[Text only of letters sent from the Commerce Committee Democrats]
The Honorable William J. Clinton
President of the United States
The White House
Washington, D.C. 20500
Dear Mr. President:
The series of financial crises rippling through Asia recently were properly the subject of much discussion at the recent summit in Vancouver. The world reacted with great concern when South Korea, the world's 11th largest economy, called on the International Monetary Fund (IMF) for an emergency loan of as much as $60 billion to meet its obligations to foreign lenders. South Korea is, of course, not alone. Thailand and Indonesia have also asked for IMF assistance, and Japan is experiencing major problems in its currency and securities markets.
As the United States, the IMF and other international organizations consider ways to restore health to the Asian economies, it is essential that the international community help these countries to address their problems in the broadest possible manner. In particular, while each of these countries confront common and extraordinarily serious financial market problems, they have also pursued national policies that emphasize growth through exports while they maintain closed and restrictive trade policies in their own markets.
Without new and substantial initiatives to open markets to world-class, competitive products and services, the inefficiencies that breed instability may well remain in the Asian markets. Korea has built unneeded excess capacity in a number of economic sectors. These countries must be given guidance and help to address the root cause of their economic difficulties: their closed domestic markets.
Past trade agreements have simply failed to increase foreign participation in Asian markets that could be expected in truly open markets. In 1995, the United States and South Korea entered into an agreement explicitly designed to "substantially increase market access for foreign passenger vehicles" in Korea. However, the Korean government's insistence on maintaining openly discriminatory policies against the importation and sale of U.S. and other foreign made vehicles has prevented the goals of this agreement from being achieved. The foreign market share of all automobiles sold in Korea is only 0.6%.
As a result of this failure to implement its obligations under this agreement, South Korea was recently designated by the United States as a priority country for unfair trade practices under Super 301. Before the United States participates in any international efforts to help overcome problems in the Korean financial markets, South Korea should be required to commit not only to financial reforms but also to fulfilling its market opening commitments that it so far has shirked.
Trade in autos is not the only problem. If international assistance is in effect used to prop up or subsidize failing enterprises, it may only serve to encourage the dumping of Korean products in other markets. Some of the products and sectors likely to be affected by this practice, such as DRAM chips, involve national security considerations.
Further, we have been engaged in negotiations with South Korea and the Asian and other member countries of the World Trade Organization (WTO) to open financial services markets to foreign participants ever since the WTO Agreement was entered into in 1994. When capital is what that country's financial markets most need, South Korea still limits total foreign participation in its financial services sector to 15%. It prohibits foreign securities firms from underwriting Korean securities issues abroad. It limits foreign portfolio investment, with a maximum of 5% individual and 20% aggregate holding in each listed Korean company. It applies discriminatory and costly capital requirements to foreign securities firms, and it prohibits foreign investment in blue chip corporate bonds. South Korea, and the other Asian countries, will have an opportunity to demonstrate their willingness address these issues in the WTO negotiations on financial services scheduled to conclude by December 12.
Without strong market opening commitments, South Korea and other Asian nations might not warrant the help that the U.S. and others in the international community may be asked to give. The Administration should accord the highest priority to developing a comprehensive approach to addressing the problems facing the Asian economies. That approach must not be limited to dealing with financial market problems only. Opening trade opportunities for American and other foreign products and services in Asian markets is the only way to build stable and efficient economies in Asia for the future.
Sincerely,
JOHN D. DINGELL
RANKING MEMBER
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