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C O N F I D E N T I A L SEOUL 001241

SIPDIS

E.O. 12958: DECL: 08/06/2019
TAGS: PGOV PREL KS KN
SUBJECT: SCENESETTER FOR CODEL BERMAN'S VISIT TO KOREA

Classified By: Deputy Chief of Mission Mark A. Tokola.
Reasons 1.4 (b),
(d).

¶1. (C) SUMMARY:  CODEL Berman, welcome to Korea.  The
alliance between the U.S. and the Republic of Korea (ROK) is
strong, enduring, and strategically important.  Your visit
follows the successful June 16 U.S.-ROK Presidential Summit
and adoption of the Joint Vision Statement.  The Joint Vision
Statement was well-received here, both for its recommitment
to a continued strengthening of our security relationship
(including its affirmation of the U.S. nuclear umbrella and
extended deterrence to the ROK), and for outlining what a
21st century U.S.-ROK relationship entails.  To realize this
vision, we will need to continue to expand our cooperation,
both regionally and globally.  Security in the region,
particularly in view of North Korea,s continued belligerent
posture and Kim Jong-Il,s declining health, is important to
Korean officials.  Like us, the ROK supports the Six Party
Talks and remains adamant that we should not recognize North
Korea as a nuclear state.  Your South Korean interlocutors
are very interested in how you view the proposed North Korean
contingency plan, and prospects for denuclearizing North
Korea.

¶2. (C) President Lee has faced criticism from his opponents
for his inability to generate momentum for the Korea-U.S.
(KORUS) FTA in Washington.  Ratification of the FTA is seen
as a sign of America's strategic commitment in northeast
Asia.  President Obama's statement at the April G20 meeting
with Lee, that the U.S. wanted to find a way forward on the
KORUS FTA, allayed some of the anxiety in Seoul, and enabled
Lee to push the FTA through the committee of jurisdiction in
Korea,s National Assembly in late April.  A full plenary
vote in the National Assembly has not been scheduled; while
opponents are vocal, the KORUS FTA continues to receive about
a 60 percent approval Korean public opinion polls, is
strongly supported by the majority GNP party, and is expected
to pass once there is some sign of movement in Washington.
The Obama Administration is conducting a thorough review of
the KORUS FTA and consulting closely with all stakeholders to
understand the exact nature of their concerns, and to develop
recommendations for addressing them.  To assist with this
review, and to ensure that all who may have an interest in
this free trade agreement are able to fully express their
views, we issued a Federal Register Notice on July 27, 2009,
requesting comments on the KORUS FTA.  End Summary.

----------
BACKGROUND
----------

¶3. (C) The ROK, with its vibrant democracy, free market,
high-tech economy, highly educated population, free press,
and ever-deepening people-to-people ties with the United
States, is a striking success story, including for U.S.
foreign policy.  Our intensive engagement with the ROK since
its founding in 1948 exemplifies the importance of all three
pillars Secretary Clinton has outlined describing U.S.
foreign policy:  defense, diplomacy, and development.  South
Korea's success is based on a shared commitment to defense,
as shown by the 28,500 U.S. troops still on the Peninsula,
the substantial development assistance the U.S. provided
after the Korean War, and our close diplomatic cooperation to
achieve a denuclearized North Korea and a more secure and
prosperous future for the region.

¶4. (C) Now a developed country with a tested democratic
system, South Korea increasingly has the capability as well
as the political will to assume larger regional and global
roles.  Your visit will encourage your interlocutors to
become even more active partners with us on issues ranging
from human rights promotion to climate change to sea piracy
to counter-terrorism.  We share values and strategic goals
with this highly capable ally; we need to give substance to
our shared aspiration to upgrade our bilateral relationship,
making it a global partnership.

----------------------
The Domestic Situation
----------------------

¶5. (C) President Lee, of the center-right Grand National
Party (GNP), began his single five-year term in February
2008, ending ten years of center-left control of the
Presidency.  In April 2008 the GNP won a solid majority over
the main opposition Democratic Party (DP) in the unicameral
National Assembly.  The GNP's success at the polls, however,
belied the lack of consensus among the South Korean public on
domestic political issues like media law reform, labor relations,
tax policy, and education.  President Lee has
struggled with low approval ratings -- about 30 percent --
since taking office, especially following his decision to
re-open the Korean market to U.S. beef last year.  In the
National Assembly, the GNP and DP have even lower approval
ratings than President Lee, resulting in a virtually
deadlocked domestic agenda.

