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prisoners of war; and included a recommendation that a political conference be held to settle the Korea question.

The first provisions of the Armistice Agreement were quickly carried out. A four-kilometers wide Demilitarized Zone, or DMZ, was established, extending for two-kilometers on either side of a military demarcation line, or MDL, running, generally, along the line of ground contact at the time of the cease fire. The 151-mile MDL runs from the Han River Estuary in the west to a point north of the 38th Parallel in the east. It is marked by 1,292 markers printed in English and Korean on the south side and in Korean and Chinese on the north side.

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Each side is allowed to have 1,024 persons in the DMZ/HRE at any one time, including soldiers called DMZ Police, civil relief, and maintenance personnel. The DMZ Police are permitted under the terms of the Armistice Agreement to be armed only with pistols or non-automatic rifles. addition to these personnel, a small number of farmers who were living in the vicinity of Panmunjom at the time of the cease fire are permitted to continue to reside inside the DMZ.

The introduction of new weapons into Korea was restricted by the Armistice Agreement. However, as a result of North Korean violations, the United Nations Command unilaterally suspended this provision in 1957.

The organization established to implement the Armistice Agreement is the Military Armistice Commission, or MAC, composed of ten senior officers, five from each side to negotiate Armistice-related matters and discuss Armistice violations. The UNC component of the MAC consists of one U.S. Two-Star Admiral or General, a ROK Major General, a ROK Brigadier General, a British Brigadier who is also the Chief of the Commonwealth Liaison Mission, and one 0-6 level officer from among the foreign representatives of the UNC Advisory Group which includes Australian, Canadian, Philippine, Thai, and British members.

The North Korean component of the MAC consists of four North Korean
Generals and Colonels and one representative of the Chinese People's
Volunteers.

The Military Armistice Commission is assisted by a Secretariat, which performs administrative and translation tasks. The Secretariat of the UNC side is also the United Nations Command Armistice Affairs Division, the UNC staff element responsible for Armistice-related matters. The members of AAD prepare for and conduct MAC and Secretaries' meetings. They also monitor North Korean military activity in the DMZ, investigate possible Armistice violations, and coordinate with the Neutral Nations Supervisory Commission and the UNC Advisory Group.

Each side also maintains a Joint Duty Office, or JDO, as an advanced
Secretariat at Panmunjom. The JDO provides the main channel of

communication with the North Koreans and maintains 24-hour a day telephone contact with the Communists.

The Joint Duty officers meet every day except Sundays and holidays to exchange correspondence such as routine Armistice violation charges and reports on troops and equipment.

The Armistice Agreement also provided for an inspection system to determine the degree of compliance with the Agreement outside the DMZ. In order to accomplish this, a Neutral Nations Supervisory Commission was established composed of Swiss, Swedish, Polish, and Czech members.

Their mission was to conduct investigations of troop rotations and equipment replacement in the north and south. However, the Swiss and Swedes' mobility was restricted by the North Koreans, and, in the south, there were allegations that the Poles and Czechs were spying. As a consequence, the inspections were terminated in 1956. Although their Inspection function has been curtailed, the NNSC continues to meet weekly to review reports of troop and equipment rotation submitted by both sides. Despite their limited mission, the UNC position is that the members of the NNSC perform a valuable function as independent observers and act as a stabilizing influence in the JSA.

Military Armistice Commission meetings are held at the Joint Security Area at Panmunjom. The JSA is an area roughly 800 meters in diameter located in the western part of the Demilitarized Zone in what is referred to as the Military Armistice Commission Headquarters Area, or MACHA. This is the one area along the DMZ where U.S. troops are atill stationed.

A battalion of the Second Infantry Division mans two guard posts in the MACHA (with one platoon each) and maintains a company alert force outside the DMZ. This unit provides security and, if war should break out, will handle the evacuation of the personnel in the JSA and the Swiss and Swedish members of the NNSC.

The unit charged with the responsibility of providing security and support for MAC meetings is the UN Command Support Group-Joint Security Area. The members of this organization provide security and logistic support to the UNC component of the MAC and to the Swiss and Swedish members of the Neutral Nations Supervisory Commission. They provide the UNC portion of the Joint Security Force at Panmunjom and they provide transportation for the Swiss and Swedes when they travel within the Republic of Korea. This unit is attached to the Second U.S. Infantry Division for administrative and logistic support but is under the operational control of the Chief, Armistice Affairs Division. The two officers killed on August 18, 1976 were members of the UNC Support Group.

The political conference recommended by the Armistice Agreement was held in Geneva, Switzerland in 1954, but failed to produce a permanent settlement. Today, some years after it was signed, the Armistice remains in effect; the Military Armistice Commission remains the only channel of communication between the military commanders of the two sides and continues to serve as a mechanism for the negotiation of truce violations and as a means of defusing potentially explosive incidents on the peninsula.

