶11. (SBU) Dan said that the irregular worker issue was at the heart of the problem of societal polarization. The DLP advocated a "principled stand" because the problem was not just an economic issue, but an issue of grave social concern. He said the number of irregular workers had to be reduced; discrimination against irregular workers had to be eliminated; and irregular workers had to be protected by all labor rights and protections. Because the government's legislation, he said, would result in an increase in the number of irregular workers and would not eliminate discrimination, the conflict regarding irregular workers would continue. ¶12. (SBU) There was also continuing governmental harassment of workers, Dan claimed. Asked about trade unionists placed under arrest, he dismissed government explanations that all recent arrests had been for violence or destruction of property, claiming that 90 percent of these arrests were political. Dan remarked that he himself had been arrested five times and had never been involved in anything other than legitimate trade union activities. ¶13. (SBU) On migrant workers, Dan said that about half of the 400,000 foreign workers in the ROK were legally in the country and received some protection. The others feared that if they complained about anything to the authorities, they would be deported. For example, even if they were not paid, they would just seek another job rather than risk deportation. Dan criticized the industrial trainee system as a means for bringing in foreign workers, paying them low wages, and giving them no rights. While the Employee Permit System was an improvement, workers had limited flexibility and no recourse if work conditions were unacceptable. "They have to leave the country if they object," he said. ¶14. (SBU) Criticizing various labor institutions, Dan said the TPC was ineffective and that the Ministry of Labor, although strengthened under the current government, operated under the influence of the Ministry of Finance. Further, he said, the MOL did not have adequate resources. It had, for example, only 30 health and safety inspectors. Dan was unsure whether workers were aware of their rights, and did not think that the MOL was doing sufficient outreach. INTERNATIONAL LABOR FOUNDATION NOTES POSITIVE CHANGES -------------- -------------- ¶15. (SBU) Kim Seong-jin, Executive Director of the tripartite Korean International Labor Foundation (and former FKTU Director of International Relations) said that it was indisputable that fundamental rights of labor in the ROK had greatly improved over the past ten years. The pressing issues now no longer related to fundamental collective rights, but rather to the tension between employment stability and workplace flexibility. Kim said that the Ministry of Labor was responsive to complaints. ¶16. (SBU) On migrant workers, Kim said Korea did not have a very good record prior to 2004. However, there have been substantial improvements with the introduction of the employment permit system. The industrial trainee system, which was prone to abuse, would terminate at the end of 2006. ¶17. (SBU) On approaching the FTA, Kim said that the Asian financial crisis had to be taken into account because it fundamentally changed the way Koreans think. There used to be no consideration of social security because companies employed persons for life. Suddenly, in sectors such as banking, 50 percent of the workforce is unemployed. Many blamed foreign shareholders for initiating the shift to irregular workers in order to push down labor costs. AMCHAM: ANTI-FTA FORCES OUTSHOUTING SILENT MAJORITY -------------- -------------- ¶18. (SBU) AmCham President Tami Overby said that the local FTA debate seemed to be dominated by FTA opponents. Koreans liked the ROK-Singapore FTA because it included products made in the Kaesong (Ref D and E) and they liked the Chile agreement because they enjoyed wine. However, they felt more threatened by the U.S.-ROK FTA. The only people that were talking were the farmers and the government. The consumers, who would be the main beneficiaries, were the silent majority. It was also important not to underestimate Korean nationalism. The FTA could turn into a huge lightening rod, she said. Overby thought it significant that the only issue that the ruling Uri Party and the opposition Grand National Party have agreed on recently was to delay FTA negotiations until June, after the May 31 local elections. MANAGEMENT VIEWS LABOR FLEXIBILITY AS GREATEST CHALLENGE -------------- -------------- ¶19. (SBU) The foreign business community viewed labor flexibility as the biggest challenge to employers in the ROK. AmCham Vice Chairman and Citigroup Senior Executive Vice President Michael Zink said the labor law was restrictive because an employer could only release an employee with "just cause" and after exhausting all means to avoid release. An employer was not free to release an employee for mere incompetence. He added that there were also cultural issues, such as the expectation that supervisors would always be older than their subordinates. Despite the labor friction, many companies calculated that it was still worth doing business in the ROK because the workforce was so well-educated and the market is so large. On the other hand, many companies -- including Korean companies -- were choosing to invest elsewhere. He noted recent large-scale investments by Hyundai Motors in Alabama, Hyundai Heavy Industry in China, Kia in Georgia, and Posco in India. When companies did hire in Korea, they generally hired irregular employees. ¶20. (SBU) Zink said that organized labor no longer enjoyed the public support it once did. "When a member of the public wants a credit card and can't get it because the teller who makes USD 200,000 closed early as part of a 'righteous struggle' with management for more money, the public gets annoyed," he said. Zink, unlike the union representatives we met, said that the memory of the financial crisis was beginning to fade and that "people are forgetting all the jobs that were lost in 98." EMPLOYERS' FEDERATION WARNS OF UNION GREED, OPPOSITION -------------- -------------- ¶21. (SBU) The Korean Employer Federation (KEF),the largest umbrella employers' organization, said that the increase in the number of irregular employees was due to the excessive wage demands of unions. Trade unions claimed that all jobs had to have the highest level of wages, said Hwang Eun-young, Team Leader of the KEF International Affairs Policy Bureau. Employers were unable to meet union demands and were being forced to look for an alternative workforce, or invest abroad. ¶22. (SBU) Clarifying the payment to full-time union workers issue (Ref B),KEF Managing Director Lee Dong-eun said that currently employers on average paid the salary of one full-time union employee for every 150 union members. In some companies, the ratio was 1:21. This would end in January 2007, as a result of labor legislation whose implementation had been twice postponed. Lee said that employers would consider giving time off for union work, but that it was time to end the "irrational practice" of paying full-time labor activists. Meanwhile, employers would welcome multiple trade unions, but need to have a unified bargaining channel in order to make the system manageable. ¶23. (SBU) Lee was pleased that the number of labor disputes per year had decreased by 90 percent since 1998. He pointed out that there has been a turning point in labor relations every ten years. In 1987, a rash of strikes followed democratization. In 1997, there was the financial crisis, and labor suffered terribly. We would have to wait and see what would happen in 2007. VERSHBOW