¶6. (C) President Lee has remained publicly disengaged from
the squabbling in the National Assembly and is focusing
instead on foreign policy, resource diplomacy, and
international cooperative efforts on green growth, climate
change, and overcoming the economic crisis.  He campaigned on
a pledge to strengthen the U.S.-ROK alliance, and is widely
seen as having been successful.  With China and Russia, he
has substantially expanded the ROK's economic and political
ties.  He has attempted to overcome historical animosities
with Japan to advance Korea-Japan ties based on Korea's
pragmatic interests, but sensitivities to Japan's
colonization of Korea run deep.  Looking wider, President Lee
is actively cultivating new ties with Southeast Asia, Central
Asia, and Europe.

¶7. (C) Former President Kim Dae-jung's health has been
failing and he is currently hospitalized in Seoul in
intensive care.  The prognosis for President Kim, who was in
office 1998-2003 and who is 84, is not good.

------------
The Alliance
------------

¶8. (C) For over half a century the U.S.-ROK alliance has
provided the foundation for peace and prosperity in Northeast
Asia.  The ROK has benefitted greatly; neither the economic
"Miracle on the Han" nor Korea,s democratic flowering would
have been possible absent a U.S. defense shield and economic
assistance and support.  The U.S. too has benefited.  USFK
(U.S. Forces in Korea) is our only troop presence in mainland
East Asia, and South Korea contributes billions of dollars to
USFK operating expenses.

¶9. (C) The Summit Joint Vision Statement offers a compelling
vision of expanding the role of the U.S.-ROK alliance
regionally and globally.  On the Korean Peninsula, we are
also working to strengthen, further broaden, and
appropriately evolve the security relationship by
implementing three key bilateral transformation agreements
known as YRP, LPP and STP.

-- YRP:  The Yongsan Relocation Plan will relocate the
headquarters of U.S. Forces (USFK) from the middle of Seoul
to a new, purpose-built war-fighting headquarters south of
the city, thereby giving back to the Koreans a large tract of
land historically associated with Japanese occupation which
they plan to turn into a central park.  Progress on the
implementation of YRP continues but construction to prepare
U.S. Army Garrison ) Humphreys, the hub for the relocation,
continues on schedule but faces obstacles that require
President Lee,s and his administration,s support if we are
to meet the agreed 2014 completion date.

-- LPP:  The Land Partnership Plan will consolidate over 100
U.S. military bases spread all across Korea into two key
strategic hubs south of the Han River, replacing an outdated
military footprint from the end of the Korean War with a
modern and better-positioned force posture.  The ROK Ministry
of National Defense (MND) seeks to complete the LPP by the
end of 2015.

-- STP: The Strategic Transition Plan is the process under
which we are transferring wartime operational control (OPCON)
of South Korean forces from the U.S. military to the ROK
military by April 17, 2012.  President Lee has emphasized the
need to keep the spotlight off of wartime OPCON transition
due to increased scrutiny by ROK domestic opposition groups
regarding the April 17, 2012 transition date (in the wake of
North Korea,s recent claimed nuclear test).  We are
continuing to emphasize the process for close cooperation in
reviewing OPCON transition progress through the SCM and
management of messaging and public perceptions to highlight
the value of the restructuring.

¶10. (C) We must continue to emphasize the importance of
completing the two relocation elements of USFK
transformation, YRP and LPP.  Those agreements, signed in
2004, did not come with appropriated funds.  The Master Plan,
finished in 2007, lays out the cost and timeline but the ROKG
has yet to request funding from the National Assembly.  Other
U.S. and ROK private sector initiatives are failing to fill
the funding gap.  As a result, alliance transformation, which
was originally scheduled for completion in 2008, is facing a
delay of many more years.  To avoid further delays, the ROKG
must make implementation of these moves a priority.  For our
part, we must be clear and consistent in identifying our own
top priorities .

