As many had warned, the fear of the United States-South Korea Free Trade Agreement becoming an infringement of national sovereignty is coming true. South Korea was planning to introduce a system of imposing a surcharge on buyers of cars with excessive CO2 emissions in July, but the plan was postponed until the year 2015 under the pressure from the American auto industry. The decision was apparently made taking into account the underlying threat of an investor-state dispute resolution, a system which is expected to be introduced in the Trans-Pacific Partnership framework as well, and such a trend should on no account be overlooked.
It was on March 15 last year that the free trade agreement came into effect despite strong opposition from the South Korean people, mainly the young. Nearly a year has passed since then, and already in November last year, Lone Star Funds, a U.S. private equity fund, launched an investor-state dispute arbitration claim against the South Korean government. The firm filed for international arbitration on the grounds that it suffered losses as the government was slow in approving the firm’s sale of Korea Exchange Bank which it previously acquired.
The system of which the South Korean government decided to delay introduction under the U.S. pressure is a scheme of offering subsidies for buyers of cars with lower CO2 emissions and imposing a surcharge on buyers of cars with higher CO2 emissions. The U.S. auto industry submitted an opinion letter to the South Korean government, noting that the system could be judged as a technical barrier to trade which is banned under the free trade pact. The system would be disadvantageous for U.S. automakers, as U.S. vehicles are mainly cars with higher CO2 emissions.
The South Korean government, although it was not sued for this case under the ISD provision dubbed “a toxic clause,” decided to postpone the introduction of the system. Suppose the government pushed through the introduction of the system, it could be sued by American firms under the ISD clause and be claimed for damages. This case can be called an example of the fact that the existence of the ISD provision itself, even if the actual claims are not made, can become a latent threat to the nation’s systems, policies and sovereignty.
The Japanese government and the Diet should pay close attention to the situation in South Korea. If Japan is to join in the U.S.-controlled Trans-Pacific Partnership free-trade talks, it will inevitably be pressured by American industries to review its systems and policies which are designed to protect people’s lives and the environment, and its national sovereignty will be at stake, as in the case of South Korea.
The Liberal Democratic Party’s Research Commission on Regional Diplomatic and Economic Partnership reconfirmed the 6 issues to be protected with respect to the TPP, which the LDP pledged in the Lower House elections last year, including its intention to oppose participation in the TPP negotiations if they require a prior commitment to abolish all tariffs without exceptions. It also includes a statement that says the ISD provision, which could undermine national sovereignty, is not acceptable. Participation in the TPP talks is unthinkable if the 6 pledges are to be protected. Japanese Prime Minister Shinzo Abe, when he holds the first summit meeting with U.S. President Barack Obama on Friday, February 22 (Saturday, February 23 Japan time), should not rush to join the TPP negotiations by underestimating such risks and focusing only on confirming Obama’s recognition that Japan has sensitive products which should be exempted from tariff elimination.
In South Korea, where new President Park Geun-hye is expected to take office on Monday, February 25, many are rallying against the free trade agreement, urging the government to renegotiate and abolish the ISD provisions. We should also face the actualities of the agreement.
(Feb. 23, 2013)