1. BILATERAL/MULTILATERAL ISSUES

[Viwepoint] Endgame for Korus[English, KJH]

The political cost to Obama of attempting to pass trade deals will increase rapidly and at some point become unbearable.

http://joongangdaily.joins.com/article/view.asp?aid=2938477

Full Text: Four years after striking an initial deal with Korea, and after a number of significant revisions to that deal, President Barack Obama has finally announced a plan for Congressional consideration of the Korea-U.S. FTA (Korus), and he hopes for ratification prior to the Congressional recess in August. Under his plan, the Senate, controlled by Obama’s Democratic Party, will soon begin consideration of the legislation, with subsequent review by the Republican-controlled House. Prospects for the passage of Korus have never been so good, and there are grounds for optimism.

Obama’s plan for Korus’ ratification, however, is a high-stakes political gamble in an enormously complicated political environment.

After trying for months to forge a bipartisan consensus on the ratification, Obama has changed course and opted to try to push Korus through Congress in tandem with other controversial trade legislation. To succeed in this gamble, Obama must overcome a number of immediate challenges under great time pressure.

The principle challenge is the renewal of Trade Adjustment Assistance (TAA), a program that provides benefits to U.S. industrial workers laid off due to competition from imports. The renewal of the TAA is a must for Democrats, and Obama is attempting to link its renewal with the Korus bill. This linkage will complicate Congressional consideration of Korus, as many Republicans are opposed to the TAA, particularly in the current climate of fiscal austerity. Indeed, Senate Republicans boycotted a hearing organized by Senate Finance Committee Chairman Max Baucus to discuss an initial draft of the combined TAA-Korus bill. Key Republicans in both chambers, including House Speaker John Boehner, are now seeking any means to separate the TAA renewal from Korus in the hope that they can vote down the former while passing the latter. The White House, however, has declared it will not present Korus legislation to Congress without the TAA renewal.

A second challenge is the linkage of Korus to pending FTAs with Colombia and Panama. Under Obama’s plan, and as a concession to the demands of Congressional Republicans, ratification of the three FTAs will move through Congress at the same time. However, many Democrats, including Sander Levin, the top Democrat on the House Committee on Ways & Means, which oversees trade matters, oppose the Colombia FTA because of concerns about Colombia’s treatment of trade union leaders. Levin’s opposition to the Colombia deal should not derail, but may well complicate, consideration of Korus in the House.

Additional challenges relate to the so-called fast-track rules governing the submission of the trade deals to Congress. These rules provide, first, for informal reviews of draft legislation by both houses of Congress and permit members of Congress to propose amendments. While the president does not need to accept the amendments in the final version of the bill presented to Congress for passage, amendments proposed during the informal process signal Congressional concerns.

The many amendments proposed for Korus, or at least those made public to date, indicate a high level of controversy and are previews of the heated debates to be expected in Congress about the legislation. They will also be used by opponents of the president’s strategy as drags on the process. Furthermore, Republicans insist that the pairing of the TAA renewal with the Korus legislation is inconsistent with fast-track rules.

Timing is also a key concern for the White House. The November 2012 presidential election is coming fast, and the democratic base - already wary of trade deals and disappointed with Obama’s inability to revive the U.S. economy - may hold passage of three trade deals against him. The political cost to Obama of attempting to pass new trade deals will increase rapidly after the summer recess and at some point become unbearable. Hence, the Obama administration is now waging an all-out effort to secure passage under the expedited fast-track process before then.

There is little that Korea can do to influence the outcome of the U.S. ratification process at this point. The Obama administration has decided it has obtained the best deal with Korea that it can get, and has launched a high-stakes domestic process to get the deal passed. Obama is personally invested in the success of this process, and we can expect that he will do his utmost to secure passage quickly. Indeed, Obama has repeatedly lauded Korus as a vital part of America’s exports promotion - and job growth from exports - strategy.

The weeks ahead will show whether he can succeed in his audacious gamble.

*The writer is a senior partner at the law firm of Akin Gump Strauss Hauer & Feld LLP in Washington, D.C.

