BOB DOLE KANSAS United States Senate OFFICE OF MAJORITY LEADER S-230 THE CAPITOL ROD : You may want to sit in on this one. See my "instant analysis" of the Korean trade liberalization package in the "Issues/Talking Points" section. [signature] AL [page 2] Shinyong LHO (low) , Prime Minister of South Korea Addressed as: MR. PRIME MINISTER Prime Minister for six months. Influential adviser to President Chun but not independent political power. Made some headlines at UN when he had brief meeting with North Korean Vice President, highest level North- South contact in more than a decade. You met him in Seoul August 17. Discussion centered on trade. ISSUES * Trade. South Korea about to announce new trade liberalization package. Three year, staged increase in number of commodities allowed to be imported. Major disappointments: doesn't lower any tariffs; doesn't deal with intellectual property issues; ignores some areas of major concern (e.g., insurance) ; delays permission to import many key items (e.g., computers until 1987 and canned fruits until 1988) . * North-South contacts. Lho's meeting with North Korean Vice President in New York has sparked rumors of [word scribbled out] Chun-Kim Il Sung summit. [page 3] MEMORANDUM October 25, 1985 To: SENATOR DOLE From: AL LEHN DAVE CORDOVA Subject: YOUR MEETING WITH KOREAN PRIME MINISTER LHO, MONDAY, OCTOBER 28, 10:30 AM Shinyong LHO (low) has been Prime Minister for six months. While influential on policy matters with President Chun, he is not a political heavyweight in his own right. He is a career diplomat who rose through the bureaucratic ranks to be Foreign Minister (1980-82) and Director of the Agency for National Security Planning (1982-85), roughly equivalent to Bud McFarlane's job in our system, prior to becoming Prime Minister. Lho is in the US to attend the UN General Assembly. While in New York, he met briefly at a social event with the North Korean Vice President, the highest level encounter between officials of the two Koreas in more than a decade. You will recall meeting with Lho in Seoul. On that occasion, trade was virtually the sole topic. Attached are: -- A delegation list (Lho will be accompanied by six aides) . -- A summary of your August 17 meeting with Lho in Seoul. -- Issues/talking points. cc . ROD JOYCE [page 4] DELEGATION LIST OF SOUTH KOREAN PRIME MINISTER LHO Shinyong LHO, Prime Minister Addressed as: MR. PRIME MINISTER Sang Ok LEE, Vice Minister of Foreign Affairs Addressed as: MR. LEE Soonbong HA, Secretary General to the Prime Minister Addressed as: MR. HA Pak Chae HAN, Deputy Chief of Mission, South Korean Embassy Addressed as: MR. HAN Yang LEE, Director, North American Division, Ministry of Foreign Affairs Addressed as: MR. LEE Kimoon BAN, Protocol Secretary to the Prime Minister Addressed as: MR. BAN Jai Ryong JANG, Counsellor, South Korean Embassy Addressed as: MR. JANG [page 5] SUMMARY OF MEETING SOUTH KOREAN PRIME MINISTER LHO AUGUST 17, 1985 PRIME MINISTER LHO. THE DELEGATION STRESSED TO LHO THAT, UNLESS THE ROK TAKES CONCRETE AND EFFECTIVE STEPS TO REDUCE OUR DEFICITS WITHIN TWO OR THREE MONTHS, AT MOST, CONGRESS IS LIKELY TO ACT. THE DELEGATION CITED COMPUTERS AND TOBACCO PRODUCTS AS EXAMPLES OF AMERICAN PRODUCTS WHICH COULD COMPETE EFFECTIVELY IN A FREE MARKET IN KOREA. WE ACKNOWLEDGED LHO'S POINTS THAT KOREA IS DIFFERENT THAN JAPAN AND HAS ITS OWN ECONOMIC PROBLEMS, SUCH AS A LABOR FORCE WORKING ON THE MARGINS OF POVERTY, WITH POTENTIAL FOR DOMESTIC UNREST IF UNEMPLOYMENT SHOULD INCREASE. BUT WE ALSO OUTLINED OUR OWN ECONOMIC PROBLEMS -- PER CAPITA DEBT MORE THAN EIGHT TIMES AS LARGE AS SOUTH KOREA'S, HIGH BUDGET DEFICITS AND MANY THOUSANDS OF AMERICANS OUT OF WORK BECAUSE OF IMPORTS. [page 6] ISSUES/TALKING POINTS TRADE. On October 12, the South Korean Ambassador wrote to advise you of a "new and comprehensive package of market-opening measures for both commodities and foreign investment" that his Government planned to announce "at the latest by October 19." As of today (October 25) no announcement has been made. Presumably it will be made soon . Commodities. About 600 specific items will be approved for import over the period 1986-88. Among the most significant: -- 1986: alfalfa, some auto parts, some service vehicles (buses, fire engines), some machine tools. -- 1987: personal computers, some construction equipment, electrical generators, small cars, some chemical products. -- 