South Korea agreed yesterday under strong pressure from the Reagan administration to three major trade concessions that could mean as much as $200 million in added sales for American companies.
Korea said it would relax its ban on the sale of foreign cigarettes, allow U.S. companies to sell life and fire insurance and enact legislation to take effect within a year that would protect American books, records, technology and other products from piracy.
The actions, announced at the White House and in Seoul, come as Korea's growing trade surplus with the United States is becoming a major irritant between the two countries. The surplus amounted to $4.8 billion in 1985, according to U.S. Commerce Department figures, and is likely to be larger this year.
Korea viewed yesterday's trade concessions as major efforts to heal the frictions, Washington Post correspondent John Burgess reported from Seoul. U.S. officials said Korea was anxious to appear reasonable in trade matters out of concern that Congress would order cuts in its duty-free import privileges under the Generalized System of Preferences for developing nations.
The United States contends that Korea's economy has developed sufficiently to allow for greater competition and the removal of market barriers. Korea, while making concessions, argues that its progress is overrated and that it remains a developing country that should not be pushed too hard.
"It is very difficult to pursuade people that our market should be opening up when the markets in the advanced countries are closing down," Nyum Jin, assistant minister of the government's Economic Planning Board, said in an interview with Burgess. He was referring to steps toward protectionism in many advanced countries.
Korea's moves on insurance and piracy result from President Reagan's aggressive trade policy of last fall, when he initiated complaints of unfair trade practices that could have led to retaliatory action if Seoul had not agreed to accept U.S. insurance companies and offer protection to U.S. intellectual property.
White House Deputy Press Secretary Edward Djerejian said Seoul's action "admits U.S. firms to the $5 billion Korean insurance market and provides comprehensive protection of foreign patents, copyrights and trademarks in Korea."
The agreement on insurance was hailed by an attorney for American International Group, a major U.S. insurance carrier. "We view it as a landmark. We think it is a tremendous settlement," said Claude Fontheim of the Dallas and Washington law firm of Akin Gump Strauss Hauer & Feld.
U.S. participation in Korea's insurance market will be phased in, with two American firms receiving licenses to underwrite fire insurance by the end of this month, another firm getting a license for life insurance by the end of the year, and others to follow.
The Korean government agreed to submit legislation on copyright protection to the National Assembly in September to take effect next July. U.S. book publishers claimed they lose $170 million a year from pirated volumes, and Korea is known as a center of counterfeit products, including records, designer jeans, pharmaceuticals and computer softwear.
The action on cigarettes, announced yesterday in Seoul, will limit foreign cigarette sales to 1 percent of the Korean market, about 40 million packs worth $15 million a year.
The United States has been trying for years to open Korea's $1.5-billion-a-year market, which is now controlled by a government tobacco monopoly and totally closed to foreign brands.
"That's a start. We are assuming more will follow," said Deputy U.S. Trade Representative Michael B. Smith.
The end of the total ban on cigarette imports means that Korean citizens no longer will be subject to arrest and a $60 fine if they are caught smoking a foreign cigarette, which is considered contraband.
U.S. trade officials and tobacco companies considered the penalties against smoking foreign cigarettes as a grossly unfair trade practice. But Korean officials explained it as an offshoot of efforts to stamp out black market activities caused by U.S. servicemen, who since the 1950-1953 Korea war have been illegally peddling U.S. cigarettes bought in military post exchanges.
The government said the first imports for legal sale to Koreans will come in September, Burgess reported. With a 100 percent import tax, the cigarettes will sell for about $1.50 a pack compared with about 60 cents for domestic brands. Legislation will be submitted to the assembly, meanwhile, to make the tobacco monopoly a public corporation.
The government contends that hundreds of thousands of South Korean farmers depend for their livelihood on tobacco cultivation and they will be hard hit.
Major Korean industrial associations yesterday expressed disappointment over the various market-opening measures, but for the most part depicted them as unavoidable. The opposition New Korea Democratic Party strongly condemned the cigarette decision, saying it sacrificed the interests of the nation's farmers.