Win the Battle, Lose the War: How South Korea’s Brilliant Negotiation Skills May Have Killed the FTA

[Update:   The USTR will reportedly call for renegotiation of the entire deal, in part to make the draft FTA compliant with U.S. labor standards.  More at the bottom of this post.]

Absolutely stomach-turning. 

After all of the Bush Administration’s brave rhetoric about  “forced labor” and  “material support” for  “atrocities,” it ended up signing a free-trade  agreement that could very well have allowed slave-made, axis-of-evil  Kaesong imports into the United States.  Then, because there was no denying the staggering hypocrisy of this, the Administration kept the whole thing a big secret.  Until now.  Thus dies the Bush  Administration’s last reserve of  credibility on human rights in North Korea.   

The unlikely hero of this story is Democratic Representative Sander Levin of Michigan, a Ways and Means Subcommittee Chairman, who  has written  a letter to U.S. Trade Representative Susan  “It Won’t Happen” Schwab, thus exposing the secret agreement, called “Annex 22-C,” on what are euphemistically called “outward processing zones:”

South Korea and the U.S. had maneuvered around the sensitive issue of the inter-Korean joint economic venture, the Kaesong industrial complex, by agreeing to discuss in the future whether or not to include products from the OPZs in their FTA….  The proposed agreement establishes a joint committee to consider whether and under what conditions an OPZ would be included in the trade deal….

The annex directs the joint committee to examine the standards with “due reference to the situation prevailing elsewhere in the local economy and the relevant international norms.”

“This raises a number of troubling policy and legal issues,” Levin wrote in the letter, “To apply any lesser or different standard for goods from North Korea to take account of the situation prevailing elsewhere in the local economy would be wholly inconsistent with the recently agreed upon provisions applying basic international labor standards.”

He said the annex also allows the administration to recommend Kaesong products be included in the FTA without congressional approval.

“Since neither is satisfactory, the conclusion is that Annex 22-C must be removed from the FTA,” he wrote.  [Asia Pulse, via Yonhap]

So once again,  the Administration would make North Korea an exception to our laws, in this case, a statute prohibiting the import of goods made from forced labor.  Now, lest anyone suggest I’m saying that Levin’s motives are completely pure, I’m not.  Levin represents a district that makes cars, and Levin has made it known that  he’s not happy with the FTA’s terms on opening Korea to U.S. automobiles.  On the other hand, labor unions tend to be natural allies of human rights advocates when it comes to  forced labor.  You’ll also note in the previous link that Hillary Clinton has also declared her opposition to the FTA with Korea.

For its part, South Korea is saying that it won’t budge on the automobile provisions of the FTA, so expect Kaesong to stay in contention.  That’s especially  true now that  conservatives have also learned the dirty secret of  Annex 22-C.

State isn’t just  playing games with  the law; it’s being disingenuous about the facts, too.  Just last year, the State Department cited Kaesong as an issue of concern in its annual Trafficking in Persons Report.  Remember?

The report says, “There are concerns that this labor may be exploitative, with the [North Korean] government keeping most or all of the foreign exchange paid and then paying workers in local, non-convertible currency.
“They lack freedom,” [Ambassador John J. Miller] said at a news conference. “It’s not clear that they get any money, whether the money goes to them or the North Korean government.  We are talking about forced labor. [Joongang Ilbo]

Just like the sleight-of-hand in this year’s  terrorism report, State has airbrushed that concern out of this year’s report, which was just issued today. 

Update 7/15:   According to Yonhap, Schwab has told her South Korean counterpart that she’ll ask to renegotiate the entire FTA that was agreed in  April. 

South Korea and the U.S. reached the landmark deal in early April after 10 months of tough negotiations, but officials from both sides have indicated Washington needs to reflect tougher labor and environment provisions to improve the chances of getting approval from the Democratic-led U.S. Congress.

There are reports that the new talks have already begun.

The local daily Kyunghyang Shinmun reported, quoting what it called a key government official, that the renegotiation between South Korea and the U.S. is “virtually” under way, but the ministry said the report is not true.  [Yonhap]  

We’re now just 15 days from the expiration of the President’s trade promotion authority, and it’s questionable at best whether the Democrats will renew it.  Whether you approve or not may be moot, because it’s hard to see us agreeing in two weeks of an election year  what couldn’t be agreed in nearly a year that was dominated by gutter demagoguery

The Marmot and Richardson disapprove, believing that we had a deal and should stick to it.  Many of Robert’s commenters argue that because Korea habitually fails to keep its own agreements, that this will be a highly satisfying teaching point.  As to the latter point, it doesn’t quite manage to persuade me.  The second of two wrongs may put a smile on your face, but it still doesn’t make a right.  This is not to deny that I’m also smiling, because I think Schwab’s  people signed a bad deal.