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The delegation was received at the U.S. Embassy by:

Honorable Richard L. Walker, Ambassador

Thomas P. H. Dunlop, Counselor for Political Affairs
Donald F. McConville, Counselor for Economic Affairs
Bernard J. Lavin, Counselor for Public Affairs
Daniel B. Conable, Counselor for Agricultural Affairs
George G. Griffin, Counselor for Commercial Affairs
Sam Kidder, Commercial Officer

The delegation was warmly received by Ambassador Walker and briefed on a wide range of domestic issues and those affecting the U.S.-Korean bilateral relationship.

As one of the world's most dynamic economies, the Republic of Korea, during the last twenty years, has transformed itself from one of the poorest nations into a leading industrial country.

In 1984, Korea's GNP totaled about $81 billion and per capita GNP reached nearly $2,000. Although export and import growth of 20 and 17 percent respectively fueled a seven-percent increase in real GNP in 1984, inflation was held to a relatively modest 4 percent. Last year, Korea's export sector posted a disappointing .3 percent increase, but an import decline of 3.7 percent helped the country record its lowest trade deficit since 1950. Aided by falling oil prices, lower international interest rates and a brighter outlook for exports in 1986, the Government hopes to balance Korea's current account at year's end.

Foreign trade as a percent of GNP has grown from 5 percent GNP during the Korean War to 20 percent GNP in 1985.

Korea's impressive economic record has secured it a place among the world's Industrialized nations and recognition as a major trading nation. Korea, once a large aid recipient, has received no U.S. economic assistance since the mid-seventies. Currently, U.S.-Korea trade annually exceeds in value all U.S. economic aid ever provided Korea.

Political Development

The Korean political situation traditionally has been characterized by a tendency toward confrontation and factionalism rather than compromise and consensus. The internal dynamics of the faction make compromise with competing factions extremely difficult: compromise is often seen as capitulation. In a society where power historically has always been highly centralized, politics is generally considered to be a zero-sum game.

The year 1988 will be a watershed year. President Chun Doo Hwan has promised to adhere to the Constitution's provision for a single, seven-year term and step down then after an election for a successor is held. Seoul will also host the summer Olympic Games beginning September 1988.

U.S.-Korean Relationship

The American security commitment to Korea, exemplified by the presence of 40,000 U.S. soldiers stationed in Korea, lies at the heart of U.S.-Korean relations. The security relationship is currently strong and confident. The delegation visited the Demilitarized Zone (DMZ) that has divided North and South Korea since the end of 1953. (A separate section in this report describes the delegation's visit to the DMZ.)

Today, Korea is the seventh largest trading partner of the United States. Major imports form the United States include electronics, electrical machinery, grain, chemicals/chemical products, cotton, coal, iron, steel, and logs. The United States taking approximately 36 percent to 40 percent of total Korean exports. In comparison, Japan takes about 16 percent of Korea's exports.

Korea's economic success has increased public awareness of tariff and non-tariff barriers which prevent U.S. firms from participating in the country's growing domestic market. U.S. exports subject to import restrictions include personal computers, cigarettes, razor blades, al fal fa, off-season oranges and servies such as insurance and advertising. USG pressure to convince the Koreans to eliminate policies which discourage free trade in goods and services and to protect adequately intellectual property have created tensions in the economic relationship. The Korean Government has committed itself to a program aimed at liberalizing its market and many outright restrictions on imports of industrial products are scheduled to be phased out by 1988. For their part, Koreans are most concerned by what they perceive as growing U.S. protectionism.

Korean officials view recent U.S. trade actions against Korea as a result of our frustration with Japan which they see as the real source of the U.S. trade and balance of payments difficulties. From the Korean perspective, existing trade barriers are necessary to assist Korea's "infant industries" adjust to foreign competition.

Trade disincentives also exist in the form of inadequate protection of Intellectual property. Copyright protection for foreigners is almost non-existent; pirating of foreign books, sound recordings and movies is widespread and protection for software and semiconductors is denied. Korean patent law expressly excludes from coverage foods, beverages, medicines and medicinal preparation processes.

Officials explained that the Koreans view U.S. treatment largely as a result of U.S. frustration with Japan, which they see as the source of U.S. trade problems. In the Korean's view, trade barriers are essential to help expand Korean markets and compete with foreign markets.

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U.S. efforts to convince Korea to open its markets include `USG-initiated section 301 Investigations of Korean Government policies which prohibit U.S. firms from participating in significant sectors of the country's Insurance sector and fail to effectively protect intellectual property.

With its traditional industries (textiles, footwear) facing intense competition from China and other developing country producers, Koreans are determined to upgrade their technology and move into high technology industries. In this regard, Korea's failure to effectively protect Intellectual property will be a disincentive to foreign firms considering investment in Korea. Some U.S. companies have resorted to legal Innovations to protect their intellectual property -- one firm, for example, required its Korean partner to post a bond in a New York bank to be forfeited in the event the technology was stolen or misappropriated.

U.S. exports of agricultural products, including raw cotton, amounted to over $1 billion in 1984. Although the U.S. agricultural products currently account for 50 percent of Korean imports, the U.S. share has fallen in recent years as a result of increased competition from other agricultural exporters.

