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TITLE:  SOUTH KOREA ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE


                           SOUTH KOREA

                     Key Economic Indicators
         (Billions of Korean won, unless otherwise noted)


                                  1991      1992      1993  /1
Income, Production,
 and Employment

Real GDP (1985 prices) /2         142,633   149,463   156,488
Real GDP Growth (pct.)              8.5       4.8       4.7
GDP (at current prices) /3        208,201   231,727   256,058
By Sector: 
  Agriculture/Forestry/Fisheries   16,566    17,682     n/a
  Mining and Manufacturing         59,503    64,021     n/a
  Electricity/Gas/Water             4,240     4,979     n/a
  Construction                     32,320    38,469     n/a
  Financial/Real Estate/
  Business Services                32,320    38,469     n/a
  Other Services                   47,208    52,510     n/a
  Government Services              16,043    18,939     n/a
Net Exports of Goods and
 Services                          -5,290    -2,401     n/a
Real Per Capita GDP
 (000's of won at 1985 prices)      3,300     3,422     3,555
Labor Force (000's)                19,011    19,384    20,200
Unemployment Rate (pct.)            2.3       2.4       2.9


Money and Prices
(annual percentage rate)

Money Supply (M2)                      18.6      18.4      19.0
Yield on Corp. Bonds (pct.) /3         18.9      16.2      12.9
Personal Saving Rate /3                28.2      26.9     n/a
Retail Inflation                        9.3       6.2       5.1
Wholesale Inflation                     4.7       2.2       1.5
Consumer Price Index (1990 base)      109.3     116.1     122.0
Average Exchange Rate
 (US$/1,000 WON)                    1.363     1.280     1.245


Balance of Payments and Trade
(Millions of U.S. dollars)

Total Exports (FOB) /4             71,870    76,632    82,800
  Exports to U.S.                  18,559    18,090    18,200
Total Imports (CIF) /4             81,525    81,775    84,900
  Imports from U.S.                18,525    18,287    17,500
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Debt /5                   39,100    42,800    45,000
Debt Service Payments               5,060     5,500     6,000
Good and FOREX Reserves            13,733    17,154    20,000
Trade Balance /4 (cust. basis)     -9,655    -5,143    -2,100
  Balance with U.S. (cust. basis)    -335      -197       700


Notes:

1/  1993 Figures are all estimates based on first half data.
2/  GDP at factor cost.
3/  Figures are average annual interest rates.
4/  Merchandise trade.
5/  Includes non-guaranteed private debt.



1.  General Policy Framework

    The South Korean government's economic policies have
traditionally emphasized rapid export-led development,
protection of domestic industries, and the reduction of the
Republic of Korea's large external debt.  Government
intervention in the economy to promote these objectives has
been pervasive throughout the post-Korean war era. 
Restrictions on foreign participation in the economy through
trade and investment have been common.  In the latter part of
the 1980s, removal of explicit import prohibitions and steadily
increasing domestic demand began to push Korea toward a more
mature stage of economic development.  Some Korean
policy-makers recognize the need to deregulate and modernize,
but are still influenced by the dirigism of past governments.

    Korea's economy is undergoing a difficult transition period
characterized by growth at comparatively low levels and policy
uncertainty.  After a disappointing rise of 4.7 percent in
1992, real GNP in first half 1993 grew by a relatively meager
3.8 percent over the year before.  Businesses are concerned
that economic activity in the second half will be weakened by
the government's "real name" decree outlawing alias bank
accounts.  That act, though conducive to long term efficiency,
will squeeze credit for small businesses unless they can
rapidly shift to institutional borrowing.  Real GNP growth in
1993 will roughly match last year's level of 4.7 percent, and
is expected to be followed by a moderate acceleration to 6.3
percent in 1994.  By contrast, Korea experienced double-digit
real growth in the 1986-1991 period.