¶11. (C).  The time is right to expand the areas in which the
U.S. and the ROK cooperate on global security issues.  You
may want to raise the following areas where the ROK may be
ready to increase its global security role:

-- Afghanistan:  The ROKG is planning to provide more
assistance and training in Afghanistan, including building a
new hospital and a training center in Bagram, and
contributing ambulances, motorcycles, and police trainers.
However, we need a lot more from the ROK, especially
financial support for the Afghan Army, for which we have
requested USD 100 million a year for five years, which is the
USG primary request of the ROK.  The ROKG also is considering
sending a Provincial Reconstruction Team (PRT) to
Afghanistan, which we would welcome, but we also have
insisted that any such PRT include a military unit to provide
for its own security.  Such a deployment (the PRT as well as
any other military assets, such as an ISR unit )
intelligence, surveillance and reconnaissance) will need
National Assembly approval, which will pose difficult, but
not insurmountable, political problems for President Lee.

-- UN Peacekeeping Operations:  The National Assembly is
deliberating on a bill that will allow the ROK military to be
deployed for peacekeeping missions without prior legislative
approval.  In the meantime, the National Assembly in July
approved extending the ROK,s PKO deployment in Lebanon until
the end of December 2010.  The ROK has contributed 367
soldiers for peacekeeping in Lebanon since 2007 and is
participating in eight other PKO operations around the world.
As of January 1, 2008 the ROK was the 10th largest provider
of assessed contributions to the UN PKO budget.

-- Combating Piracy off Somalia:  The ROK is a member of the
Contact Group on Piracy off the Coast of Somalia.
Additionally, the ROKG deployed a 4,500 ton class destroyer
equipped with a Lynx helicopter and rigid inflatable craft to
the Gulf of Aden to be part of the maritime security
operations of the combined maritime forces.  The destroyer
carries up to 310 personnel.

-- Proliferation Security Initiative:  In response to the
DPRK,s May rocket launch and nuclear test, the ROK on May 26
joined the U.S.-initiated Proliferation Security Initiative
(PSI).   In June the ROK participated in a PSI meeting in
Poland, and held a workshop in Seoul in July.  The ROKG plans
to attend the next workshop in Sydney in September, and has
expressed interest in attending the interdiction exercises in
Singapore in October.  PSI is an international, interagency
effort aimed at preventing or interdicting the proliferation
of weapons of mass destruction using existing domestic laws
and established international agreements.  The ROKG currently
is formulating an interagency strategy for its effective PSI
participation.

---------------------------
U.S.-ROK Global Partnership
---------------------------

¶12. (C) The ROK also wants to play a bigger role on other
global issues and the following are good areas for increased
cooperation:

-- Democracy and Human Rights: The ROK has demonstrated a new
readiness to address human rights concerns in the DPRK,
co-sponsoring the annual UNGA North Korea human rights
resolution in 2008 for the first time.  In October 2008 the
ROK agreed to chair the first Senior Officials' Meeting of
the Asia-Pacific Democracy Partnership, a U.S.-supported
regional subset of the Community of Democracies.

-- Climate Change:  Korea, the 13th largest per capita
emitter of greenhouse gases and the world,s 15th largest
economy in terms of GDP, is playing a constructive role in
discussions on global climate change.  The ROKG shares the
U.S. view that that investment in new and renewable energy
sources not only can reduce greenhouse gas emissions, but
also can create jobs, spur economic growth, and enhance
energy security. The U.S. Department of Energy is engaged in
a variety of collaborative R&D activities with Korea,
including in nuclear energy, fusion, gas hydrates,
"smart grids," and other new and renewable energy technologies, but
there is room to expand and strengthen our cooperation.

-- Development Assistance:  Korea's overseas development
assistance program currently includes nearly USD 500 million
in Official Development Assistance (ODA), as well as a
roughly similar figure for North Korea (suspended).  The ROKG
target is to triple ODA (as a percentage of GDP) by 2015.
With limited functional and regional capacity, Korea should
be receptive to policy discussions on ODA coordination.

