VZCZCXYZ0001
PP RUEHWEB

DE RUEHUL #1328/01 1110929
ZNR UUUUU ZZH
P 210929Z APR 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7456
INFO RUEHBJ/AMEMBASSY BEIJING 0515
RUEHKO/AMEMBASSY TOKYO 0594
RHMFISS/COMUSKOREA J2 SEOUL KOR
RHMFIUU/COMUSKOREA SCJS SEOUL KOR
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFISS/COMUSKOREA J5 SEOUL KOR
RUCPDOC/DEPT OF COMMERCE WASHDC 1411

UNCLAS SEOUL 001328 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/K AND EB/TPP/BTA 
PASS USTR FOR CUTLER, KARESH, ANGEROT AND KI 
 
E.O. 12958: N/A 
TAGS: ECON ELAB ETRD KS PGOV
SUBJECT: LABOR GIRDING FOR FTA BATTLE 
 
REF: A. SEOUL 507 
 
     ¶B. SEOUL 548 
     ¶C. SEOUL 549 
     ¶D. SEOUL 963 
     ¶E. SEOUL 1266 
 
SENSITIVE BUT UNCLASSIFIED -- PLEASE HANDLE ACCORDINGLY 
 
SUMMARY 
------- 
 
¶1.  (SBU) The U.S. FTA labor negotiating team visited Seoul 
April 4 to 7 to meet with Korean government, labor and 
management officials and conduct background research.  Korean 
organized labor representatives were wary of an FTA and 
feared that it would precede mass layoffs like those 
experienced after the 1997 "IMF crisis" (the Asian Financial 
Crisis).  A Democratic Labor Party member of the National 
Assembly said Korean workers would likely stage protests not 
just in the ROK, but in the U.S. as well.  Local management 
representatives focused on labor flexibility as the main 
concern in the ROK labor market and expressed concern about 
anti-FTA sentiment among the public.  Government meetings are 
reported septel.  END SUMMARY. 
 
DELEGATION IN LISTENING MODE 
---------------------------- 
 
¶2.  (SBU) FTA lead negotiator AUSTR Lewis Karesh told all 
interlocutors that the purpose of his trip to the ROK was not 
to negotiate but to learn.  Karesh was accompanied by 
Department of Labor (DOL) International Economist Carlos 
Romero and DRL Deputy Director of International Labor Affairs 
Joseph DeMaria.  As with the government meetings, much of the 
discussion centered on temporary, part-time, or other 
"irregular" workers and Korea's Labor-Management Roadmap. 
These issues are discussed in-depth in Reftels A, B, and C. 
 
FKTU: LABOR HARBORS STRONG ANTI-FTA SENTIMENT 
--------------------------------------------- 
 
¶3.  (SBU) The Federation of Korean Trade Unions (FKTU), the 
less radical of the ROK's two major trade organizations,is 
planning in consultation with the AFL-CIO to mount strong 
union opposition to FTA negotiations.  FKTU leaders expressed 
apprehension that an FTA would lead to major corporate 
restructuring and workplace instability comparable to the 
aftermath of the 1997 Asian financial crisis.  As a result, 
said FKTU Vice President Jeong Kwang-ho, there was strong 
anti-FTA sentiment among labor groups. In particular, labor 
groups believed that an FTA would worsen the social disparity 
that emerged in 1997 and doubted whether the Agreement would 
deliver any tangible benefits to Korea.  Kang Ik-gu, Director 
of FKTU's Policy Bureau, added that the social support system 
in Korea was too weak to support the restructuring and 
unemployment that would follow an FTA.  "The FTA would be 
worse than the IMF crisis," predicted Korea Financial 
Industry Union Policy Chief Lee Young-kyu. 
 
¶4.  (SBU) The FKTU hinted at strong union opposition to the 
negotiations.  Keeping in mind the social implications of an 
FTA and the Korean government's apparent commitment, Jeong 
said the FKTU could not afford to be passive.  He said the 
FKTU was planning its opposition in consultation with the 
AFL/CIO. 
 
¶5.  (SBU) One of the FKTU's concerns was that U.S. labor law, 
which they considered to be weaker than ROK law, would dilute 
worker protections in the ROK.  The delegation explained that 
an FTA would not force one country to accept another 
country's laws.  It only obligated each country to enforce 
its own laws.  Answering why the U.S. Congress was concerned 
about ROK law, the delegation further explained that in 
entering an FTA, Congress had to be confident that Korea's 
laws protected fundamental labor rights. 
 
¶6.  (SBU) FKTU Executive Director Lee Young-bum pointed to 
the irregular worker issue as one example of where Korean law 
was deficient.  He said the problem began in 1997 when 
"speculative capital entered Korea and pursued profitability" 
by hiring irregular workers at the expense of regular 
workers.  As a result, irregular workers accounted for over 
50 percent of the workforce but earned 50 percent of the 
wages, even though they often performed the same work.  He 
pointed to the example of Hyundai Motors, where, he said, 
regular workers made automobile front wheels while irregular 
workers made the back wheels.  He said that after companies 
terminated employees, they would immediately hire irregular 
workers to replace them.  The only way to control this abuse 
would be to limit the types of work that irregular workers 
could be employed to perform, guarantee the rights of 
irregular workers to become regular employees, and eliminate 
discrimination. 
 