I also disagree with Robert and Richardson,  because in this context, a deal is not a deal.  The two trade representatives who  shook hands  did so  based on a  contingent and limited delegation of authority that should have been  understood as such, rather than as an investment of absolute approval authority.  The authority to approve international agreements lies with the U.S. Congress, pursuant to Article  2, Section 2  of the Constitution (“[The President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur ….”).   If the talkers agree, only then does the USTR  bring it back to Congress for an up-or-down vote.  The negotiators are merely appointed representatives of an elected President and elected representatives.  Their own  extraordinary authority was delegated in a year when the same party dominated both Congress and the White House.  Knowing that, both nations’ negotiators should have understood the importance of agreeing to a deal that would survive that up-and-down vote before the Congress that is, not the Congress that was.   This proposed agreement hit significant opposition in Congress almost immediately after it was signed.  At this point, the odds of passage must look pretty bad, or Schwab wouldn’t be asking to renegotiate.  The Korean National Assembly also reserves final approval  authority, which isn’t guaranteed, either. 

Of course, Korea could always just stand on the provisional agreement and demand that up-or-down vote, if it’s ready to accept likely failure as a consequence.  Judging by Korea’s reported reaction, it has chosen the more  pragmatic option of renegotiation.  My guess is that Korea’s reaction will not be undue outrage, since Korean negotiators of late have tended to view agreement as a mere pause before the next  renegotiation (see this, this,  and this for examples relating to USFK relocation, land acquisition, and cost-sharing).  And who really expects the Korean side  to say “a deal’s a deal” once  this debate is  fully joined at the  National Assembly?  Anyone?

Korea has no one but itself to blame for the situation in which it now found itself, having dragged out the negotiations and poisoned the deal with inflexible, often unreasonable demands.  We need not revisit the long history of South Korea’s negotiating style or the level of debate that dominated on the Korean side, because I’ve already compiled that in detail in this chronology.  Granted, the South Koreans have a different idea of how literally to interpret the law than we do, but the South Koreans should also have understood that Kaesong would be a congressional deal-breaker because of international labor standards, U.S. law, and U.S. politics.  For political reasons alone, they should have understood the importance of being more accomodating on beef and autos (Dram man has done the best issue-by-issue analysis in that regard; Andy Jackson also links to this excellent summary). 

As a result, we have a deal that almost no one in America likes and which calls the Administration’s negotiating skills and  adherence to law and principle  into serious question.  Take me, for example.  I started out as an FTA supporter, and in principle, I still am.  The general concept is sound, it would benefit the economies of both countries, and it would help to bind Korea to the United States economically at a time when China’s influence is growing.  As with any FTA, there would be losers, but a good agreement would create more winners.  But I’m opposed to the FTA draft that these two representatives signed, because the U.S. side gets very little in return for the enormous concessions it gave to the Korean side, and of course because of Kaesong, which is a stealth FTA for Kim Jong Il under circumstances that could hardly be more morally, diplomatically, or militarily  repellent (we still don’t have an FTA with Japan, after all).  Indeed, the inclusion of Annex 22-C has weakened the White House’s entire argument for Trade Promotion Authority, by turning one of its better talking points into embarrassing irony:

  • Trade spreads American values and reinforces the habits of liberty that sustain democracy.  [White House Web site]

Democrats can now argue, legitimately, that the Administration can’t be trusted to stand for even the most basic worker protections.   Plenty of  Republicans will see that the White House is using its authority to promote the survival of the globe’s most repressive regime.  Added to this, Republicans and Democrats alike will either fear increased Korean competition for products made in their districts — a concern with any FTA — or feel deep disappointment about how little the FTA would do to open Korean markets to their districts’ products.  Like it or not, the Constitution has given Congress a silent place at the bargaining table, and the talkers ignore the concerns of the Congress at the peril of the deal’s odds of passage.

