KOREA FTA: PREPARATORY DISCUSSIONS ON TRACK

UNCLAS SEOUL 000809

SIPDIS

SENSITIVE
SIPDIS

PASS USTR FOR BHATIA, CUTLER, AUGEROT AND KI
STATE FOR EAP/K AND EB/TPP/BTA
COMMERCE FOR 4431/ITA/MAC/OPB/EAP/MORGAN

E.O. 12958: N/A
TAGS: ETRD ECON SCUL PGOV KS
SUBJECT: KOREA FTA: PREPARATORY DISCUSSIONS ON TRACK


SUMMARY
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1. (SBU) On March 6-8 an interagency team led by Assistant
U.S. Trade Representative Wendy Cutler made substantial
progress in laying the procedural groundwork for U.S.-Korea
Free Trade Agreement (FTA) talks, the first round of which
will be held during the week of June 5 in Washington. The
U.S. delegation and their Korean counterparts had a useful
discussion on a wide range of procedural issues, including
the number and subject matter of the FTA negotiating groups,
confidentiality of negotiating documents, and participation

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of non-government officials in the formal negotiations. The
Korean side confirmed that they would provide their
negotiating texts to the United States in early May, around
the same time that the USG plans on submitting its texts to
Korea. Korean Chief Negotiator Ambassador Kim Jong-hoon
plans to visit Washington in April to finalize agreement on
the outstanding procedural issues.


2. (SBU) In side meetings, Cutler met with top officials
from the Blue House, the Trade and Finance Ministries, U.S.
and Korean business leaders and leading think tanks, as well
as with concerned members of the National Assembly, for
useful discussions concerning public outreach and managing
each nation's perceptions of the potential benefits and
risks of the FTA negotiations. Cutler's speech to the
American Chamber of Commerce, highlighting the benefits of
the FTA for both economies, received widespread and mostly
favorable coverage in the local media. End Summary.

ESTABLISHING FTA MODALITIES AND PROCEDURES
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3. (SBU) The primary purpose of AUSTR Cutler's successful
March 6-8 visit was to lay the procedural groundwork for the
U.S.-Korea FTA negotiations, which will be critical to
successful conclusion of the agreement. To that end, AUSTR
Cutler and her delegation, including officials from USTR,
the Departments of State, Commerce and Agriculture, and the
Embassy, met for three hours with Korean Chief Negotiator
Ambassador Kim Jong-hoon and his team on March 6, to discuss
modalities and procedures for the negotiation of the FTA.
The two sides had a useful discussion on key procedural
issues, including the number and subject matter of the FTA
negotiating groups, confidentiality of negotiating
documents, and participation of non-government officials in
the formal negotiations.


4. (SBU) The two sides reached agreement on a time schedule
for the negotiating rounds, as follows:

April: Visit by Ambassador Kim Jong-hoon to Washington to
finalize modalities and procedures

May 4: 90-day consultation period expires, two sides
exchange draft texts in early May

Mid-May: Working level MOFAT visit to Washington to meld
texts and construct brackets

June 5-9: First Negotiating Round, in Washington

July 10-14: Second Negotiating Round, in Seoul

September 11-15: Third Negotiating Round, in United States

October 23-27: Fourth Negotiating Round, in Korea

December 4-8: Fifth Negotiating Round, in United States


5. (SBU) The Korean side also provided a list of their
negotiators for the FTA, which included representatives from
the Ministry of Foreign Affairs and Trade (MOFAT),Ministry
of Agriculture and Forestry (MAF),the Ministry of Commerce,
Industry and Energy (MOCIE),the Ministry of Information and
Communications (MIC),the Fair Trade Commission (FTC),the
Ministry of Culture and Tourism (MOCT),the Ministry of
Labor (MOL),and the Ministry of Finance and Economy (MOFE).
The Koreans confirmed that they intend to provide their own
negotiating texts in early May, around the same time that
the United States is planning on submitting its texts to the
Koreans.

6. (SBU) Discussion on the composition of the FTA
negotiating groups was fruitful but less conclusive, and the
meeting concluded with agreement by both sides to further
consult in capitals in an effort to reach a resolution of
the issue. The United States presented its prior practices
for maintaining text confidentiality in FTA negotiations to
determine if they would meet the needs of the Koreans. The
two sides agreed to continue discussions regarding
confidentiality concerns to find a mechanism that would be

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acceptable to both parties. The Korean delegation also
expressed concern about the USG's proposed blanket ban on
participation by non-government personnel during the
negotiations, saying that they hoped to have government-
affiliated think tank experts and contracted private lawyers
joining the talks as observers and advisors. Discussion on
that will continue as well.


7. (SBU) AUSTR Cutler also stressed during the meeting that
she is under instructions to complete substantive
negotiations by the end of 2006. The Korean side indicated
that they could make a best-effort commitment toward that
goal, but hesitated to set the end of 2006 as a public
target date, fearing that would exacerbate public concern in
Korea that the United States is railroading concessions in
the FTA talks.