¶7.  (SBU) Lee said that besides irregular workers, the 
emergence of multiple unions and the cessation of company 
payment to full-time union workers were the most contentious 
labor issues.  He said that neither issue should be 
legislated, but rather left for labor and management to 
negotiate between themselves. 
 
¶8.  (SBU) Lee said that employer domination of unions, or 
"paper unions," are not a major issue.  On collective 
bargaining agreements, Lee said that negotiations were too 
tightly restricted.  Whereas in France, workers could 
negotiate 90 percent of the matters pertaining to their 
employment, in the ROK, workers could negotiate only 14 
percent.  Jeong claimed that there were still many cases of 
workers getting fired for "obstruction," even if they were 
engaged in legitimate industrial activity.  Legal processes 
to obtain reinstatement were in place, but were tedious and 
could take 2 to 3 years. 
 
LABOR PARTY WARY OF FTA, UNSATISFIED WITH ROKG REFORMS 
--------------------------------------------- --------- 
 
¶9.  (SBU) A Representative of the left-of-center Democratic 
Labor Party (DLP), Dan Byung-ho, previewed his party's 
opposition to the FTA.  He said that workers were wary that 
if an FTA were passed, there would be an increased chance of 
labor instability.  He said the DLP and FKTU are considering 
sending demonstrators to the U.S. as well as demonstrating in 
Korea against an FTA.  (NOTE:  On April 19, a DLP staff 
member told poloff that the party was struggling over the 
practicalities of getting visas and providing travel and 
lodging expenses for U.S.-bound demonstrators.  He predicted 
that only a few demonstrators would make the trip.  Asked 
about the thousands of Korean demonstrators that went to 
protest WTO talks in Hong Kong last year, the DLP staff 
member complained that "D.C. is a lot more expensive than 
Hong Kong."  END NOTE.). 
 
¶10.  (SBU) Dan expressed concern over a range of labor 
problems, many of which could be attributed to the effects of 
"developmental dictatorship," social injustice, and the 
misallocation of wealth.  He criticized the Roadmap as a 
regressive measure packaged as labor reform.   He said the 
Roadmap would make layoffs easier while making it more 
difficult for workers to engage in industrial action.  Also, 
although the Roadmap would allow for multiple unions, it 
would also require workers to unify their bargaining channel, 
which would lead to abuse and differentiation of bargaining 
rights.  Likewise, the Roadmap would abolish mandatory 
arbitration, but would allow for replacement workers.  Thus, 
although there were some progressive measures in the Roadmap, 
he said, it had so many offsets that it would have no net 
benefit for worker rights.  Dan predicted conflict if the 
government insisted on passing the Roadmap before January 
¶2007. 
 
¶11.  (SBU) Dan said that the irregular worker issue was at 
the heart of the problem of societal polarization.  The DLP 
advocated a "principled stand" because the problem was not 
just an economic issue, but an issue of grave social concern. 
 He said the number of irregular workers had to be reduced; 
discrimination against irregular workers had to be 
eliminated; and irregular workers had to be protected by all 
labor rights and protections.  Because the government's 
legislation, he said, would result in an increase in the 
number of irregular workers and would not eliminate 
discrimination, the conflict regarding irregular workers 
would continue. 
 
¶12.  (SBU) There was also continuing governmental harassment 
of workers, Dan claimed.  Asked about trade unionists placed 
under arrest, he dismissed government explanations that all 
recent arrests had been for violence or destruction of 
property, claiming that 90 percent of these arrests were 
political.  Dan remarked that he himself had been arrested 
five times and had never been involved in anything other than 
legitimate trade union activities. 
 
¶13.  (SBU) On migrant workers, Dan said that about half of 
the 400,000 foreign workers in the ROK were legally in the 
country and received some protection.  The others feared that 
if they complained about anything to the authorities, they 
would be deported.  For example, even if they were not paid, 
they would just seek another job rather than risk 
deportation.  Dan criticized the industrial trainee system as 
a means for bringing in foreign workers, paying them low 
wages, and giving them no rights.  While the Employee Permit 
System was an improvement, workers had limited flexibility 
and no recourse if work conditions were unacceptable.  "They 
have to leave the country if they object," he said. 
 
¶14.  (SBU) Criticizing various labor institutions, Dan said 
the TPC was ineffective and that the Ministry of Labor, 
although strengthened under the current government, operated 
under the influence of the Ministry of Finance.  Further, he 
said, the MOL did not have adequate resources.  It had, for 
example, only 30 health and safety inspectors.  Dan was 
unsure whether workers were aware of their rights, and did 
not think that the MOL was doing sufficient outreach. 
 
