Compensation plan for new FTA faces backlash

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Compensation plan for new FTA faces backlash

A package of compensation measures designed for the Korea-China Free Trade Agreement (FTA) came under fire on Tuesday, less than a day after its passage at the National Assembly, as the government scrambled to reassure the business community and invested groups.

Most of the criticism after the agreement was approved was directed, in particular, toward a proposal calling for the creation of a massive fund, meant to appease disgruntled farmers over losses incurred by the FTA, that would collect supposedly voluntary donations from industrial enterprises.

The legislature on Monday ended a months-long impasse on ratifying the free trade agreement with China, Korea’s largest trading partner. In return, the ruling and opposition parties and the Park Geun-hye administration struck a deal earlier in the morning on a 1.6 trillion won ($1.4 billion) compensation package for farmers and fishermen.

The last-minute agreement, created just hours before the voting session, included a plan to create a cooperation fund worth 1 trillion won that centered on the idea that private companies, public enterprises and agricultural and fisheries cooperatives will voluntarily offer 100 billion won in annual contributions for the next 10 years to support farmers and fishermen.

The cooperation fund was agreed upon in place of the demand from the main opposition party to establish a trade profit-sharing system; the New Politics Alliance for Democracy (NPAD) had previously insisted on collecting some of the profits from companies that would benefit from the FTA.

The fund will be managed by the Corporate Partnership Foundation, and the money will be spent on scholarships for children from farming and fishing villages, and medical, cultural and housing projects for those areas. If the contributions fail to meet the annual goal, the government will take necessary measures to make up for the shortage, the agreement said.

Although the Civilian Committee on FTA Countermeasures, formed by 40 groups including the Federation of Korean Industries and the Korea Chamber of Commerce & Industry, issued a statement on Monday to support the idea of a cooperation fund, the business community expressed anger.

Conglomerates complained on Tuesday that the statement failed to reflect their positions and that the supposedly voluntary contributions were no different than taxing industrial enterprises. The business camp also claimed that the government strong-armed them to welcome the idea of a cooperation fund.

“The government never consulted with us,” an official on the committee said. “The government just demanded that we support the fund in its statement.

“We told the government that our member companies would resist the plan, but it had no effect,” he said. “The companies required to pay the contributions were shocked because they had no idea that they would have to pay for the fund.”

Another official from the committee said the NPAD also forced it to support the fund. “The opposition party said they won’t cooperate with the ratification unless we support it,” he said.

Criticism also grew around the fact that tax money might be used to make up for the shortage in the cooperation fund. Lobbying groups for the country’s farmers and fishermen insisted that the agreement was a promise that the government would inject tax money to compensate them.

Although the ruling party fully supported President Park’s demand to ratify the FTA with China before the end of this year, its concern was clear that FTAs would be too costly.

On Monday, Saenuri Party Chairman Kim Moo-sung met with Trade Minister Yoon Sang-jick shortly before the voting session to tell him that the government should refrain from signing any more free trade agreements. “State finances become strained whenever any FTA takes effect,” Kim was reported to have said.

Still, the ruling party and the government attempted to convince the public and those disgruntled in the business community to get behind the plan.

“There is no way that a single coin in tax money will be spent on the fund,” Rep. Won Yoo-chul, the Saenuri floor leader, said.

He also left room for the possibility that the cooperation fund plan could be revised.

“We agreed to the plan to help farmers and fishermen because the intention was good, but if it is too much, then we need to adjust it somehow,” Won said.

The Finance Ministry and the Trade Ministry also held separate briefings to defend the plan for the fund.

“We won’t enforce quotas on companies,” Deputy Trade Minister Kim Hak-do, the chief FTA negotiator for the Ministry of Trade, Industry and Energy, said. “This is not a semi-tax.

“We believe companies will make enough voluntary donations to create it,” he said, stressing that the government would provide incentives to the companies for their contributions. “For a 1 million won donation, 22 percent will be counted as an expense, and a 7 percent income deduction will be provided. That means 300,000 won in tax support. And that’s strong.”

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