    President Kim is hoping to jump-start economic growth. 
Stabilization programs enacted in early 1992 by ex-president
Roh Tae Woo had lowered Korea's inflation rate and narrowed the
current account deficit by the time President Kim assumed
office in February 1993.  Although several key advisors urged
continued stabilization, the new President, alarmed by sharp
declines in investment spending, decided to ease policy.  His
"100 days" plan lowered interest rates, increased credit lines
for business, and promised accelerated spending on public
investment.  The draft FY1994 budget endorsed by the government
in late-September 1993 proposes a 13.7 percent general spending
increase over the previous year, with large expenditure
increases planned for public investment, research and
development, and small business support.  Although nominally
balanced, revenue shortfalls will probably result in a moderate
deficit of about one percent of GNP, financed partly by bond
sales and partly by money creation.  To promote growth, the
Bank of Korea has permitted the money supply to rise four to
five percentage points beyond its original 1993 target of 17
percent.

    Korea's current account deficit narrowed to about $1.0
billion in first half 1993 from $4.5 billion in first half
1992.  This remarkable shrinkage was derived primarily from
trade flows, as capital goods imports fell due to weak domestic
facility investment and exports, aided by the depreciation of
the won against the yen during 1993, held up.  Korea has
succeeded during the 1990s in diversifying away from slow
growth OECD markets in favor of China, the ASEAN nations and
Latin America.  The current account deficit will fall to $770
million in 1993, and could shift into surplus the following
year.  The general slowdown in the Korean economy is affecting
demand for U.S. products.  U.S. exports to Korea declined in
1992 by $600 million, and will decline another $787 million in
1993.  The U.S. bilateral trade balance with Korea, based on
Korean customs data, is estimated to shift from a surplus of
about $200 million in 1992 to a $700 million deficit in 1993.

    Korea has halved its inflation rate since the start of the
decade, and consumer prices in August 1993 rose only 4.4
percent over 1992 levels.  The government is appealing to
businesses to avoid price hikes in 1993 in order to share the
pain of adjustment.  Wage demands, which intensified over the
last few years with the eclipse of authoritarian rule, began to
moderate in 1993, supporting a forecast of contained
inflation.  Government incomes policy for 1993 calls for a
freeze on civil service salaries and private sector wage
increases of 4.7 to 8.9 percent depending on firm size.  In
fact, according to the Korean Employers' Federation, wage
increases at the nation's top thirty conglomerates averaged
just 3.71 percent at end August 1993, about one percentage
point below the guideline.

    Much uncertainty surrounds President Kim's long range
economic policies.  The government's five year plan released in
early July 1993 foresees sustained annual real GNP growth of
seven percent, raising per capita incomes from $6,800 in 1992
to $14,000 by 1998, and promises a "new Korea" of liberalized
domestic and international policies.  The spirit and scope of
the plan are ambitious and encouraging, but details are lacking
and its implementation schedule is back-loaded toward the end
of the period.  The language of the plan suggests that certain
markets, like foreign exchange, may be subject to regulation
even after 1998.  Also, the bureaucracy can and often does
frustrate efforts to implement change.  While many of Korea's
leaders recognize that reform is essential for a nation that
aspires to OECD membership in the mid-1990s, the ministries and
the industrial and agrarian interests which derive power and
protection from the old system will undoubtedly fight
deregulation.


2.  Exchange Rate Policies

    The won fell gradually against the dollar in 1993.  Between
January and September 1993 the won depreciated about 2.8
percent against the dollar, closing at 811.1 won per dollar on
September 21.  The real, effective devaluation of the won
during the same period was about six percent.  On the plus side
for U.S. exporters, the sharp appreciation of the yen against
the dollar should help U.S. capital goods suppliers challenge
Japan's position as the dominant equipment supplier to Korea.

    The U.S. Treasury reported to the U.S. Congress in November
1993 that it found no evidence of direct exchange rate
manipulation by the Korean authorities to gain competitive
advantage.  However, the Treasury noted that stringent foreign
exchange and capital controls distort trade and investment
flows and frustrate the emergence of a truly market-determined
exchange rate.


3.  Structural Policies

    South Korea's economy is based on private ownership of the
means of production and distribution.  The government, however,
has actively intervened in the South Korean economy through low
interest "policy loans," and discretionary enforcement of
regulatory policies.  This has resulted in a high degree of
concentration of capital and industrial output in a small
number of large business conglomerates, or "chaebols."  The
most recent Korean government estimates indicate that the 30
largest chaebols account for 45 percent of the total capital of
the domestic financial sector, and 28 percent of total
manufacturing capacity.  The Korean government uses tax audits
and a tight grip on the financial sector to maintain effective
control over Korean industry.