INTERNATIONAL LABOR FOUNDATION NOTES POSITIVE CHANGES 
--------------------------------------------- -------- 
 
¶15.  (SBU) Kim Seong-jin, Executive Director of the 
tripartite Korean International Labor Foundation (and former 
FKTU Director of International Relations) said that it was 
indisputable that fundamental rights of labor in the ROK had 
greatly improved over the past ten years.  The pressing 
issues now no longer related to fundamental collective 
rights, but rather to the tension between employment 
stability and workplace flexibility.  Kim said that the 
Ministry of Labor was responsive to complaints. 
 
¶16.  (SBU) On migrant workers, Kim said Korea did not have a 
very good record prior to 2004.  However, there have been 
substantial improvements with the introduction of the 
employment permit system.  The industrial trainee system, 
which was prone to abuse, would terminate at the end of 2006. 
 
¶17.  (SBU) On approaching the FTA, Kim said that the Asian 
financial crisis had to be taken into account because it 
fundamentally changed the way Koreans think.  There used to 
be no consideration of social security because companies 
employed persons for life.  Suddenly, in sectors such as 
banking, 50 percent of the workforce is unemployed.  Many 
blamed foreign shareholders for initiating the shift to 
irregular workers in order to push down labor costs. 
 
AMCHAM: ANTI-FTA FORCES OUTSHOUTING SILENT MAJORITY 
--------------------------------------------- ------ 
 
¶18.  (SBU) AmCham President Tami Overby said that the local 
FTA debate seemed to be dominated by FTA opponents.  Koreans 
liked the ROK-Singapore FTA because it included products made 
in the Kaesong (Ref D and E) and they liked the Chile 
agreement because they enjoyed wine.  However, they felt more 
threatened by the U.S.-ROK FTA.  The only people that were 
talking were the farmers and the government.  The consumers, 
who would be the main beneficiaries, were the silent 
majority.  It was also important not to underestimate Korean 
nationalism.  The FTA could turn into a huge lightening rod, 
she said.  Overby thought it significant that the only issue 
that the ruling Uri Party and the opposition Grand National 
Party have agreed on recently was to delay FTA negotiations 
until June, after the May 31 local elections. 
 
MANAGEMENT VIEWS LABOR FLEXIBILITY AS GREATEST CHALLENGE 
--------------------------------------------- ----------- 
 
¶19.  (SBU) The foreign business community viewed labor 
flexibility as the biggest challenge to employers in the ROK. 
 AmCham Vice Chairman and Citigroup Senior Executive Vice 
President Michael Zink said the labor law was restrictive 
because an employer could only release an employee with "just 
cause" and after exhausting all means to avoid release.  An 
employer was not free to release an employee for mere 
incompetence.  He added that there were also cultural issues, 
such as the expectation that supervisors would always be 
older than their subordinates.  Despite the labor friction, 
many companies calculated that it was still worth doing 
business in the ROK because the workforce was so 
well-educated and the market is so large.  On the other hand, 
many companies -- including Korean companies -- were choosing 
to invest elsewhere.  He noted recent large-scale investments 
by Hyundai Motors in Alabama, Hyundai Heavy Industry in 
China, Kia in Georgia, and Posco in India.  When companies 
did hire in Korea, they generally hired irregular employees. 
 
¶20.  (SBU) Zink said that organized labor no longer enjoyed 
the public support it once did.  "When a member of the public 
wants a credit card and can't get it because the teller who 
makes USD 200,000 closed early as part of a 'righteous 
struggle' with management for more money, the public gets 
annoyed," he said.  Zink, unlike the union representatives we 
met, said that the memory of the financial crisis was 
beginning to fade and that "people are forgetting all the 
jobs that were lost in 98." 
 
EMPLOYERS' FEDERATION WARNS OF UNION GREED, OPPOSITION 
--------------------------------------------- --------- 
 
¶21.  (SBU) The Korean Employer Federation (KEF), the largest 
umbrella employers' organization, said that the increase in 
the number of irregular employees was due to the excessive 
wage demands of unions.  Trade unions claimed that all jobs 
had to have the highest level of wages, said Hwang Eun-young, 
Team Leader of the KEF International Affairs Policy Bureau. 
Employers were unable to meet union demands and were being 
forced to look for an alternative workforce, or invest abroad. 
 
¶22.  (SBU) Clarifying the payment to full-time union workers 
issue (Ref B), KEF Managing Director Lee Dong-eun said that 
currently employers on average paid the salary of one 
full-time union employee for every 150 union members.  In 
some companies, the ratio was 1:21.  This would end in 
January 2007, as a result of labor legislation whose 
implementation had been twice postponed.  Lee said that 
employers would consider giving time off for union work, but 
that it was time to end the "irrational practice" of paying 
full-time labor activists.  Meanwhile, employers would 
welcome multiple trade unions, but need to have a unified 
bargaining channel in order to make the system manageable. 
 
¶23.  (SBU) Lee was pleased that the number of labor disputes 
per year had decreased by 90 percent since 1998.  He pointed 
out that there has been a turning point in labor relations 
every ten years.  In 1987, a rash of strikes followed 
democratization.  In 1997, there was the financial crisis, 
and labor suffered terribly.  We would have to wait and see 
what would happen in 2007. 
VERSHBOW