Korea's Kim signs investment deal with Japan


Koizumi (l) and Kim watched on as their nations agreed to make it easier for executives to do business in both

Alex Frew McMillan
CNN Hong Kong

SEOUL, South Korea -- South Korean President Kim Dae-jung and his Japanese counterpart, Junichiro Koizumi, pledged on Friday to explore a free-trade deal.

Earlier in the day, Kim welcomed the Japanese premier to the Blue House so that the two countries could seek closer ties on trade.

Japanese Prime Minister is in the Korean capital for a three-day trip. Friday's summit at Korea's official residence is the fourth time the heads of state have met.

The two men agreed to research a full-blown free-trade agreement between the two countries. The panel would likely include executives, academics and government officials.

Investment pact inked

Though Japan has lined up a series of bilateral pacts, such a deal would be something of a first for Korea.

Kim and Koizumi also signed a bone fide pact to boost direct investment between the two countries.


Koizmi takes time out of his three-day visit to play a kayakum at the National Center of Korean Traditional Performing Arts

It makes it easier for Japanese companies to invest in and manage subsidiaries in Korea, and vice versa.

Japan's ambassador and Korea's minister of foreign affairs signed that treaty, with the two leaders watching, Kyodo news service reports.

The leaders had plenty to discuss, from U.S. steel tariffs that both nations oppose, to the plight of the chip industry.

Plenty to discuss

Aside from trade, they touched on their relationship with the United States, as well as links with North Korea.

The two countries are preparing to host the soccer World Cup tournament, the world's most-watched sporting event.

Korea's Fair Trade Commission on Thursday also levied an $8.5 million fine on four Japanese companies for colluding with a German and an American competitor to rig prices on graphic electrodes.


Protests have surfaced around Koizumi's visit in Korea, where tempers still run high over the Japanese occupation

Korea says it is the first country to levy such a fine against a cartel of overseas companies, though the United States and Europe are also investigating.

The fine -- on Showa Denko, Nippon Carbon Co., Tokai Carbon Co. and SEC Corp. -- dates to alleged price fixing between 1992 and 1998.

Together with Germany's SGL Carbon and U.S.-based UCAR International, the companies produced more than 80 percent of the world's graphic electrodes, used to produce and melt steel.

Both Japan and Korea have also been vociferous in their opposition to U.S. tariffs of as much as 30 percent on steel imports, which went into effect on Wednesday.

A coordinated response on steel

Both countries say they will take the issue to the World Trade Organization, as well as cooperate with the European Union on a response.

Japan, the world's No. 2 economy, pledges retaliatory measures against the United States, the world's No. 1.

Trade between Japan and Korea, which totaled some $43 billion in 2001, is also problematic.

Korean chipmakers such as Samsung Electronics and Hynix Semiconductor have been forcing Japanese competitors to shift focus.

Japan's "Big Five" chip companies have considered filing a measure against illegal "dumping" of cheap Korean chips. But they have so far averted that.

Instead the Japanese companies are moving closer to home. They are concentrating on chips for home appliances, cell phones and cars -- all staples of Japan's industrial output.

Toshiba and Fujitsu confirmed Thursday they are in talks on a linkup, which analysts credit to pressures from Korea and the United States.

World Cup will give a boost

Both Korea and Japan are still attempting to recover from the Asian financial crisis, which left many companies in both countries with massive debts.

Some overseas investors credit South Korea, one of Asia's strongest performing stock markets and economies, with learning from mistakes that have plunged Japan into a decade of economic stagnation.

They hope to get a boost out of the World Cup, short-term in the case of tourism and long-term from the exposure.

The event starts in Korea on May 31, with the finals June 30 in Japan. The two countries, former enemies, are the first co-hosts in its history, as well as the first Asian hosts.