[Viewpoint] Korea is a foreign investor tooThe Gaoxin Hi-Tech Development Zone in the southern suburbs of Xian, Shaanxi Province, is nothing but a big field. But in various places around Xian, banners have been hung to celebrate a South Korean memory chipmaker’s decision to build new manufacturing plant there. Samsung has pledged to spend $7 billion on a NAND flash wafer fab in Xian to supply Chinese makers of smartphones and tablet computers.
The Shaanxi government offered various tax and financial benefits as well new infrastructure and logistics support to land the investment by the world’s largest chipmaker. Samsung’s NAND fab plant will be joined by some 160 parts suppliers in the industrial zone, creating more than 10,000 jobs. Capital investment by a manufacturing giant like Samsung Electronics is a windfall for any local government.
The private Metropolitan Club on Fifth Avenue in New York was host to more than 200 high-profile investors gathered to hear a presentation on the Korean economy last week. The attendance swelled after the Korea-U.S. Free Trade Agreement took effect in March. Korean trade authorities said $427 million worth of investments were pledged that day, a record for the government-sponsored investment road show. The Korea-U.S. FTA has already helped boost investors’ interest in Korea.
Last month, Korea, China, and Japan signed a trilateral investment accord to pave the wave for a broader free trade agreement among the three East Asian economies. The three countries will finalize talks in hopes of signing the formal investment treaty next month. The investment accord is a state guarantee on safe investments and protection of intellectual property rights.
Its articles include an investor-state dispute clause that caused controversy in the Korea-U.S. FTA. Opposition parties and civil activist groups have been opposing the Korea-U.S. FTA by saying the dispute settlement clause will undermine Korea’s sovereignty. Opposition figures even pledged to nullify the Korea-U.S. free trade deal if they get a majority in the legislature and sent a letter demanding a renegotiation of the deal to U.S. President Barack Obama.
The Democratic United Party softened its stance slightly after its plan came under attack. The Unified Progressive Party still vows to kill the trade deal. The Korea-U.S. FTA debate lost the spotlight in the general election campaign as other issues gained traction, like the illegal spying operations of the Prime Minister’s Office and controversial comments made by an opposition candidate from a popular podcast program. But if the Democratic Party does very well in the election, the issue is bound to resurface. Since the investor dispute settlement is in the eye of the storm, we must thoroughly study it to assess if it really goes against national interest.
A group of civilian and government experts from the two countries are currently studying the clause based on a pledge to revisit and renegotiate contentious areas within three months after the FTA took effect. Opponents of the clause mostly claim it weakens Korea’s national sovereignty. They argue that if American investors file charges and demand international arbitration for disputes, the country’s administrative and judiciary dignity would be seriously impaired.
Koreans are particularly sensitive about sovereignty issues. When Japan renews claims on the Dokdo islets, public fury immediately swells. When American beef imports sparked fears of mad cow disease and a threat to so-called “national health sovereignty,” people rushed to streets to protest. Japan’s territorial claims on Dokdo are a serious challenge to our sovereignty, but the argument against American beef imports were mostly hyped by anti-American political forces and individuals.
The ISD clause is a basic protection for investors. Investors naturally demand as much protection as possible while the receiving end wants as little interference as possible. An investor dispute settlement is a compromise between the two and has become a standard in free trade and international investment agreements.
The clause is included in 2,600 investment accords among countries around the world as well as 300 free trade deals. The reasoning that the ISD clause in the Korea-U.S. FTA is harmful, therefore, cannot hope to gain international consensus and understanding. Governments around the world vying to attract international capital are, in fact, reinforcing various protections for foreign investors.
In recent years, Korean capital investments overseas had been much greater than inflow of foreign capital here. We should be campaigning for stronger capital protection overseas, like for the Samsung investment in Xian. To do so, we must provide the same protection for investors here. The ISD clause does not harm - it actually is in our national interest.
*The author is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo
More in Columns
Revolt and its ramifications
A kiddie talent pool
A well-calculated move
Waking up from an illusion