Investment Provisions in the U.S.-South Korea Trade Agreement
Foreign investment delivers significant economic benefits to U.S. companies and American workers. When U.S. companies can more easily expand to and invest in foreign markets, that can boost employment, increase wages, promote exports, and enhance innovation here at home by increasing demand for their products and services overseas.
The U.S.-South Korea trade agreement increases investment opportunities for U.S. companies in South Korea by providing them access to the market, strong investor protections, and a way for investors to enforce their rights. The agreement does not provide South Korean investors in the United States any more investment protections than U.S. law gives American investors here, and it ensures that the U.S. government and our state and local governments can continue to regulate in the public interest, including to protect public health, public safety, and the environment.
The agreement’s investment rules establish a stable framework for U.S. companies investing in South Korea, level the playing field, and require U.S. investors to be treated in accordance with the rule of law. The investment rules preserve a level playing field for U.S. investors here at home, and ensure government’s ability to look out for the public interest where South Korean investment is concerned.
The agreement’s investment rules are largely drawn from U.S. law, and increase protections for U.S. investors in South Korea to the standards that they – and South Korean investors – already enjoy in the United States. These include requirements that the South Korean government will treat U.S. investors just as well as domestic investors or any other foreign investor. The South Korean government cannot illegally seize U.S. investors’ property or illegally destroy the value of their investments without paying full compensation, and the South Korean government will allow U.S. investors to move their money into or out of South Korea. U.S. investors cannot be forced to transfer technology to South Korea as a condition for investing there, nor be required to hire local managers.
The agreement provides U.S. investors with locked-in and, in some cases, improved market access in key sectors in South Korea, such as delivery services, legal services, and telecommunications – where, for instance, American companies will be allowed to own 100 percent of a subsidiary in South Korea.
If a U.S. investor believes that the South Korean government has breached key investment rules of the agreement – for instance, a prohibition against discriminatory treatment of a U.S. investor – then that investor is guaranteed recourse to neutral, transparent, and binding international arbitration.
In the Trade Act of 2002, Congress mandated that trade agreements should not give foreign investors in the United States any greater substantive rights than American investors already receive – and all of the protections offered to South Korean investors in this agreement reflect U.S. law protections that are already available to all investors, both foreign and domestic, in the United States.
Nothing in the agreement’s investment rules prevents the federal government or a state or local government from adopting or maintaining laws or regulations to protect public health, public safety, the environment, or other public interests.
While South Korean investors will have recourse if they believe the United States has violated their rights, the rules of the agreement contain safeguards to deter and penalize frivolous suits. They require all arbitration proceedings be open to the public and allow the public to weigh in with the arbitration panel. Both countries can review how the agreement should be applied if there are concerns about how a panel may rule.