1988: all cars, all computers, canned fruits, additional chemical products. Major disappointments in the package: -- Does nothing about tariffs. -- Does nothing about intellectual property. -- Ignores some major areas of US concern, e.g., insurance. -- Delays many of the most important products until the later years (e.g., personal computers in 1987 and canned fruits in 1988). Investment. Opens 102 more industries to foreign investment immediately (making 762 out of a total of 999 industries open) . Also eliminates some "red tape" from investment procedures. Suggested talking points: -- APPRECIATE ADVANCE NOTICE OF TRADE/INVESTMENT LIBERALIZATION PACKAGE. -- WHEN WILL TRADE MEASURES BE ANNOUNCED? [page 7] -2- -- PACKAGE IS STEP FORWARD. WELCOME IT. -- BUT DISAPPOINTED THAT DOES NOT INCLUDE: -- NEEDED TARIFF CUTS. -- ANYTHING ON INTELLECTUAL PROPERTY PROBLEMS. -- SOME IMPORTANT SECTORS LIKE INSURANCE. -- EARLIER ACTION ON IMPORTANT COMMODITIES LIKE COMPUTERS AND CANNED FRUIT. NORTH-SOUTH CONTACTS. Lho's meeting with the North Korean Vice President in New York has spurred rumors about a possible "summit" between South Korean President Chun and North Korean leader Kim Il Sung. Meanwhile, other contacts continue: family reunification, economic issues and possible North Korean participation in the 1988 Olympics. Suggested talking points: -- NOTED YOUR NEW YORK MEETING WITH NORTH KOREAN VICE PRESIDENT. -- ANY PLANS FOR FOLLOW-UP WITH OTHER HIGH LEVEL CONTACTS? -- ANYTHING HAPPENING ON THE QUESTION OF NORTH KOREAN PARTICIPATION IN THE 1988 OLYMPICS? [page 8] Shinyong LHO (low) , Prime Minister of South Korea Addressed as: MR. PRIME MINISTER Prime Minister for six months. Influential adviser to President Chun but not independent political power. Made some headlines at UN when he had brief meeting with North Korean Vice President, highest level North-South contact in more than a decade. You met him in Seoul August 17. Discussion centered on trade. ISSUES * Trade. South Korea about to announce new trade liberalization package. Three year, staged increase in number of commodities allowed to be imported. Major disappointments: doesn't lower any tariffs; doesn't deal with intellectual property issues; ignores some areas of major concern (e.g., insurance) ; delays permission to import many key items (e.g., computers until 1987 and canned fruits until 1988) . * North-South contacts. Lho's meeting with North Korean Vice President in New York has sparked rumors of [word crossed out] Chun-Kim Il Sung summit. [page 9] MEMORANDUM October 25, 1985 To: SENATOR DOLE From: AL LEHN DAVE CORDOVA Subject: YOUR MEETING WITH KOREAN PRIME MINISTER LHO, MONDAY, OCTOBER 28, 10:30 AM Shinyong LHO (low) has been Prime Minister for six months. While influential on policy matters with President Chun, he is not a political heavyweight in his own right. He is a career diplomat who rose through the bureaucratic ranks to be Foreign Minister (1980-82) and Director of the Agency for National Security Planning (1982-85), roughly equivalent to Bud McFarlane's job in our system, prior to becoming Prime Minister. Lho is in the US to attend the UN General Assembly. While in New York, he met briefly at a social event with the North Korean Vice President, the highest level encounter between officials of the two Koreas in more than a decade. You will recall meeting with Lho in Seoul. On that occasion, trade was virtually the sole topic. Attached are: -- A delegation list (Lho will be accompanied by six aides). -- A summary of your August 17 meeting with Lho in Seoul. -- Issues/talking points. cc . ROD JOYCE [page 10] DELEGATION LIST OF SOUTH KOREAN PRIME MINISTER LHO Shinyong LHO, Prime Minister Addressed as: MR. PRIME MINISTER Sang Ok LEE, Vice Minister of Foreign Affairs Addressed as: MR. LEE Soonbong HA, Secretary General to the Prime Minister Addressed as: MR. HA Pak Chae HAN, Deputy Chief of Mission, South Korean Embassy Addressed as: MR. HAN Yang LEE, Director, North American Division, Ministry of Foreign Affairs Addressed as: MR. LEE Kimoon BAN, Protocol Secretary to the Prime Minister Addressed as: MR. BAN Jai Ryong JANG, Counsellor, South Korean Embassy Addressed as: MR. JANG [page 11] SUMMARY OF MEETING SOUTH KOREAN PRIME MINISTER LHO AUGUST 17, 1985 PRIME MINISTER LHO. THE DELEGATION STRESSED TO LHO THAT, UNLESS THE ROK TAKES CONCRETE AND EFFECTIVE STEPS TO REDUCE OUR DEFICITS WITHIN TWO