Letter to President Donald J. Trump: South Korea Trade Relations

June 28, 2017

The Honorable President Donald J. Trump
The White House
1600 Pennsylvania Avenue NW
Washington, D.C. 20500

Dear Mr. President:

We write to you today about the upcoming visit of South Korea’s new President Moon Jae-in.  While South Korea has been a great ally diplomatically and militarily, there are concerns about South Korea’s treatment of U.S. companies and South Korea’s adherence to the U.S. –Korea Free Trade Agreement (KORUS). During President Moon’s visit, we urge you to openly discuss how to best resolve the trade disparities between the United States and South Korea.

We echo the concerns of Senator Orrin Hatch, a supporter of free trade with South Korea, who wrote last year that “implementation of and compliance with the agreement has fallen short in several areas, resulting in limited benefits to U.S. firms seeking to benefit from the agreement and to expand their economic partnership with Korean firms.” According to the U.S. Trade Representative’s 2017 National Trade Estimate Report on Foreign Trade Barriers, “[a] number of U.S firms have raised the concern that the Korea Fair Trade Commission (KFTC) has targeted foreign companies with more aggressive enforcement efforts, and that KFTC procedures and practices have inhibited their ability to defend themselves during KFTC proceedings.”

Although KORUS requires that respondents have the opportunity to “cross-examine any witnesses or other persons” who testify in a hearing, KFTC routinely permits “participant witnesses” to testify against respondents in competition hearings without cross examination.  Additionally, in what appears to be in close coordination with Korean companies, KFTC has introduced new evidence and allegations for the first time at the hearing stage of proceedings.  These practices contravene fundamental norms of fair process.

KFTC’s recent actions also disregard jurisdictional limits on enforcement.  Intellectual property is territorial in nature and governed exclusively by the issuing government.  However, KFTC’s recent actions dictate the terms upon which a U.S. company could license a U.S. patent to a U.S. company for sale of a device manufactured in China that never entered Korea.

Such application also violates well-established principles of international comity.  No nation should intrude upon the sovereignty of another nation, including by exerting its enforcement authority when another nation has a more direct interest in the subject matter.  The KFTC has sought to exert its competition authority, while the United States has a more direct interest.

Since 2011, the Commission has opened more than 40 investigations against U.S. companies.  The KFTC caseload, as Sen. Hatch pointed out, “appears to show a concerted effort to prioritize antitrust investigations against U.S. companies.”  These actions stifle U.S. innovation and economic growth and act to protect Korean companies from U.S. competition.  While we certainly hope KFTC is not engaging in intentional discrimination, targeting U.S. companies to assist Korean competitors is a clear violation of KORUS.

Concerns about the Korean government’s implementation of the free trade agreement has extended to a number of other areas as well.  These include a lack of IP protections, incoherent and damaging pricing policies for the US pharmaceutical and medical device industries, and cumbersome data transfer regulations for financial firms.

As President Moon seeks to turn a new page in his country on a number of issues, we are hopeful this includes a greater commitment to following the tenets of our trade agreement for the benefit of all parties. Mr. President, we appreciate your efforts to stand up for American industries and businesses around the world and we hope you use these important meetings with the new Korean leadership to encourage them to begin a new chapter in economic cooperation.

Sincerely,

Dan Schneider, Executive Director
American Conservative Union

Phil Kerpen, President
American Commitment

Lisa B. Nelson, CEO
American Legislative Exchange Council

Ashley N. Varner, Executive Director
ALEC Action

Rick Manning, President
Americans for Limited Government

Matthew Kandrach, President
Consumer Action for A Strong Economy

Jim Edwards, Policy Advisor
Eagle Forum Education and Legal Defense Fund

Jason Pye, Director of Public Policy and Legislative Affairs
FreedomWorks

George Landrith, President
Frontiers of Freedom

Mario Lopez, President
Hispanic Leadership Fund

Andrew Langer, President
Institute for Liberty

Don Racheter, Ph.D., Moderator
Iowa Center Right Coalition

Seton Motley, President
Less Government

Colin A. Hanna, President
Let Freedom Ring

Brandon Arnold, Vice President
National Taxpayers Union

Paul Gessing, President
Rio Grande Foundation

Jenny Beth Martin, Co-Founder
Tea Party Patriots

James L. Martin, Founder and Chairman
60 Plus Association