China denies THAAD retaliation against Korea: WTO report

Trade representatives of China denied the existence of trade-restrictive measures in tourism and distribution services against South Korean companies, despite the United States and Japan voicing support for Korea, a report by the World Trade Organization showed Sunday.

According to the meeting minutes for a council meeting held in June by the Council for Trade in Services, the Korean government raised again the issue of China’s trade-restrictive measures seen as retaliatory actions against Seoul’s decision to deploy the US anti-missile Terminal High Altitude Area Defense system.

“China was not aware of the existence of the ‘measures’ mentioned by Korea, and regretted that Korea had raised the issue under ‘other business’ once again,” the report said.

The Korean government had previously raised the issue to the World Trade Organization in March. However, amid little to no progress made between Beijing and Seoul, the Korean government said it would continue to raise the issue to the trade council as part of the WTO council meeting on trade in services.

“Korea believed that the measures of the Chinese government, which were inconsistent with the MFN (Most Favored Nation), National Treatment and Market Access disciplines of the GATS (General Agreement on Trade in Services), still existed,” the report stated.

Despite China’s denial of any economic backlash against the peninsula, representatives of the US and Japan were unified in citing concerns over China’s retaliation measures, arguing that it not only violates terms of international trade, but also raises fears of other nations becoming potential targets. 

“If China was indeed restricting the sale of tourist packages to another WTO member, it would be an issue of concern. ... Obviously, such a measure would mostly affect Korea, but it would also affect any WTO member whose suppliers were invested in Korea or providing cross-border services that benefitted from travel and tourism between the two countries, such as hotels, airlines or travel agencies,” the report stated as the stance of the US.

“In addition, while Korea might be the target of such a measure at that moment, any member could be the target of a similar measure in the future; it was therefore important for all members to understand the basis of the restrictions, and how China justified them in the context of its trade commitments.”

Japan added that it had a strong interest in the matter and that it was mainly concerned from a systemic viewpoint.

“China’s restrictive measures in tourism and distribution services could be inconsistent with China’s existing obligations under the GATS,” the report said.

Upon Seoul’s decision to deploy the missile defense system here, Beijing went on to ban the sale of group tours to Korea as well as unofficially blacklist Korean companies operating in China. The economic backlash has led to drastically plummeting sales figures in the country’s tourism sector and various business sectors.

Last month, a report from the Hyundai Research Institute said the number of Chinese tourists to Korea plunged 40 percent from March to July. It was estimated that Seoul’s lost tourism revenue reached some $6.51 billion during the period.

According to local auto industry data, Hyundai sold 404,300 vehicles in China from January to August this year, a 40 percent drop compared to a year earlier. Kia Motors also saw its sales plunge 53 percent during the same period.

By Julie Jackson (juliejackson@heraldcorp.com)