WT/TPR/S/346/Rev.1 6 January 2017 (17-0131) Page: 1/186 Trade Policy Review Body TRADE POLICY REVIEW REPORT BY THE SECRETARIAT REPUBLIC OF KOREA Revision This report, prepared for the seventh Trade Policy Review of the Republic of Korea, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the Republic of Korea on its trade policies and practices. Any technical questions arising from this report may be addressed to Sergios Stamnas (tel: 022 739 5382) and Zheng Wang (tel: 022 739 5288). Document WT/TPR/G/346/Rev.1 contains the policy statement submitted by the Republic of Korea. Note: This report was drafted in English. WT/TPR/S/346/Rev.1 • Republic of Korea - 2 - CONTENTS SUMMARY ........................................................................................................................ 8 1 ECONOMIC ENVIRONMENT ........................................................................................ 12 1.1 Overview ...................................................................................................................12 1.2 Recent Economic Performance .....................................................................................14 1.2.1 Growth, income, and employment .............................................................................14 1.2.2 Prices .....................................................................................................................17 1.3 Main Macroeconomic Policy Developments .....................................................................17 1.3.1 Monetary and exchange rate policy ............................................................................17 1.3.2 Fiscal policy ............................................................................................................18 1.3.3 Structural policies ....................................................................................................18 1.3.3.1 Tax reform ...........................................................................................................18 1.3.3.2 Privatization .........................................................................................................19 1.3.3.3 Competition policy ................................................................................................19 1.3.3.4 Corporate governance and the cost of capital ...........................................................19 1.3.3.5 Labour market policies ...........................................................................................20 1.4 Balance of Payments ...................................................................................................20 1.5 Composition and Pattern of Trade .................................................................................22 1.6 Trends and Patterns in Foreign Direct Investment ...........................................................24 2 TRADE AND INVESTMENT REGIME ............................................................................ 28 2.1 Introduction ...............................................................................................................28 2.2 General Constitutional and Institutional Framework ........................................................28 2.3 Structure of Trade Policy Formulation ............................................................................29 2.4 Trade Policy Objectives ...............................................................................................30 2.5 Trade Laws and Regulations .........................................................................................31 2.5.1 Regulatory reform ....................................................................................................31 2.5.2 Trade-related legislation ...........................................................................................32 2.5.3 Transparency ..........................................................................................................33 2.6 Trade Agreements and Arrangements ...........................................................................35 2.6.1 WTO ......................................................................................................................35 2.6.2 Regional and preferential agreements ........................................................................36 2.6.3 Preferential trade agreements ...................................................................................39 2.6.4 Other agreements and arrangements .........................................................................39 2.6.4.1 Asia-Pacific Economic Cooperation (APEC) ................................................................39 2.6.4.2 Asia-Europe Meetings (ASEM) .................................................................................40 2.6.4.3 Trade with the Democratic People's Republic of Korea ...............................................40 2.7 Foreign Direct Investment ...........................................................................................40 2.7.1 Overview ................................................................................................................40 2.7.2 FDI restrictions ........................................................................................................41 2.7.3 FDI incentives .........................................................................................................43 WT/TPR/S/346/Rev.1 • Republic of Korea - 3 - 2.7.3.1 Tax incentives ......................................................................................................43 2.7.3.2 Cash grants ..........................................................................................................44 2.7.3.3 Industrial site support ...........................................................................................45 2.7.4 Other .....................................................................................................................45 3 TRADE POLICIES AND PRACTICES BY MEASURE ........................................................ 47 3.1 Introduction ...............................................................................................................47 3.2 Measures Directly Affecting Imports ..............................................................................49 3.2.1 Customs procedures.................................................................................................49 3.2.2 Customs valuation ...................................................................................................52 3.2.3 Tariffs ....................................................................................................................53 3.2.3.1 Applied MFN rate ..................................................................................................53 3.2.3.2 MFN tariff dispersion and escalation ........................................................................56 3.2.3.3 "Flexible" tariffs ....................................................................................................57 3.2.3.4 Bound tariff ..........................................................................................................59 3.2.3.5 Duty concessions/exemptions .................................................................................59 3.2.3.6 "Usage" tariff rates................................................................................................59 3.2.3.7 Tariff preferences and rules of origin .......................................................................59 3.2.4 Tariff quotas ...........................................................................................................62 3.2.4.1 Agricultural tariff quotas ........................................................................................62 3.2.4.2 Autonomous tariff quotas .......................................................................................63 3.2.5 Other levies and charges ..........................................................................................63 3.2.6 Import licensing, quotas, and prohibitions ...................................................................63 3.2.6.1 Licensing .............................................................................................................63 3.2.6.2 Quotas ................................................................................................................64 3.2.6.3 Prohibitions ..........................................................................................................64 3.2.7 State trading ...........................................................................................................65 3.2.8 Contingency measures .............................................................................................66 3.2.8.1 Anti-dumping and countervailing measures ..............................................................66 3.2.8.2 Safeguards ...........................................................................................................67 3.2.9 Standards and other technical requirements ...............................................................68 3.2.9.1 Standards, testing, and certification ........................................................................68