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Korean opposition parties threaten to cancel KorUS FTA; investor-state dispute process major issue in Korea and India

South Korea’s main opposition party, which polls suggest is cruising to an election win in April, said yesterday it will cancel a free trade agreement with the U.S. unless major changes are made, reports Reuters.

“The FTA pursued by the (President Lee Myung-bak) government has no regards for our national interest and it is our position that it cannot be left to go into effect,” said Democratic United Party leader Han Myeong-sook this week. “It must be renegotiated before it takes effect to fix the poisonous clauses. Otherwise, we will repeal it in the new parliament session.”

A top issue for the detractors, which include ruling party members also, is the proposed investor-state dispute process, which “would restrict policy options available to our governments to promote the public interest and undermine the government’s ability to protect public services and promote public health, food safety, and environmental protection,” according to a February 8 letter (click here, scroll down) to U.S. President Obama from Korea’s opposition coalition leaders.

The letter was sent to express “deep concern” about the U.S. FTA, which was passed by the ruling Grand National Party (formerly Saenuri Party) last November, and the need for “significant revision,” as expressed in a resolution passed by the Korean national assembly. “This resolution,” says the letter, “urges the governments of the Republic of Korea and the United States to revisit the investor-state dispute settlement mechanism (‘ISD’) either to delete it from the agreement, or substantially revise it as an amendment to the agreement. In this regard, the resolution further requests that the United States government accede to the proposal of renegotiation.”

Concerns go beyond investor-state and relate to the need to protect small- and medium-sized businesses, reduce the scope of the services and investment chapter, delete so-called ratchet clauses that “would exclude policy options of our future governments,” as well as making changes to the intellectual property and financial services chapters. These and other problems have been brought to the attention of Korean government officials by the Korean public, says the letter to Obama.

“The majority of the Korean people are concerned that a range of provisions in the FTA, designed to maximize corporate interests, would jeopardize democratic polices that promote economic justice, eliminate poverty, regulate financial services, and develop healthy communities,” it reads.

“First of all, these provisions are directly in conflict with the Article 119 of the Constitution of the Republic of Korea, which obliges the state to intervene for economic democratization. Furthermore, it is our shared view that the KorUS FTA is simply unfair because: the agreement itself has no direct effect within the territory of the United States; and the domestic U.S. laws prevail when there is a conflict between the two.

“Therefore, we the leaders and the members of the National Assembly of the opposition parties would like to take this opportunity to bring our concerns to your attention regarding the ten items listed below. If our governments fail to address these issues satisfactorily before the KorUS FTA goes into effect, we are afraid that we would be forced to exercise our legislative authority to prevent the current provisions of the deal from being implemented.”


South Korea has already signed and approved a free trade agreement with the European Union which took many years to negotiate. The deal does not include an investor-state dispute process simply because the EU did not have a mandate to negotiate such a thing until recently. However, there is language in the EU-Korea deal suggesting the investment chapter will be revised in the future, possibly with the aim of include investor-state protections.

Meanwhile, the EU is seeking to include an investor-state dispute process in its free trade deals with India, Singapore and Canada. The Canadian government is happy to oblige and in fact insists on these protections for Canadian investors in all its trade deals. But India officials are not so sure, as Brent Patterson wrote in a Campaign Blog a few days ago. Now a prominent NGO is asking the India government to give investor-state a pass in its EU trade deal.

Médecins sans frontières wrote to Indian Prime Minister Dr. Manmohan Singh yesterday, ahead of the February 10 India-EU Summit, urging his government to make sure the proposed FTA with the EU does not undermine access to medicines through intellectual property and investment protections. According to MSF, the EU agenda:

– Widens the enforcement net so that life-saving legitimate medicines, under alleged trademark infringement, could be detained or destroyed at the border when being exported, simply because their label appears similar to the originator product.

– Substantially increases the penalties for alleged patent and trademark infringements. On a mere allegation – and not proof – including allegations brought by a competitor, generic suppliers allegedly infringing a patent or a trademark may face a ban on production, delay or destruction of goods, disproportionate damages, and potential bankruptcy.

– Limits the India courts’ ability to balance commercial and public health interests and the Indian Constitution’s guarantee to the right to life, by making use of a variety of alternative remedies rather than as the EU proposes, routinely granting provisional injunctions.

– Extends liability to third parties, thereby putting at risk of injunctions and provisional measures a wide variety of public health stakeholders, including suppliers of active pharmaceutical ingredients used for producing generic medicines; distributors and retailers who stock generic medicines; NGOs such as MSF who provide treatment; funders who support health programmes; and drug regulatory authorities who examine medicines. This could act as a significant deterrent to anyone involved in the production, sale or distribution of affordable generic medicines.

MSF links these new protections for brand name drug companies to the proposed investment chapter and investor-state dispute process, which the organization says will allow the firms to bypass courts by taking intellectual property-related disputes directly to secretive tribunals. The NGO recommends that the India government include the following safeguards in its FTA with the EU:

– The withdrawal of the IP enforcement measures, and as a minimum safeguard, the deletion of patents from the entire scope of the enforcement section;

– The withdrawal of third party liability from the enforcement provisions;

– The withdrawal of specific provisions dealing with injunctions from the enforcement provisions in order to preserve the existing flexibilities of the Indian judicial system;

– Border enforcement should be limited to the requirements of the TRIPS Agreement and as such exclude exports and trademark infringements; and

– The withdrawal of IP and the investor-to-state dispute mechanism from the scope of the investment chapter.

Since the EU requests of India and of Canada in the Comprehensive Economic and Trade Agreement are virtually identical, and Canada also has a strong generic drug sector, these recommendations seem perfectly reasonable ones to make of the Canadian government as it finalizes details of CETA’s intellectual property rights and investment chapters. In 2011, the Canadian HIV/AIDS Legal Network listed access to medicines globally and domestically as one of the five most pressing issues for World AIDS Day 2011.

“As Canada and the EU negotiate a Comprehensive Economic and Trade Agreement, intellectual property issues are one of the remaining contentious points,” they wrote. “Leaked text of the draft agreement suggests Canada and the EU are on the verge of finalizing proposals that would further restrict the introduction of cost-saving generics into the Canadian market when patents expire, unnecessarily driving up health care costs at a time of budget pressures.”