    Historically, the import regime in Korea was structured to
allow easy entry of raw materials and capital equipment needed
by competitive export industries while consumer imports were
severely restricted.  Since the mid-1980s the Republic of Korea
has eliminated most explicit import prohibitions outside of the
agricultural area.  Many of the problems U.S. exporters now
experience in South Korea are rooted in the maze of regulations
which make up complicated licensing requirements, rules for
inspection and approval of imported goods, country of origin
marking requirements, and other standards often inconsistent
with international norms.

    January 1992 marked the beginning of the Presidents'
Economic Initiative (PEI), a bilateral cooperative effort to
eliminate generic barriers in the areas of standards and
rule-making, customs and import clearance, technology, and
investment.  The PEI lists of recommendations in these three
critical areas built on the results of the 1989 Super 301
Agreements and addressed key doing-business concerns of U.S.
firms.  After more than a year of discussions, the PEI working
groups issued reports on implementation in June 1993. 
Significant progress was made by Korea in carrying out the
recommendations in all areas except investment, but both sides
recognized the need for additional work on generic issues in
general and on investment in particular.  Also, both parties
agreed that the cooperative format had been a success and
wanted to continue talking.

    In June 1993, the undersecretary-level Economic Sub-Cabinet
launched the Dialogue for Economic Cooperation (DEC), a
year-long intensive effort to address systemic issues of
deregulation and economic cooperation.  The DEC was endorsed by
Presidents Clinton and Kim during their July 1993 meetings in
Seoul.  The DEC has agreed to establish counterpart groups to
examine specific problems in the areas of taxation, 
administrative procedures, import clearance, and investment. 
Other groups may be formed later.  These groups will report at
the next Economic Sub-cabinet meeting in June of 1994.  Both
governments expect that the DEC will result in an easing of
regulatory barriers in the two economies and expanded business
opportunities.


4.  Debt Management Policies

    Korea's gross foreign debt will reach an estimated $45
billion by the end of 1993, while debt service as a share of
goods and service exports remains in the comfortable six
percent range.  Net foreign debt, taking into account Korea's
approximate $35 billion in overseas assets, was just under $10
billion at the end of June 1993.

    In 1995 the Republic of Korea will graduate from its status
as a World Bank loan recipient.  In September 1991 the
government formally filed a graduation plan which included a
four-year phaseout period agreed upon with World Bank officials.


5.  Significant Barriers to U.S. Exports

    As formal barriers to imports have fallen, Korea has raised
new, more subtle, secondary barriers that effectively prevent
the widespread liberalization envisioned under the major trade
initiatives of the late 1980s.  Korean tariff rates remain
higher than the average rates of developing countries.  After a
one-year delay in 1990, Seoul has continued its five-year
tariff reduction plan.  As of January 1994, Korean tariff rates
will average 7.9 percent.  However, significant peaks will
remain in the agricultural area, particularly in products of
major interest to the United States.

    Korean safeguard regulations permit the government to
impose special "emergency tariffs" of up to 100 percent on
imported goods to protect domestic industry.  Seoul also uses
"adjustment tariffs" to cushion the impact of liberalization of
import restrictions.  In 1993 Korea removed canned pork from
the list of U.S. products affected by emergency tariffs. 
Batteries and glass products remain on the list.

    One of the most pervasive remaining formal barriers to U.S.
exports to Korea is the restriction on the ability to import on
credit.  Use of limited deferred payment terms (generally 60-90
days) is restricted to items with a tariff of ten percent or
less, which are generally raw materials.  Use of deferred
payment terms for other goods requires a license from the
Foreign Exchange Bank and permission from the Governor of the
Bank of Korea; permission is rarely granted.  U.S. firms
estimate that they could increase exports by up to one third if
Korean firms were allowed to buy on credit.

