U.S. Deputy Commissioner of Social Security William Halter and
Republic of Korea Minister for Economic Affairs Hyuck Choi
Remarks at Signing and Fact Sheet on Social Security Agreement and Administrative Arrangement
Treaty Room, U.S. Department of State
Released by the Office of the Spokesman
Washington, DC, March 13, 2000
MODERATOR: Ladies and Gentlemen, Mr. William Halter, Deputy Commissioner of Society Security, and Mr. Hyuck Choi, Minister for Economic Affairs, Embassy of the Republic of Korea.
MR. HALTER: Minister Choi, distinguished guests, it is a pleasure for me to join you today for the signing of this agreement to coordinate our two countries' social security programs. I believe this agreement symbolizes the special bond of friendship between the United States and Korea and our strong commitment to improving social security protection for our citizens while enhancing commerce between our two nations.
The growing interdependence of the US and Korean economies makes this agreement particularly timely and welcome. Today, the United States and Korea are among each other's largest and most important trading partners. The trade in goods and services between our nations would not be possible without the free movement of managers and executives, technicians and skilled workers.
The agreement we sign here today will remove a serious and unnecessary impediment to that free movement. I am speaking here of the duplicate social security contribution requirements that citizens of Korea and the United States must frequently face when they work even temporarily in the other country.
As a result of this problem and without disagreement, US citizens on temporary assignment in Korea and Koreans working in the United States have been paying social security contributions to both countries on the same earnings. Frequently, the contributions paid to the host country do not result in any benefits because the worker does not stay long enough to meet minimum eligibility requirements.
Fortunately, this agreement will alleviate the problem by assuring that workers contribute to either the US or Korean social security system but not both. In addition to eliminating duplicate social security contributions, this agreement will help fill gaps in benefit protection for the growing number of people who move back and forth between the United States and Korea and earn social security credits in both countries.
Although they contribute through their work to the economies of both Korea and the United States, many reach retirement or become disabled or die without earning enough social security credits to qualify for benefits from one or both countries. This agreement will help to overcome the problem by permitting these workers and their families to qualify for US and Korean benefits based on combined social security credits from both countries.
We are firmly convinced of the mutual benefits this form of social and economic cooperation brings to the people of each participating country and are especially pleased that Korea is the first country in Asia to sign a social security agreement with the United States.
MR. CHOI: Mr. Halter, distinguished guests, I am pleased to sign on behalf of the Korean Government the administrative arrangement for the implementation of the social security agreement between Korea and the United States.
For the past six years, officials of our two governments have worked arduously to enable us to sign the agreement today. I would like to extend my wholehearted thanks to all of them.
When the agreement enters into force, hopefully before the end of this year, more than 4,000 US and Korean nationals, mostly businessmen, residing in each other's territory within a period not exceeding five years would no longer be required to pay social security taxes twice, both in their home country and in the country where they reside.
As our bilateral trade and economic relations continue to grow in the coming years, it is expected that more and more businessmen from our two countries will enjoy this benefit. Our bilateral economic relations are closer than ever. In 1999, the United States is Korea's largest trading partner and the largest investor in Korea. Korea is among America's six largest export markets in the world and the fourth in agricultural trade.
The social security agreement will greatly contribute to the expansion of the Korea-US business activities, thereby further strengthening the bilateral economic partnership.
We are here today to mark an undertaking well accomplished. Yet, we have some more work to do. We'll have to complete our domestic procedures as soon as practicable to ensure an early benefit for our businessmen. I can assure you that my government will take all the necessary steps to expedite its domestic procedures. I thank you very much.
MODERATOR: We do have time for a couple of questions if you have questions about the agreement.
QUESTION: How much money are we talking about that's been double-paid by workers from both sides? How long has this problem existed as well? Since the beginning of South Korea?
MR. HALTER: The answer to your question is yes. This problem of double taxation has been in effect since both countries have had their social security programs. The Korean program came into effect later than the United States program did. In terms of the amounts of workers that are impacted by this, we are talking about a number that will measure in the thousands of employees over the five-year period through which this is gradually sort of brought into full force. We are talking about in the tens of millions of dollars in taxation over a $5 million dollar period, and that's taxes that are in effect being double paid by in one instance American workers who are working in Korea for American multinationals.
QUESTION: Does that include the military?
MR. HALTER: We'll get you the technicals on that, but my understanding is this does not include the military.
QUESTION: Were these people being compensated for the double taxation? In other words, did their salaries reflect, as salaries often reflect, different burdens in working overseas?
MR. HALTER: My understanding is that varies, of course, by company, but that some companies did, in fact, compensate their employees for this. But there was still an income tax that had to be paid on some of the benefits, and we're getting now into the technical aspects of the Korean income tax structure as well.
QUESTION: Well, it didn't hurt the workers basically, did it? It just hurt the companies who want to do more business.
MR. HALTER: It depends on what the policy of the companies involved was.
QUESTION: Are there other countries that you'd like to develop this sort of agreement with?
MR. HALTER: Absolutely. We have agreements in place now with 17 countries. We've recently signed with another country, so that brings it to 19 that we have the process in place. We have other countries that we are negotiating with now including Australia and Argentina. And there are several other countries that we would like to establish these agreements with and they are in various stages of that process.
MODERATOR: Final question.
MR. CHOI: May I?
MODERATOR: Sure, please, if you would.
MR. CHOI: May I add my comments on the first question you have raised. According to the estimation by the Korean Federation of Industries, the benefit on the annual basis is estimated to be around $30 million.
MODERATOR: One final question here.
QUESTION: What would be the main reason for the US to choose Korea from all Asian countries to reach this kind of an agreement?
MR. HALTER: Well, there was an expressed interest on the part of the Korean Government and the President of the United States in 1993, in meeting with the Korean Prime Minister in 1993, they agreed that they would tackle this issue, and that's what our respective countries have been working on since.
MR. CHOI: That's right.
MODERATOR: Thank you.
Social Security Agreement and Administrative Arrangement
The Social Security agreement between the U.S. and the Republic of Korea, signed on March 13, 2000, is referred to as a totalization agreement. It will eliminate dual social security coverage and contributions (which frequently occur when a worker from one country goes to work in a second country) and prevent gaps in the social security protection of workers who have divided their careers between two countries.
Negotiation of the agreement followed a request by the Government of Korea to negotiate a social security agreement as part of the "Dialogue of Economic Cooperation" initiated by President Clinton and former Korean President Kim Young Sam in 1993. Negotiations began in April 1994.
After the agreement is signed, it will be submitted to our respective legislative bodies for approval (no opposition is anticipated), a 3-4 month process. In this country, the agreement must lie before the House and Senate for 60 session days, but no affirmative congressional action is required for approval. Once both legislatures have approved, Instruments of Approval are exchanged. The Agreement takes effect on the first day of the third month after completion of the exchange. We expect this agreement to come into force around April 1, 2001.
In addition to the agreement, a related administrative arrangement also will be signed today. The administrative arrangement provides for the exchange of claims-related information and authorizes the Social Security agencies in both countries to develop procedures and forms necessary to implement the agreement.
[end of document]
Link to Secretary Albright's March 13, 2000 remarks at signing ceremony.
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