-- Counter-Proliferation:  The ROKG has told Iranian
counterparts at every opportunity that Tehran's uranium
enrichment activities are unacceptable and has supported the
P5-plus-1 incentives package.

-----------------------
FTA and Economic Issues
-----------------------

¶13. (C) President Lee has faced criticism from his opponents
for his inability to generate momentum for the Korea-U.S.
(KORUS) FTA in Washington.  President Obama's statement at
the April G20 meeting with Lee, that the U.S. wanted to find
a way forward on the KORUS FTA, allayed some of the anxiety
in Seoul, and enabled Lee to push the FTA through the
committee of jurisdiction in Korea,s National Assembly in
late April.  A full plenary vote in the National Assembly has
not been scheduled; while opponents are vocal, the KORUS FTA
continues to receive about a 60 percent approval Korean
public opinion polls, is strongly supported by the majority
GNP party, and is expected to pass once there is some sign of
movement in Washington.  The Obama Administration is
conducting a thorough review of the KORUS FTA and consulting
closely with all stakeholders to understand the exact nature
of their concerns, to develop recommendations for addressing
them.  To assist with this review, and to ensure that all who
may have an interest in this free trade agreement are able to
fully express their views, we issued a Federal Register
Notice on July 27, 2009, requesting comments on the KORUS FTA.

¶14. (C) Korea is our seventh largest trading partner, with
total merchandise trade in 2008 of over USD 82 billion (and
more than USD 100 billion if services are included).  The
U.S. International Trade Commission estimated in September
2007 that U.S. merchandise exports to Korea would expand by
USD 10-12 billion on an annual basis as a result of the FTA
and that services exports would also expand.  The United
States has traditionally been the ROK's biggest trading
partner in the post-WWII era.  One tangible sign of China's
growing importance in Asia and in Korea, however, is that
China displaced the United States as Korea's top trading
partner in 2004.  By 2008, China-ROK merchandise trade
reached USD 168 billion, doubling the U.S.-ROK total.  With
respect to North Korea, China accounts for nearly 50 percent
of that country's total trade.  The growing economic and
political role of China on the Korean peninsula is one of the
most important motivations for Korea to enter into FTA
negotiations with the United States.  Successive ROK
Governments have seen the ratification and implementation of
the KORUS FTA as symbolic of the U.S. will to remain fully
engaged in Northeast Asia in the face of increasing Chinese
influence.

¶15. (C) Korea also wants to conclude an FTA with the United
States because Korean economic reformers recognize that the
Korean economy needs to liberalize and open in order to
promote greater competitiveness vis--vis China and Japan.
South Korea has concluded a number of FTAs and launched
negotiations on others since the signing of the KORUS FTA
negotiations on June 30, 2007.  The ROK has implemented FTAs
with Chile, Singapore, EFTA, and ASEAN (except investment).
The ROK has concluded negotiations with India and signing is
reportedly imminent.  Negotiations are underway with Canada,
Mexico, the Gulf Cooperation Council, Australia, New Zealand,
and Peru.  In July, the ROKG announced that negotiations on
the EU-Korea FTA were concluded (but the agreement is not yet
signed).  ROK media have been filled with stories of the
increasing economic weight of Europe in Korea as a result of
the FTA.  The Board of Governors of the American Chamber of
Commerce has expressed concern that the EU-Korea FTA will
disadvantage the competitiveness of U.S. firms vis--vis
their European competitors in Korea.

¶16. (C) The reopening of the beef market was accomplished in
an April 2008 agreement separate from the FTA.  Under this
agreement, the United States and Korea agreed to reopen
Korea,s market to U.S. beef and beef products in a manner
fully consistent with international standards and science.
In June 2008, following massive street protests in Seoul,
U.S. beef exporters and Korean beef importers reached a
temporary commercial agreement to only export beef and beef
products from cattle under 30 months of age, as a
transitional measure, until Korean consumer confidence
improves.  While beef sales have not yet returned to past
levels due to Korea,s currency exchange fluctuations,
increased competition from Australian beef, and lingering
public concerns about the safety of U.S. beef, the market is
open and we expect increased sales over the medium term.
Korea is also watching closely our ongoing negotiations with
other countries that have stricter restrictions on U.S. beef.