    Licenses are required for all imports to Korea, but they
are usually granted automatically, except for prohibited or
regulated goods.  These goods now include around 150 mostly
agricultural products.  Under Korea's agreement to phase out
its GATT balance of payments (BOP) restrictions, the government
is committed progressively to eliminate most of these import 
restrictions by 1997.  To date, BOP liberalization of
agricultural products has been largely limited to products with
little import potential.  The final tranche of products for
liberalization will be announced in March 1994.

    Korea agreed in the Uruguay Round to eliminate balance of
payments restrictions on beef by December 31, 2000.  A July
1993 U.S.- Korea bilateral beef agreement outlines minimum
market access levels for 1993 through 1995.  Under this
agreement, operation of the current
"simultaneous-buy-sell-system" (SBS) portion of the market will
be greatly improved by the prohibition of the active
involvement of the Korean government.  The number of SBS
participants will also increase during the course of the
agreement to include non-tourist hotels, meat processors, and
many supermarkets, as well as the tourist hotels and others who
currently have access to the system.

    Standards, licensing, registration, and certification
requirements effectively limit U.S. exporters' access to the
Korean market.  Unreasonably tough and arbitrarily-enforced
standards and labelling requirements have adversely affected
U.S. exports of a wide variety of consumer products, including
appliances and electronic equipment.  Registration requirements
for products such as chemicals and cosmetics hamper entry into
the market and often require U.S. firms to release detailed
proprietary information on the composition of their products.

    On January 1, 1993 a Prime Ministerial Decree took effect,
outlining improved procedures for standards and rule-making,
including a requirement for public notice, minimum comment
periods, and an adjustment period prior to implementation. 
However, the decree does not have the force of law.  Seoul has
said that it plans to introduce a full-fledged Administrative
Procedures Act in 1995.  Administrative procedures is one of
the principal topics of discussion in the DEC.  The United
States hopes to influence the plans for the Administrative
Procedures Act and to have an impact on intermediate
regulations that are proposed and implemented between now and
1995.

    Investment in most professional services remains restricted
for foreign firms in Korea.

    The significant barriers to U.S. investment in Korea are
one of the key areas of discussion in the DEC.  Korea
systematically targets favored industries for development
through the provision of low interest "policy loans."  U.S.
investments often do not receive national treatment under
Korean law or in practice.  Also, foreign-invested firms face
other discriminatory lending practices by domestic financial
institutions and restrictions on access to offshore funding,
including offshore borrowing, intra-company transfers, and
inter-company loans.  Foreign equity participation requirements
remain in some sectors.  In some, only joint ventures are
permitted, and in others foreign equity participation is
restricted to less than 50 percent.  Land ownership by foreign
individuals and firms is restricted, although pending
legislation would ease the problem somewhat.  Although the
Korean government is moving to expand the number of sectors in
which only notification of a foreign investment is required, 
government approval of investment is still needed in many
sectors.  These approvals often are time consuming to obtain,
sometimes taking years.  However, even in sectors in which
notification is allowed, the government reserves the right to
reject notification of a proposed investment.  Downstream
services by foreign firms, including distribution, remain
restricted.

    The government has done little to educate a public
accustomed to a closed domestic market on the benefits of
imports, particularly to consumers.  Most Koreans have been
taught that imports are, by definition, luxury goods and
somehow unpatriotic.  The government has encouraged regular
"frugality campaigns" against "over-consumption" that hit
consumer imports particularly hard.  While the government has
privately pledged not to target imports, it has not publicly
objected to rallies against foreign cigarettes or promotion of
unfounded imported food safety scares by government-funded
"consumer groups."  Domestic industry often puts pressure on
the government to use its authority against foreign companies. 
In 1993, foreign firms in the recently-liberalized cosmetics
sector simultaneously were undergoing customs valuation audits
and investigation of their import procedures.  Numerous press
articles negatively highlighted the increase in sales of
foreign cosmetics and the amount of floor space devoted to
their display by department stores.  The Korean press
frequently airs reports that the office of national taxation
will audit individuals who travel excessively abroad or spend
too much on so-called luxury goods.