Agriculture

The total volume of Korea's agricultural trade grew in 1984, although the U.S. market (currently the U.S. holds a 50 percent agricultural import market space) share has diminished due to growing Korean diversification, particularly in oil, wheat, corn and cotton.

Embassy officials noted that recently enacted farm legislation (H.R. 2100; P.L. 99-198) should enhance U.S. competition of agricultural exports. MEETING WITH THE AMERICAN CHAMBER OF COMMERCE

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Background: Korea has put high priority on acquiring new technology to make them competitive in world markets; however, there has been little progress made on protection of intellectual property rights. Korea is a signatory to the Paris agreements covering patents and trade marks, but has not signed all the Articles. Pirating of intellectual property, technology, software, copying of trademarks and other violations of international codes are common. As a result, many companies are reluctant to bring in high technology. Several proposals have been made to revise Korea's archaic laws governing patents and copyrights, and the Chamber of Commerce is hoping a revised law will clear the Blue House and the National Assembly this year. Currently domestic patent laws are process patents and not product patents and claims of infringements on foreign patents are disregarded in most instances. Laws on copyrights only protect works which were first copyrighted in Korea, thus there is considerable pirating of books of all kinds, music, and computer software.

Members of the Chamber of Commerce who met with the delegation were:

Mr. J.H. Riddle; Vice President, Teledyne

Mr. T.M. Brown; President, Westinghouse Electric S.A. Korea
Mr. Donald Coker; Director of Planning, IBM Korea, Inc.
Mr. Jeffrey D. Jones; Lawyer, Kim and Chang, Attorneys
Mr. Richard M. Lieber; Executive Vice President, Samsung
Petrochemical Co., Ltd.

Mr. John E. Robb; Vice President, Bechtel International,
Gen. Frederick C. Krause (BG); Executive Vice President, American
Chamber of Commerce in Korea

Inc.

Discussion: Members of the Chamber dicussed their difficulties in competing with other countries, particularly France, Germany, and Japan for Korean trade. They stated that these countries had a significant advantage in financing and stressed the importance of the Exim Bank in mitigating this. They also believed that the military assistance provided by the U.S. partially offset this advantage and suggested that Science and Technology could also help in this regard. They believe that S&T can be used as an effective trading tool in dealing with developing countries, but stated that they needed help from the Federal Government in this area. In particular, they stressed the importance of a strong technology transfer program. Recognizing the need for new technology to make them competitive

in today's world, the Koreans have made technology transfer a key factor in their trade policy.

AMCHAM members reiterated their concern over the lack of protection for intellectual property rights and criticized Korea for not recognizing the value of high technology and its cost. It was pointed out that proper protection could provide important benefits for Korea. Particularly in the area of computer software, it will stimulate the growth of their domestic software industry, further the modernization and enhance the efficiency of the Korean economy, and also could be a significant step to help defuse protectionist sentiments in the United States and elsewhere.

The following recommendations were made by AMCHAM:

Korea should sign and honor the Geneva and Paris agreements and all articles.

Korea should encourage a higher level of technology to be induced and ensure that it is adequately protected by domestic laws.

The Government should allow the market place to decide the value of technology.

Korea should protect the owners of technology and not provide protection when intellectual property is obtained from questionable

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Background: In 1949, the Lucky Company, a manufacturer of chemical products, merged with the Goldstar Company which manufactured vacuum tubes for radios. With no managerial changes, the Lucky Group joined with Goldstar to form the Lucky Goldstar Company. Today, Lucky Goldstar boasts $7 billion in sales yearly, employing over 65,000 employees country-wide, accounting for over 10 percent of the South Korean GNP. Lucky Goldstar is the third largest company in South Korea, ranking behind Hyundai and Samson. Basic research is important to Lucky Goldstar's business; 4 percent of sales in manufacturing is reinvested in basic research in the company. In 1985 Lucky Goldstar invested $150 million in research and technology development. Although most of the R&D is for product development, Lucky Goldstar does support research at several universities.

Organization: Lucky Goldstar's R&D work is being carried out at ten research facilities owned and operated by member companies and on a group-wide level at the Lucky Goldstar Central Research Institute and Lucky Goldstar Sunnyvale R&D Center in the United States. All of these facilities are tied together in a cooperative system allowing for easy access to each other's work, providing for joint development and cooperation on product development. Of the ten research facilities operated by member companies, seven are housed in this new R&D Center at Anyang. These are the laboratories of: Gold Star Cable, Gold Star Tele-Electric, Gold star Electric, Gold Star Instrument and Electric, Gold Star Precision, Shinyeong Electric and Gold Star Semiconductor.

Lucky Goldstar officials who met with the Members of the Delegation were:

Char Yoo Bae, Chairman

Dr. Chang, Gold Star Cable

Dr. C.D. Kim, Gold Star Electric
Dr. Kang, Gold Star Tele-Electric

Dr. Min, Gold Star Semiconductor

Hong S. Kim, Executive Director, Administrative Complex

Topics of Discussion: Goldstar executives discussed the general

organization of the Lucky Goldstar Company and focused particularly on the

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