VZCZCXYZ0000
PP RUEHWEB

DE RUEHUL #0491/01 0442243
ZNR UUUUU ZZH
P 132243Z FEB 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC PRIORITY 5965
INFO RUEHNE/AMEMBASSY NEW DELHI 0500
RUEHME/AMEMBASSY MEXICO CITY 0290
RUEHKO/AMEMBASSY TOKYO 0153
RUEHBJ/AMEMBASSY BEIJING 0069

UNCLAS SEOUL 000491 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/K AND EB/TPP/BTA 
PASS USTR FOR CUTLER AND KI 
 
E.O. 12958: N/A 
TAGS: ETRD PREL KS IN MX
SUBJECT: KOREA LAUNCHES SPECIAL TRADE NEGOTIATIONS WITH 
INDIA AND MEXICO 
 
 
SUMMARY 
------- 
 
¶1. (SBU) Korea added to its rapidly lengthening list of 
trade negotiations by announcing on February 7 the launch of 
Comprehensive Economic Partnership Agreement (CEPA) 
negotiations with India during the visit to Seoul of Indian 
President Abdul Kalam.  The same week, Korea and Mexico held 
a first round of talks aimed at concluding a "Strategic 
Economic Complementation Agreement" (SECA).  According to 
contacts at the Ministry of Foreign Affairs and Trade 
(MOFAT), both agreements are less ambitious in terms of 
liberalization than more comprehensive free trade agreements 
(FTA's), although MOFAT claims to plan on striving for 
getting as close to real FTA's as it can.  Both initiatives 
will require the partners to hold rounds every two months, 
and take approximately two years to conclude.  End summary. 
 
¶2. (SBU) Econoff met on February 10 with MOFAT FTA 
Coordination Division Deputy Director Noh Won-il to discuss 
Korea's plans for a CEPA with India, and with Deputy 
Director Park Tae-young to discuss the negotiations with 
Mexico. 
 
INDIA: SHALL I COMPARE THEE TO AN FTA? 
-------------------------------------- 
 
¶3. (SBU) According to Deputy Director Noh, the decision to 
launch CEPA negotiations grew out of a bilateral joint study 
group composed of government, business, and academic 
representatives that convened four times between January 
2005 and January 2006 to analyze the feasibility of a Korean- 
India free trade agreement.  The group came back with a 
positive response.  According to an economic impact analysis 
done as part of the joint study by the state-affiliated 
think tank Korea Institute for International Economic Policy 
(KIEP), an FTA with India would boost Korea's exports to 
India by 80 percent, and imports from India by 30 percent, 
as well as have smaller but positive impacts on national 
income.  Korea agreed to term the agreement a Comprehensive 
Economic Partnership Agreement at India's behest, as India 
claimed there would be too much domestic Indian opposition 
to a "free trade agreement." 
 
¶4. (SBU) Noh said that the CEPA would cover the "traditional 
FTA aspects" of trade in goods and services, but would also 
include coverage of investment promotion and development 
cooperation projects that are dear to India.  The Korea- 
India joint statement announcing the negotiations states 
that the agreement will cover trade in goods; trade in 
services; trade facilitation measures; promotion, 
facilitation, and liberalization of investment flows; and 
measures for promoting bilateral economic cooperation in 
identified sectors.  He commented that the full framework of 
what will be included in the final agreement is not yet 
certain.  Korea is pursuing the inclusion of chapters on 
intellectual property rights, government procurement, and 
competition policy, but the outcome of this drive is not yet 
clear.  Noh said that Korea was pleased that India accepted 
a line in the joint statement stating that the agreement 
could be expanded to include "other areas." 
 
¶5. (SBU) Noh was less forthcoming about the degree of 
liberalization that could be expected from the CEPA.  While 
he maintained that the scope of sectors covered would be 
broad, he implied that the liberalization may not be too 
deep in many sectors.  Noh said that since India's average 
tariff for industrial goods is over 30 percent and Korea 
already has a trade surplus with India, Seoul does not 
expect India to lower many industrial tariffs significantly. 
He predicted that "slightly less" than 90 percent of trade 
will be liberalized as a result of the CEPA.  For example, 
he did not expect India to liberalize automobile imports, 
but maintained that Korea's auto makers would not be 
concerned, since their India strategy was already focused 
more on local production than exports. 
 
¶6. (SBU) According to Noh, the first round of CEPA 
negotiations will take place in mid-March in New Delhi. 
 
MEXICO: WOULD AN FTA BY ANOTHER NAME STILL SMELL SWEET? 
--------------------------------------------- ---------- 
 
¶7. (SBU) According to Deputy Director Park, the Strategic 
Economic Complementation Agreement (SECA) with Mexico is in 
 
some ways the structural antipode to the CEPA with India. 
Whereas the CEPA looks to be broad in scope but shallow in 
liberalization, the SECA will cover a much narrower range of 
goods, but liberalize trade in those sectors more fully. 
 
¶8. (SBU) Korea has long sought an FTA with Mexico to counter 
trade diversion from Mexico's FTA's with Japan and others, 
which Seoul believes is siphoning off its exports.  However, 
despite the conclusion of a joint feasibility study, Mexico 
refused to negotiate a free trade agreement due to strong 
opposition from domestic industry, which (as Mexico told 
Korea) was already too busy digesting Mexico's existing 
FTA's to be able to handle another. 
 
¶9. (SBU) Park said that Korea consented to a less ambitious 
agreement in order to get its nose under the tent and to at 
least liberalize those sectors that Mexico is willing to 
open.  However, the scope and depth of coverage is still 
under negotiation.  The initial idea is that it would cover 
trade in goods (including agriculture), services, 
investment, and competition policy, as well as perhaps 
intellectual property rights and economic cooperation. 
According to Park, Mexico has already informed Korea that it 
wants autos, steel and chemicals excluded from the 
agreement. 
 
¶10. (SBU) The SECA negotiations, like the talks with India, 
are on a two-month rotating schedule, although the SECA 
talks have no notional end date. 
 
COMMENT: WHAT'S IN A NAME? 
-------------------------- 
 
¶11. (SBU) Based on the information currently available, it 
is clear that neither of these agreements constitute an FTA 
according to U.S. definitions.  It was also clear from the 
discussions with MOFAT that Korea does not have firm 
preconceptions of what it wants out of these negotiations, 
and that these agreements are primarily targets of 
opportunity.  Seoul is entering into the talks without set 
goals, but rather with a general approach of seeking to get 
as much as can now while laying the institutional groundwork 
for being able to gradually expand coverage and 
liberalization over time.  In the case of India, MOFAT also 
considers the CEPA to be a fundamental building block for 
defining the economic aspects of its relationship with a 
country it views as a future Great Power. 
 
VERSHBOW