MEETINGS WITH SENIOR OFFICIALS
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8. (SBU) The Ambassador joined AUSTR Cutler for an hour-long
meeting with Trade Minister Kim Hyun-chong. Cutler and Kim
reviewed recent developments in media reporting on the FTA,
and Cutler specifically complained about MAF Minister Park
Hong-soo's statements that liberalization of rice and beef
imports would not be included in the FTA. Cutler and Kim
agreed that it would be important for both sides to continue
to avoid the temptation to be too explicit about explaining
their negotiating positions in the press, so as to avoid
undermining public consensus behind the agreement on both
sides of the Pacific. While some background noise is
unavoidable, given the need for public transparency,
Minister Kim pledged to minimize his own statements on the
FTA beyond generic cheerleading concerning the benefits of
the FTA for both economies.


9. (SBU) In a separate meeting, Presidential Economic
Advisor Chung Moon-soo emphasized President Roh Moo-hyun's
strong support for the FTA, highlighting the President's
recent statement that conclusion of the FTA was among his
top two priorities for the remaining two years of his
tenure. Chung told Cutler that the President's FTA policy
is threefold:

-- Achieving a balanced, high-quality result, to garner
public and National Assembly support;

-- Not allowing interest group pressure to cause
negotiations to fail; and

-- At the same time, not agreeing to concessions that exceed
Korea's (unstated) bottom line.

Chung explained that the Korean public is anxious about
concluding an FTA with a much "larger and stronger" partner,
and therefore concerned that the talks will be a one-way
street.


10. (SBU) Ministry of Finance and Economy (MOFE) Vice
Minister Kwon Tae-shin explained to AUSTR Cutler the role
that Deputy Prime Minister Han Duck-soo will play in
reaching consensus on negotiating positions within the
Korean government. Han, for example, played the leading
role in the decision to lower Korea's screen quota trade
barrier prior to the announcement of FTA talks. Kwon
reiterated his ministry's strong support for the FTA as a
process that can help upgrade the Korean economy in many
ways. On a sectoral basis, MOFE will be most involved in
the financial services negotiations. MOFE hopes that its
recent efforts to push forward another round of financial
regulatory reforms will help ease FTA negotiations in that
sector.

OUTREACH TO ASSEMBLY, ACADEMICS AND PRIVATE BUSINESS
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11. (SBU) AUSTR Cutler met with key National Assembly
supporters of the FTA, from both sides of the aisle, during
a dinner hosted by the DCM. Cutler encouraged the
Assembly's "FTA Forum" to be active throughout the year in
promoting the FTA. Uri Party Foreign Affairs Chairman Chung
Eui-yong responded that the Forum is working hard to
increase its membership from the current 21 members (there
are 299 members in the unicameral Korean National Assembly).
Chung also indicated that the Forum hopes to organize a trip
to Washington during May 2-4 to meet with counterparts in
the U.S. Congress to discuss the FTA.


12. (SBU) In other meetings, senior staff from the Korea
International Trade Association (KITA) told Cutler over
breakfast that the organization is leading a coalition of
Korea's five major business organizations to support the
FTA. Thus far, their public outreach has included newspaper
advertisements and press conferences. Separately, Korea-
U.S. Business Council Chairman (and Hyosung Group Chairman)
S.R. Cho told Cutler of his plans to leverage the June 20-22
meeting of the U.S. and Korea councils to underscore
business community support for the FTA. In a free-ranging
discussion with top academics from Korean universities and
think tanks, the trade policy experts told AUSTR Cutler that
it will be a constant struggle to keep the Korean public
from focusing on the loud minority economic "losers" from
the FTA, rather than the silent majority "winners." In all
these meetings, Cutler emphasized that the U.S. experience
with promoting trade policy in an active democracy dictates
that it is imperative for supporters to be vocal about the
broader benefits of the FTA for Korea's economy and society,
including the benefits for consumers. It is also critical
for that drumbeat to be maintained throughout the process,
all the way from announcement through the negotiations to
ratification.

OUTREACH TO U.S. BUSINESS AND THE MEDIA
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13. (SBU) Cutler's first meeting in Seoul was a roundtable
with the Executive Committee of the American Chamber of
Commerce. The Chamber is highly supportive of the FTA, and
has been conducting numerous outreach activities. At the
same time, AmCham's membership is concerned about obtaining
high-quality outcomes from the FTA negotiations,
particularly in the autos and pharmaceuticals areas.


14. (SBU) Cutler's on-the-record luncheon speech to the full
AmCham membership later in the week was attended by 200
individuals and covered widely throughout the Korean media.
The speech, which emphasized the benefits of the FTA for
both economies, while flagging the tight timeline for
achieving success, was widely quoted throughout the media.
Most press accounts were accurate, although two newspapers
chose to interpret AUSTR Cutler's response to one question
as indicating an unyielding USG stance toward the
negotiations. The speech and Q&A have been posted on the
Embassy website in both English and Korean at:
http://usembassy.state.gov/seoul/rok20060307. html.

VERSHBOW