    The streamlining of Korea's complex import clearance
procedures was an important topic under the Presidents'
Economic Initiative in 1992.  Korea is now implementing PEI
recommendations for improvement of customs and import clearance
procedures and is building on them in the DEC.  A new customs
subgroup has been established to deal with the long term
implementation of improvements in the Korean import clearance
system.  The subgroup will contribute to the final DEC report
scheduled for the spring of 1994.

    Korea has agreed to join the new GATT Government
Procurement Code.  For Korea, the Code will be effective
January 1, 1997.


6.  Export Subsidies Policies

    Since the early 1960s, Korea has eliminated several
indirect export subsidies, including the special depreciation
allowance for large exporting firms and overseas construction
firms.  In 1988, Korea terminated the provision of export loans
to large firms not affiliated with business conglomerates. 
However, in response to Korea's growing trade deficits, the
government resumed the provision of short-term export loans to
large exporting firms in April 1992.

    This measure was added to existing programs of support for
Korea's export industries, including customs duty rebates for
raw material imports used in the production of exports; short
term export loans for small and medium sized firms; rebates on
the value-added tax (VAT) and a special consumption tax for 
export products; corporate income tax benefits for costs
related to the promotion of overseas markets; unit export
financial loans; and special depreciation allowances for small
and medium exporters.  Seoul also maintains a special loan
program for small and medium business to facilitate exports to
Japan as a measure to curb its bilateral trade deficit with
that country.  Export subsidies to the shipbuilding industry
are within OECD guidelines.  Korea is a signatory to the GATT
code on subsidies and countervailing duties.


7.  Protection of U.S. Intellectual Property

    In February 1993, Korea launched a new comprehensive plan
to strengthen intellectual property rights (IPR) protection and
the enforcement of IPR laws.  The so-called special enforcement
program was originally scheduled to run three months, but was
later extended to ten months.  It included the establishment of
an information network on cases and twice-weekly raids on
markets.  Key trouble areas, such as the electronics markets in
Seoul and Pusan, were targeted more often.  Korean authorities
gave high priority to the prosecution of IPR-related cases. 
For the first time, IPR offenders routinely spent time in jail
and paid fines.  The government also announced plans to
increase the penalties for copyright infringement and to amend
the customs law to strengthen IPR enforcement for imports and
exports of copyright and trademark goods.

    As a result of this concentrated push, the U.S. government
elected not to upgrade Korea to "priority foreign country"
status in the April 1993 Special 301 review.  However, Korea
was retained on the "priority watch list" and scheduled for an
out-of-cycle review.  The American business community,
encouraged by the new signs of a serious approach to IPR by the
Korean government, supported the U.S. government's decision. 
The out-of-cycle review was conducted in the Fall of 1993;
Korea remained on the "priority watch list."

    Patents:  Patents are one area that the new campaign has
not affected.  While Korea's patent laws are satisfactory, the
actual extent of patent protection in Korea depends on judicial
interpretation.  Problems include a lack of discovery
procedures, limits on the use of the "doctrine of equivalents,"
and a determination that "improvement patents" (whether
patentable or not) do not infringe on the pioneer patent. 
Existing laws on compulsory licensing pose problems for some
U.S. firms because they specify that a patent can be subject to
compulsory licensing if the patent is not worked.

    Trademarks:  Trademark violations typically have been the
most visible area of infringement and were the prime target of
the 1993 crackdown, particularly since Korean law allows
prosecutors or police to investigate trademark infringement
cases without the filing of a formal complaint.  Problems
remain with the definition of "famous marks" in Korea.  Reviews
by the Korean authorities charged with deciding whether a
trademark has famous mark status have resulted in inconsistent
decisions.  Three dimensional characters still have no
protection at all.

    Copyrights:  Korea and the United States established
copyright relations when Korea joined the Universal Copyright
Convention in 1987.  Korean government administrative measures
outlined in the 1986 United States-Korea IPR agreement were
intended to provide retroactive protection for books
copyrighted from 1977 to 1987, software copyrighted from 1962
to 1985, and all pre-1987 sound and video recordings.