OR THREE MONTHS, AT MOST, CONGRESS IS LIKELY TO ACT. THE DELEGATION CITED COMPUTERS AND TOBACCO PRODUCTS AS EXAMPLES OF AMERICAN PRODUCTS WHICH COULD COMPETE EFFECTIVELY IN A FREE MARKET IN KOREA. WE ACKNOWLEDGED LHO'S POINTS THAT KOREA IS DIFFERENT THAN JAPAN AND HAS ITS OWN ECONOMIC PROBLEMS, SUCH AS A LABOR FORCE WORKING ON THE MARGINS OF POVERTY, WITH POTENTIAL FOR DOMESTIC UNREST IF UNEMPLOYMENT SHOULD INCREASE. BUT WE ALSO OUTLINED OUR OWN ECONOMIC PROBLEMS -- PER CAPITA DEBT MORE THAN EIGHT TIMES AS LARGE AS SOUTH KOREA'S, HIGH BUDGET DEFICITS AND MANY THOUSANDS OF AMERICANS OUT OF WORK BECAUSE OF IMPORTS. [page 12] ISSUES/TALKING POINTS TRADE. On October 12, the South Korean Ambassador wrote to advise you of a "new and comprehensive package of market-opening measures for both commodities and foreign investment" that his Government planned to announce "at the latest by October 19." As of today (October 25) no announcement has been made. Presumably it will be made soon . Commodities. About 600 specific items will be approved for import over the period 1986-88. Among the most significant: -- 1986: alfalfa, some auto parts, some service vehicles (buses, fire engines), some machine tools. -- 1987: personal computers, some construction equipment, electrical generators, small cars, some chemical products. -- 1988: all cars, all computers, canned fruits, additional chemical products. Major disappointments in the package: -- Does nothing about tariffs. -- Does nothing about intellectual property. -- Ignores some major areas of US concern, e.g., insurance. -- Delays many of the most important products until the later years (e.g., personal computers in 1987 and canned fruits in 1988) . Investment. Opens 102 more industries to foreign investment immediately (making 762 out of a total of 999 industries open) . Also eliminates some "red tape" from investment procedures. Suggested talking points: -- APPRECIATE ADVANCE NOTICE OF TRADE/ INVESTMENT LIBERALIZATION PACKAGE. -- WHEN WILL TRADE MEASURES BE ANNOUNCED? [page 13] -2- -- PACKAGE IS STEP FORWARD. WELCOME IT. -- BUT DISAPPOINTED THAT DOES NOT INCLUDE: -- NEEDED TARIFF CUTS. -- ANYTHING ON INTELLECTUAL PROPERTY PROBLEMS. -- SOME IMPORTANT SECTORS LIKE INSURANCE. -- EARLIER ACTION ON IMPORTANT COMMODITIES LIKE COMPUTERS AND CANNED FRUIT. NORTH-SOUTH CONTACTS. Lho's meeting with the North Korean Vice President in New York has spurred rumors about a possible "summit" between South Korean President Chun and North Korean leader Kim Il Sung. Meanwhile, other contacts continue: family reunification, economic issues and possible North Korean participation in the 1988 Olympics. Suggested talking points: -- NOTED YOUR NEW YORK MEETING WITH NORTH KOREAN VICE PRESIDENT. -- ANY PLANS FOR FOLLOW-UP WITH OTHER HIGH LEVEL CONTACTS? -- ANYTHING HAPPENING ON THE QUESTION OF NORTH KOREAN PARTICIPATION IN THE 1988 OLYMPICS? [page 14] Manufactured automatic Approval Requests automobile parts some cosmetics nylon carpets - 1986 loudspeakers 1986 electric hand tools razors & blades 1987 machine tools 1986 , 1988 Construction equipment some 1987 computers (Pcs) 1987 Prime Minister : meeting > Trade > from our Kansas , wheat; corn airplanes Liberalization > large trade partner textile bill => Sensitive period of time President Chun wish wish- Strong prosperous U. S. > important to ROK equity [page 15] protectionism - no serve anyone's interest -> lost 75 years -> 1982 - first time U.S. had trade deficit & ROK Current account is balanced interest payment pressure to open -mike 1988 , 3 years by [illegible] Opening > = to other Westernized Countries footwear; textiles, albums Can solve by mutual negotiation trade should not be considered as an isolated item > 6% of GNP on defense $ 4-5 billion of foreign debt push too hard - SK will stumble no in U.S. intern more student up rising ; labor Unrest anti- U.S. Pressure [page 16] Japan is the problem why ROK Gov't can't get sympathy & understanding pressure from 1986 elections Control of Senate & at stake Admin > more aggressive now Congress going it's own way now couple of days will announce trade liberalism tariff question intellectual prop insurance gradually take barriers down ROK no disrupting the U.S. mkf do not want to disrupt $ strong > some problem caused by our actions Pressure on trade front People of Korea > did not do anything wrong same degree of push ROK total GNP> $80 billion