In the end, it was the sage advice of Rep. Jim Leach that Korea should have heeded (it was on this day that I heard Leach say, prophetically, that the South Koreans had better hurry up and agree on a deal before the Dems took over or risk having the deal fail in Congress).  Leach could see what was going to happen in the next election.  He was among the casualties.  The Koreans, of course,  were too busy pandering to their  most unreasonable  domestic constituencies to lobby and tame their zero-sum demands.   And maybe  sticking it to Uncle Sam is  so  deeply coded into  the DNA of Roh’s entire administration that it couldn’t bring itself to try.  Maybe it really never wanted the FTA at all, and nothing in the South Korean playbook strongly suggests otherwise.  When, at the last minute, the U.S. representatives lost the capacity to say “no,” Korea won every battle and assured that the war would be lost.

Two Anju Links for you:

*   Chongryon, the pro-North Korean group in Japan, has fallen on such  hard financial times that it has been forced to sell its headquarters in Tokyo, once considered the  de facto  embassy of North Korea.  There’s some interesting history on the buyer, too.

*    I tend not to agree with much of what the Council on Foreign Relations says about North Korea, but I sure liked getting my hands on this summary of where all the presidential candidates stand, and do appreciate that CFR forwarded the link.  Some of the Dems are surprisingly,  if inconsistently, hawkish.  The Republicans uniformly dislike the Bush Administration’s policy, with the single exception of crazy Ron Paul, who isn’t really a Republican anyway.


  1. That’s a democracy.

    Things can only come back to bite them on the bum when enough of the people become disgusted enough (and maintain that disgust long enough for an election to roll around)…

    The apparent irony comes from the general apathy of the masses…


  2. It seems that whatever was left of Bush’s backbone has now melted faster than a block of butter over a Korean fire. Pathetic. Despite being less than a perfect deal for the US, I was supportive of the FTA, but with the inclusion of Kaesong, I’m now against this fraud. Bush’s weakening to State on everything in recent times is infuriating. No wonder so much of his base is irate. Looks like he’s going to go out with a whimper.


  3. Sander Levin is looking for any excuse to kill the FTA because it does not provide guranteed US auto sales. He has advocated lowering tariffs on Korean cars one-for-one on sales of US cars. USTR achieved what Levin and Detroit and UAW originally said they wanted but now can’t take yes for an answer. The best way to open the market is by lowering Korean tariffs and eliminating the discriminatory non-tariff barriers, which KORUS does. Without passing it, US auto makers will be worse off. As for Kaesong, there is no way NK goods are coming in. The first time the committee meets is one year after signature and before ANY NK good comes in, Kaesong has to improve denuclearization, human rights, international labor standards, etc. etc. Levin is fear-mongering on kaesong as a cover for arguing against free trade.


  4. Bruce,

    I agree and acknowledged that Levin has ulterior motives, but I don’t think that changes the fact that he’s done us all a service. As I said, the FTA in general is a good idea, but this FTA, this year, is not.

    What causes me to distrust all of the safeguards and bureaucratic roadblocks to which you refer is in part my loss of trust in the Administration. A year or two ago, I might have felt almost safe with those checks. But on both human rights and upholding law and principle in the face of North Korean demands, how much credibility remains?

    You’d think that a law as plain on it face as the prohibition against transferring criminally derived property in 18 USC 1957 would have caused us second thoughts about transferring that $25M, but we ignored the law and did it anyway. You’d think that the language in 1718, saying that we should “ensure” that the funds be used for permitted purposes would have caused us to secure at least some financial controls and a North Korean guarantee, or to simply turn the money over to the World Food Program for feeding the hungry. We gave in on that, too. Same thing with the reports on terrorism and human trafficking — State is gradually but clearly airbrushing out the harsh truths that make this regime repellent to ordinary commerce. Anyone can see where they’re going, though it flies right in the face of the Tariff Act’s slave labor provisions.

    Since the new year, this Administration has shown an extraordinary loss of principle where North Korea is involved. Confronted with obstacles of law or fact, it massages them to full release. I offer no opinion on whether the new immigration bill is “amnesty,” but I do offer it as an analogy, since I see many people expressing the same kind of distrust of this person who has secretly replaced the George W. Bush I voted for. “Sure, there are safeguards built into the bill as it is,” many are saying, “but we all know that without a principled enforcement of existing law, it will all be meaningless soon enough.” Expect the same with these “outward processing zones.” North Korea has never permitted a meaningful inspection of the labor conditions or wage payments, or let anyone account for the proceeds per 1695 or 1718. Thus, we should never have even considered them for FTA inclusion. That was what Schwab and Cutler said for 10 months, and they should have stuck to that position.

    In the end, the problem is always the same: we can’t bring ourselves to say no, because saying no might mean no deal. There is an institutional bias in favor of having “a” deal, any deal, if it’s contrary to our interests, values, and even our laws.