    Following the 1986 agreement, Korea had some immediate
success in curbing pirating activities, particularly in the
area of printed materials, through the use of tax and trademark
infringement laws.  However, until the advent of the 1993
special enforcement campaign, relatively little attention was
given to the problem of piracy in the area of sound
recordings.  One of the chief successes of the new IPR regime
has been the establishment of a mechanism for reviewing
registration applications that tracks the ownership of both
pre- and post-1987 works.  The continued effective management
of the registration system for these works -- and follow-up in
order to destroy illegally-produced or imported copies -- will
be key concerns in future evaluations of Korea's IPR regime.

    Software piracy continues to be widespread.  The Korean
authorities have conducted raids on retailers and wholesalers,
but have given relatively low priority to large end-users.  The
few raids that have been conducted on training schools and
other end-users have sparked significant purchase orders to
legitimate vendors.

    Korea agreed in 1993 to extend copyright protection to
textile designs.  Korean officials began to work with local
textile manufacturers to develop mechanisms for tracking rights
ownership and protecting Korean producers from liability.

    A key complaint of U.S. firms is that Korean law does not
permit the prosecutor or the police to undertake an
investigation of alleged copyright infringement unless a formal
complaint has been filed.  U.S. firms maintain that this
requirement causes delays which allow the alleged violator to
remove evidence from the premises before the authorities
arrive.  U.S. companies have welcomed the proposal to
significantly increase the penalties for copyright
infringement.  The Korean government currently has no plans to
change its complaint requirement.

    New technologies:  In November 1992, the National Assembly
passed legislation to extend IPR protection to semiconductor
mask works.  The legislation is currently under review by the
U.S. Government.  If the Korean law is compatible with U.S.
law, Korea could seek reciprocal protection for its chips under
U.S. law, provided it demonstrates that no "unauthorized
duplication" is occurring.  Preliminary reviews indicated that
the compulsory licensing provisions of the Korean law may
prevent reciprocal recognition.

    Legislation to protect trade secrets took effect in
December 1992.  A Prime Ministerial decree effective January 1,
1993 mandates the handling of trade secrets, including business
confidential information, in such a manner that legitimate
commercial interests are protected.  In 1992, the Korean
government enacted new legislation to regulate cable 
television.  The U.S. government views the legislation with
concern because certain provisions may inhibit market access
for U.S. firms.

    Korea is a party to the Paris Convention for the Protection
of Industrial Property, the Patent Cooperation Treaty, the
Universal Copyright Convention, the Geneva Phonograms
Convention, and is a member of the World Intellectual Property
Organization.  In November 1992, the National Assembly ratified
the United States - Korea Patent Secrecy Agreement signed in
January 1992.


8.  Worker Rights

    a.   Right of Association

    The Constitution gives workers, with the exception of most
public service employees and teachers, the right to free
association.  There are, however, blue collar public sector
unions in railways, telecommunications, the postal system, and
the national medical center.  The trade union law specifies
that only one union is permitted at each place of work, and all
unions are required to notify the authorities when formed or
dissolved.

    In the past the government did not formally recognize labor
federations which were not part of, nor affiliated with, the
country's legally recognized labor confederation -- the
Federation of Korean Trade Unions (FKTU).  In 1993, however,
the Labor Ministry officially recognized independent white
collar federations representing hospital workers, journalists,
financial workers, and white collar employees in construction
companies and government research institutes.  In practice,
labor federations not formally recognized by the Labor Ministry
existed and worked without government interference, except if
the authorities considered their involvement in labor disputes
harmful to the nation.

    No minimum number of members is required to form a union,
and unions may be formed without a vote of the full,
prospective membership.  Korea's election and labor laws forbid
unions from donating money to political parties or
participating in election campaigns.  However, trade unionists
have circumvented the ban by temporarily resigning their union
posts and running for office on the ticket of a political party
or as an independent.

    Strikes are prohibited in government agencies, state-run
enterprises, and defense industries.  By law, enterprises in
public interest sectors such as public transportation,
utilities, public health, banking, broadcasting, and
communications must submit to government-ordered arbitration in
lieu of striking.  The Labor Dispute Adjustment Act requires
unions to notify the Ministry of Labor of their intention to
strike and mandates a ten day cooling-off period before a
strike may legally begin.  Overall membership in Korean labor
unions has been declining over the last several years largely
because the explosion in labor organizing in 1987-89 left the
movement divided but well compensated, and worker rights
significantly improved.

