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
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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
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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
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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
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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
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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
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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