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