    Since July 1991, South Korea has been suspended from U.S.
Overseas Private Investment Corporation (OPIC) insurance
programs because of a lack of significant progress in worker
rights.

    b.   Right To Organize and Bargain Collectively

    The Constitution and the Trade Union Law guarantee the
autonomous right of workers to enjoy collective bargaining and
collective action.  Although the trade union law is ambiguous,
the authorities, backed up by the courts, have ruled that union
members cannot reject collective bargaining agreements (CBAS)
signed by management and labor negotiators.  Nonetheless, union
members continue to reject CBAS agreed to by labor and
management negotiators.  Extensive collective bargaining is
practiced.  Korea's labor laws do not extend the right to
bargain collectively to government employees, including
employees of state or public-run enterprises and defense
industries.

    Korea has no independent system of labor courts.  The
Central and Local Labor Commissions form a semiautonomous
agency of the Ministry of Labor that adjudicates disputes in
accordance with the Labor Dispute Adjustment Law.  The Law
authorizes labor commissions to start conciliation and
mediation of labor disputes after, not before, negotiations
breakdown and the two sides are locked into their positions. 
Labor-management antagonism remains a serious problem, and some
major employers remain strongly anti-union.

    U.S. executives sometimes complain that Korean law is
biased toward labor, citing the government's reluctance to
enforce management rights during a spate of strikes at
foreign-owned banks in the Summer and Fall of 1993.  However,
in early November government arbitrators did rule in favor of a
major U.S. bank, thereby ending a prolonged strike.

    c.   Prohibition of Forced or Compulsory Labor

    The Constitution provides that no person shall be punished,
placed under preventive restrictions, or subjected to
involuntary labor, except as provided by law and through lawful
procedures.  Forced or compulsory labor is not condoned by the
government.

    d.   Minimum Age for Employment of Children

    The Labor Standards Law prohibits the employment of persons
under the age of 13 without a special employment certificate
from the Ministry of Labor.  Because education is compulsory
until the age of 13, few special employment certificates are
issued for full-time employment.  Some children are allowed to
do part-time jobs such as selling newspapers.  In order to gain
employment, children under 18 must have written approval from
their parents or guardians.  Employers may require minors to
work only a reduced number of overtime hours and are prohibited
from employing them at night without special permission from
the Ministry of Labor.

    e.   Acceptable Conditions of Work

    Korea implemented a minimum wage law in 1988.  The minimum
wage level is reviewed annually.  Companies with fewer than ten
employees are exempt from this law, and some still pay
below-minimum wages.  The Labor Standards and Industrial Safety
and Health Laws provide for a maximum 55-hour workweek. 
Amendments to the Labor Standards Law passed in March 1989
brought the maximum regular workweek down to 44 hours. 
According to the Ministry of Labor, the average Korean worker
worked 47.5 hours per week, including overtime, in 1992.

    The government sets health and safety standards, but South
Korea suffers from unusually high accident rates.  The Ministry
of Labor employs few inspectors, and its standards are not
effectively enforced.

    f.   Rights in Sectors with U.S. Investment

    U.S. investment in Korea is concentrated in petroleum,
chemicals and related products, transportation equipment,
processed food, and to a lesser degree, electric and electronic
manufacturing.  Workers in these industrial sectors enjoy the
same legal rights of association and collective bargaining as
workers in other industries.  Manpower shortages are forcing
labor-intensive industries to improve wages and working
conditions, or move offshore.  Working conditions at U.S.-owned
plants are for the most part better than at Korean plants.



         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                                67
Total Manufacturing                                   1,140
    Food & Kindred Products                   240
    Chemicals and Allied Products             215
    Metals, Primary & Fabricated               33
    Machinery, except Electrical               38
    Electric & Electronic Equipment           176
    Transportation Equipment                   53
    Other Manufacturing                       386
Wholesale Trade                                         276
Banking                                               1,122
Finance and Insurance                                   165
Services                                                 25
Other Industries                                        -17

TOTAL ALL INDUSTRIES                                  2,779


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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