¶17. (C) On the global financial reform discussions, Korea is
a strong ally in the G-20 process (which it will chair in
2010).  Korea is enthusiastic about the G20 as the global
forum for action on the global financial system.  The ROKG is
concerned that European countries are advocating other
formulas for such discussions that would exclude Korea.
Within the G20, President Lee has called for a strong fiscal
response and refraining from protectionism as well as
necessary regulatory improvements.  President Lee Myung-bak
has strongly argued that it would be premature to withdraw
the national fiscal stimulus packages at this juncture.
Korea sees itself as lining up on the U.S. side on almost all
G20 debates.

¶18. (C) The Korean economy is looking better and is
increasingly forecast to be one of the first major economies
to emerge from recession.  The benchmark KOSPI stock index in
early August reached the highest level since mid-August 2008
and the won, the Korean currency, closed at 1218 per dollar
on August 4, the strongest level since October 14, 2008.
Most analysts foresee further strengthening of the won in the
months ahead.  The picture looked far different last fall,
when the financial crisis hit Korea hard.  A USD 30 billion
swap line extended by the U.S. Federal Reserve in October, as
the Korean won was plummeting and Korea looked to be on the
brink of a financial panic, helped Korea weather the worst of
the storm, and gained tremendous gratitude.  The later
Japanese and Chinese swap mechanisms did not have the same
impact.  In the closing months of 2008 Korea experienced
dramatic contraction of demand for its exports.  The ROKG's
stabilization and stimulus packages mitigated the impact and
the weakened currency has generated a significant current
account surplus in recent months.  Sectors of the Korean
economy facing restructuring challenges include construction,
shipbuilding, shipping and automotive.  GM Daewoo, GM,s
Korean subsidiary, is negotiating with the Korea Development
Bank for a sizeable loanto restructure its operations.

-----------
North Korea
-----------

¶19. (C) Presidents Obama and Lee agreed to send a clear
message to North Korea that its provocations come at a price.
They also agreed on principles to deal with North Korea's
nuclear and missile threats, including commitments to
achieving the "complete and verifiable elimination" of North
Korea's nuclear weapons and existing nuclear programs as well
as the ballistic missile program.  Korean officials continue
to seek assurances that the United States will consult
closely with the ROK on its North Korea policy and that the
United States will not recognize North Korea as a nuclear
state.

¶20. (C) North Korea policy is almost always the most
sensitive issue on the South Korean agenda.  Fifty-five years
of alliance notwithstanding, the ROKG still fears being left
out or surprised by Washington's initiatives or policy
changes on North Korea.  Simply put, the ROKG must be seen by
South Koreans as being informed and consulted on all USG
moves on North Korea.  Korean officials see Washington and
Seoul as partners in forming and implementing policies toward
the North and consistently seek affirmation that Washington
will not allow Pyongyang to drive a wedge between us.

¶21. (C) There is virtually no chance of early improvement in
South-North relations; President Lee is determined to stick
to principle and to insist on a more reciprocal relationship
with the North, and Kim Jong-il will not give in for his own
domestic reasons.  Importantly, South Koreans appear tired
of, but not particularly bothered by, the continuing
threatening rhetoric from the North, and therefore seem
largely comfortable with their government's stance.
Heightening tensions in the West Sea and missile launches
have created less public anxiety than might be expected.  The
ROKG will welcome the opportunity to present with you a
united front of calm and determination toward the North,
combined with a call to return to the Six- Party Talks.

¶22. (SBU) The Kaesong Industrial Complex (KIC) is the only
remaining joint economic project between North and South
Korea.   (The other joint venture, Mt. Kumkang tours, was
closed on July 11, 2008, after North Korean security forces
shot a South Korean tourist to death.)  Located in North
Korea, six miles north of the DMZ, the KIC opened in December
2004 and is home to 106 ROK-owned factories employing
approximately 40,000 North Korean workers (84 percent are
women age 20-39).  Since late 2008, North-South tensions
regarding the KIC have increased.  The DPRK closed the border
temporarily on multiple occasions, and has placed limits on
the number of South Korean employees allowed in the KIC.  The
DPRK is demanding drastically higher wages for employees (up
from USD 55 to USD 300 per month), construction of additional
dormitories and an additional fee of USD 500 million for land
usage.

