U.S. BUSINESS REPS AND AMBASSADOR MEET PRESIDENT

UNCLAS SEOUL 002095 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/K AND EB/TPP COMMERCE FOR 4431/MAC/OPB/EAP/DUTTON PASS USTR FOR CUTLER, AUGEROT AND KI NSC FOR CHA AND COLLINS E.O. 12958: N/A TAGS: ETRD PGOV KS SUBJECT: U.S. BUSINESS REPS AND AMBASSADOR MEET PRESIDENT ROH SUMMARY -------------- ¶1. (SBU) The Ambassador accompanied Citibank Chairman Bill Rhodes and other top representatives of the U.S.-Korea Business Council (USKBC) to their June 22 courtesy call on President Roh. The meeting focused on the U.S.-Korea Free Trade Agreement (KORUS FTA) and lasted a little over an hour. USKBC members took the opportunity to stress their support for the FTA as well as to outline some of their chief concerns with the Korean market. President Roh strongly reiterated his support for the KORUS FTA and expressed confidence that it could be successfully negotiated within the envisioned timeframe without sacrificing substance. Roh stressed the importance of the Kaesong Industrial Complex for South Korea's unification strategy and said that the two countries' political leadership should discuss the issue of Kaesong's place in the FTA in a pragmatic manner. End summary. ROH'S WELCOMING COMMENTS -------------- ¶2. (SBU) In his welcoming remarks, Roh expressed confidence that there should be enough time to finish the KORUS FTA talks, noting that negotiations should be conducted expeditiously. He commented that while content cannot be sacrificed to speed, and substance takes precedent over timing, it should be possible to satisfy both concerns. He hoped that business could be mindful that some people in Korea are anxious about the FTA and said he suspected that Korean public opinion is more complex and convoluted than is the case in the United States. At the same time, Roh emphasized his conviction that the USKBC's longstanding efforts to reduce market barriers and promote closer U.S.-Korea economic links have improved the well-being of Americans and Koreans alike. USKBC STATEMENTS -------------- ¶3. (SBU) Rhodes opened the discussion by reaffirming the strong support of the U.S. business community not only for the FTA, but also for Korea's goal of becoming an international financial hub. He added that he was helping lead efforts to persuade the U.S. Congress to put Korea on the Visa Waiver Program. Rhodes flagged pharmaceuticals, autos, agriculture and the Kaesong Industrial Complex as being the toughest issues in the negotiations in his opinion. ¶4. (SBU) Marjory Searing of Pfizer contributed a strong statement on the problems faced by the pharmaceutical sector. She said that her industry has always supported FTAs and is hopeful that the KORUS FTA will create an improved environment for research-based industry. If such an outcome could be achieved, it could lead to an "incredible" increase in investment in the life sciences sector in Korea and make Korea a center of medical innovation. Searing said, however, that the May 3 proposal by the Ministry of Health and Welfare (MHW) -- the so-called "positive list" plan -- was going in the wrong direction. She maintained the plan would not solve the problems MHW had identified, and would reduce patients' access to the newest medicines. She urged that the FTA negotiations be used to get "back on track." ¶5. (SBU) Wayne Chumley of DaimlerChrysler said the Korean automobile sector was one of the toughest markets for foreign carmakers. He hoped the FTA would address concerns in four areas: tariffs, taxes, standards and perceptions. ¶6. (SBU) Stanley Gale, CEO of Gale International, which leads the consortium that is designing and building New Songdo City, part of a new Free Economic Zone (FEZ) in Incheon, told President Roh that the project is going well and that eventually New Songdo City would outstrip Dubai, Shanghai and Singapore as an FEZ. The FTA would add to Songdo's and Korea's attractiveness as a hub. Hugh Stephens of Time Warner thanked Roh for his decision to lower the screen quota and said that the U.S. film industry is looking for opportunities to capitalize on the "Korean Wave" by partnering with the Korean film industry. Steve van Andel of Alticor said reductions in barriers to trade in consumer goods would help Korean and U.S. companies. ROH'S RESPONSE -------------- ¶7. (SBU) President Roh responded to the USKBC members' comments by noting that since the negotiations are ongoing, it would not be wise for him to express his own opinions on the various specific issues. On broader themes, however, Roh said that Korea needs to pursue a market-opening policy. While opening does not guarantee success, he averred, no society had ever been successful in developing its science and civilization without opening, and that is why he supports the FTA with conviction. He emphasized that public perceptions should not be based on fallacies, but rather on facts. Roh made clear that the FTA should achieve a balance of interests between the two countries, but noted that such a balance could be achieved either through obtaining balanced outcomes within the specific negotiating areas or in the aggregate. (Comment: Implying the potential for cross-sector trade-offs.) ¶8. (SBU) Roh mentioned that many of the issues raised by the USKBC representatives were longstanding issues that had been discussed between the two countries for some time. He admitted that with the benefit of hindsight it was clear that the decision to reduce the screen quota should have been made much earlier so that the link to the FTA would not be so apparent, but explained that it had simply taken a long time to bring along the recalcitrant stakeholders. ¶9. (SBU) President Roh commented that the FTA needs to include "safety valves" in case it caused unpredictably high adjustment costs, but hastened to add that they would probably never have to be used. Roh stressed that it was important for Korea to continue strong economic cooperation with, and focus on, the United States. Whereas Korea used to emulate Japan, Roh said, it should shift to emulating the United States. Roh commented that every time Korea had announced its intention to open a new sector or market, it had caused serious domestic social friction in advance of the opening, but in the end the opening had thus far always led to economic success. He stressed that is why safeguards are necessary for the U.S. FTA, in order to provide psychological reassurance to anxious groups and thereby deal with such social friction. KAESONG INDUSTRIAL COMPLEX -------------- ¶10. (SBU) Concerning Kaesong's relationship to the KORUS FTA, Roh said it would be up to the political leadership of both countries to discuss the matter in a pragmatic way. He noted that there were differences between Korea and the United States in their approaches to North Korea, based on differences in strategic perspectives. He emphasized that Kaesong is a way to induce change in North Korea, and is crucial for maintaining peace and stability on the Korean peninsula. ¶11. (SBU) Roh stressed that he considered Kaesong to be the "linchpin" to achieving two goals: positive evolution in North Korea's internal policies and peace and stability on the peninsula. Roh explained further that Kaesong was an important part of South Korea's unification strategy, which he said is based on working toward unification in three stages: first economic integration, then cultural change, and finally political unification. COMMENT -------------- ¶12. (SBU) The tone and substance of the meeting was quite positive. U.S. industry, especially the pharmaceutical sector, made the most of its opportunity to raise their concerns with the President. Searing's intervention -- something that ROKG interlocutors had recommended to the Embassy that a pharmaceutical industry representative do at the meeting -- hit the right note. It was also reassuring to hear that President Roh is not participating in the current Seoul political fad of calling for "going slow" on the negotiations. Roh was not strident on the Kaesong issue, but it is clear from his comments that the issue has personal importance for him, which reinforces the delicacy with which this problem needs to be handled in the FTA talks. VERSHBOW