Korea-EU FTA celebrated in Busan[English, KJH]

Full Text: The Busan-Jinhae Free Economic Zone Authority (BJFEZ) supported the European Union Chamber of Commerce in Korea (EUCCK) Busan Network Club event held on July 1 on board the Nurimaru Cruise Ship. The event was to celebrate the Korea-EU FTA that came into effect that day and to strengthen the network between the members of EUCCK for increased investment.

There were 50 EU businessmen at the event, including Pleiger Far East LCC CEO, Roger Boger. All those present commemorated the Korea-EU FTA in front of Gwangan Bridge and through one-to-one exchanges between EU members and BJFEZ staff they promoted the Myeongji and Ung-dong regions along with a development path for BJFEZ, which aims to become a 21st century global hub.

In addition to greeting the Korea-EU FTA era, the event explained the general investment environment of BJFEZ as an outstanding location and incentives of its regions that are currently for sale or in development to raise awareness and interest of BJFEZ among European companies.

BJFEZ Commissioner, Ha Myeng-keun celebrated the Korea-EU FTA onboard the Nurimaru with Busan’s famous Gwangan Bridge as a backdrop and promised to provide maximum support and benefits so more European companies, like Renault Samsung Motors, SKF, Hatlapa, Jotun, Premech, Tox and Bouygues can invest and succeed.

The event was to attract European companies since business between the two has become more active with the implication of the Korea-EU FTA.

2. ECONOMIC ISSUES

Trade deficit with Japan falls to $14B [English, KJH]

http://joongangdaily.joins.com/article/view.asp?aid=2938380

Full Text: Korea’s trade deficit with Japan fell in the first half compared with a year earlier mainly because exports by Asia’s fourth-largest economy benefited from Japan’s devastating quake in March, data showed yesterday.

Korea’s exports to Japan rose 49.9 percent on-year to $17.7 billion in the January-June period while imports grew 11.3 percent to $32.1 billion, according to data compiled by the Ministry of Knowledge Economy.

Korea’s trade deficit with the world’s third-largest economy amounted to $14.4 billion in the first half, down from a $16.9 billion shortfall registered in the same period of last year, it showed.

The government said a rise in Korea’s exports to Japan mainly came as the powerful earthquake crippled factory operations there, causing Korea’s overseas shipments of components and machinery to gain ground. Korea has been suffering from a chronic trade deficit with Japan as the country heavily relies on imports of key industrial parts from the neighboring country.

Compared with a year earlier, Korea’s exports to Japan shot up 53.5 percent in March and 63.2 percent in April. Meanwhile, the country’s imports from Japan grew 8.4 percent and 3.8 percent, respectively.

In the first half, Korea saw its exports of petrochemical products to Japan jump 157 percent and those of wireless communications goods rise 87.1 percent.

Meanwhile, Korea’s exports to China, the country’s No. 1 trade partner, slowed in the first half, indicating that China’s monetary tightening might have begun to sap demand for overseas products.

Korea’s exports grew 16.6 percent from a year earlier, data showed.

3. MARKETING ISSUES

Hypermarket Stores Offer Imported Fresh Tropical Fruits [Korean, OSY]

http://economy.donga.com/total/3/01/20110706/38572311/3

Summary: Hypermarket chains are reportedly putting efforts to offer imported fresh tropical fruits.  E-Mart has brought in 30 tons of fresh mangosteen in June from Thailand via air cargo for a special sales event that started on July 1.  Lotte Mart has also launched a sales promotion of mangosteen since mid-June, which is likely to sell a total of 80 tons of the fruit until mid-August.  Fresh apple-mango imported from Taiwan is another item that chains are promoting heavily.  Fresh doorian from South Asian countries is also scheduled to be offered this summer in leading hypermarket stores.  The reason that retailers are focusing on imported fresh tropical fruits is poor harvest of local fruits due to extended monsoon season this year.  For example, price of local watermelon has surged 35 percent to 16,900 won each compared to last year.