¶23. (SBU) North Koreans detained a South Korean Hyundai Asan
employee working at KIC on March 30, accusing him of defaming
North Korea and attempting to suborn a North Korean female
worker.  In addition to securing the release of the ROK
citizen, South Korea's priorities at the KIC include
guaranteeing employee safety, freedom of access and
border-crossing, and increasing the number of North Korean
workers brought in from outside the Kaesong area.  Although
the South Korean firms at KIC are concerned about the current
tension and complain of financial losses, only one company
has withdrawn from KIC to date.

¶24. (SBU) The DPRK and the ROK have held four rounds of
negotiations between April and July 2009 without any
breakthrough, with the most recent session taking place on
July 2.  Both sides appear to be committed to continuing KIC
operations.  The United States has consistently supported
North-South dialogue and expressed hope that the two sides
will resolve their disputes over the KIC.

--------
VWP/WEST
--------

¶25. (U)  The ROK was included in the the Visa Waiver Program
(VWP) in October 2008. This step has been a success in
facilitating travel and improving people-to-people ties
between nations.  As of the beginning of July, approximately
200,000 Koreans had applied for VWP approval using the ESTA
(Electronic Approval for Travel Authorization).  More than 99
percent of the ESTA applications have been approved and we
continue to see an upward trend in ESTA usage.

¶26. (U)  The WEST (Work, English Study, and Travel) program,
inaugurated in March 2009, allows qualifying college students
and recent graduates to enter the U.S. for up to 18 months on
J-1 exchange visitor visas that allow them to study English,
participate in professional-level internships and travel
independently.  A group of 185 Korean students have already
travelled to the U.S. on the WEST program and a second wave
of 159 is preparing to depart.  As of December 2008, there
were 110,000 South Koreans studying in the U.S. at all
levels, from elementary to graduate school.  According to
Korean Ministry of Education data for 2007, 27% of all
post-graduate students choosing to study abroad chose to
study in the U.S.

---------------
The Bottom Line
---------------

¶27. (C) South Korea is a like-minded, energetic partner that
is ready, prepared, and wants to have a broader and deeper
alliance with the United States.  Koreans would like the
alliance to be a lot more than a security arrangement.  Yes,
they want more say, even a more equal relationship, but this
is only part of their motivation.  Rather, they see that
their ties with the U.S. are deeper now than ever; witness,
for example, the two million-strong Korean American
community, and the enormous numbers of Koreans studying in
the United States.  Above all, however, a very large majority
of South Koreans are convinced that the ROK and the United
States have shared values and shared strategic interests.
It's time to take the relationship to a new level of global
partnership, even as we deepen our cooperation on the Korean
peninsula.

-------------
Your Meetings
-------------

¶28. (C) You are scheduled to meet with President Lee
Myung-bak, National security Advisor Kim Sung-hwan, Foreign
Minister Yu Myung-hwan, Trade Minister Kim Jong-hoon, Speaker
of the National Assembly Kim Hyong-o, and Chairman of the
National Assembly Foreign Affairs, Trade and Unification
Committee Park Jin.  Likely topics of discussion include:

-- North Korea: Your interlocutors may seek assurances that
the U.S. will consult closely with the ROK on its North Korea
policy and that the U.S. will not recognize North Korea as a
nuclear state.

-- U.S.-ROK Alliance: Your interlocutors may stress the
importance of the U.S. commitment to the defense of the
Korean peninsula.

-- Global Partnership: Your interlocutors may gauge your
level of interest in ROK contributions to reconstruction and
stabilization of vital countries such as Afghanistan and
Pakistan; ROK peacekeeping in Lebanon; and anti-piracy
efforts off the coast of Somalia.

-- FTA: Your interlocutors will seek your views on the
prospects for Congressional approval of the agreement.  The
Trade Minister will stress that the FTA represents a balance
of American and Korean interests and that the ROKG cannot
re-negotiate the text of the FTA.
STEPHENS