Korea Times | 3 April 2007
Trade Pact Risks Environment, Public Health
By Kim Tong-hyung
For the past few years, the backers and denouncers of a free trade accord between Korea and the United States have feuded like the Montagues and Capulets.
Not surprisingly, the two camps are still polarized on whether the trade pact bringing together the world’s largest and 10th largest economies is destined to be a happy marriage or Shakespearean tragedy.
Although its too early to tell who got the better end of the free trade agreement (FTA) reached between Korea and the U.S., one could make a reasonable argument that the deal may pose a significant threat to the country’s environment and public health in its outcome.
Lowering trade barriers on automobiles was among the most debated issues during the negotiations between the two countries. U.S. automakers have been looking to sell to Korea large-sized vehicles — which accounts for the largest part of their production — and had demanded Korea lower its taxes on big cars and relax its auto emission standards.
It looks like they got what they wanted. According to the content of the deal announced yesterday, Korea agreed to cut its ``special consumption’’ taxes on cars with two-liter (2,000 cc) or larger engines from the current 10 percent to five percent, which is identical to the taxes of mid-sized cars with 1.6 liter engines, in the course of three years after the free trade pact is approved by lawmakers.
Korean policymakers also agreed that the American cars sold here will be regulated by the emission standards of the state of California, not by the stronger local standards.
Environmentalists are worried that the deal will encourage more people to buy high emission cars that will become more cost competitive against smaller cars, thus resulting in more pollution.
Opening the market for pharmaceuticals poses another problem. With U.S. pharmaceutical firms looking to sell its high-priced drugs in the local market, there are worries that the country will be forced to restructure its national health insurance system that relies on cost control of prescription drugs.
Under the deal, the Korean government will deny a local pharmaceutical company the license to sell generic drugs should the U.S. company that produced the original drug file a lawsuit over patent infringement.
Currently, Korean firms were allowed to produce generic drugs after the patent right of the original drugs expires.
However, considering that most Korean companies had been filing for the license to sell generic drugs before the patent deadline to fast-track its market release, critics argue that the new deal has the same effect of extending the patent rights of U.S. drug companies.
``It will be a big blow to Korean companies that rely much of the revenue on the sales of generic drugs, and also threaten the government’s ability to control the prices,’’ said Cho Kyong-ae, who heads the civic group Health Right Network.
The two countries also reached an agreement for a phased opening of Korea’s legal service market. Korean law firms have five years to prepare for their competition with their bigger U.S. rivals, which will then be able to form partnerships with Korean firms and hire local talent.
Korean law firms are worried that the U.S. firms will take the domestic market by storm, sweeping most of the lucrative legal work by snatching up the big deals of multinational companies and luring away blue-chip clients from local competitors.