Pressure in U.S.-Seoul trade talks

 

 

Tough issues remain as deadline nears for Bush; vocal foes in Korea

 

By Evan Ramstad

 

SEOUL—Talks on a proposed U.S.-South Korea free-trade agreement—which is President George W. Bush’s biggest bilateral trading initiative and would be Seoul’s largest such deal—resume today amid growing pressure with the toughest issues on the table.

The progress the two countries make this week at a Montana ski resort will determine whether they can reach a deal in time for Mr. Bush to seek a simple yes-no vote on it from the U.S. Congress. His trade-negotiating authority will expire in June and Congress will then take back the ability to change trade deals, a power that inhibits countries from negotiating with the U.S.

For South Korea, the pact would provide a large boost to its already-healthy sale of products to the U.S. and drive a broad restructuring of numerous protected industries as well as its consumer market. For the U.S., the deal would have a smaller relative effect, though it should help American farmers and manufacturers sell more goods in South Korea, now the world’s 10th-largest economy.

Earlier negotiating rounds progressed more slowly than expected and the two countries are just now tackling the thorniest issues, such as how to reduce tariffs on food and autos. The session this week in Big Sky, Montana—the fifth formal negotiating round—was previously expected to be the last one.

As the round opens, the two countries are also squabbling over South Korea’s ban on U.S. beef, which was imposed in late 2003 after a case of mad-cow disease was reported in Washington state. In October, Seoul lifted the ban partially by agreeing to buy boneless beef, which is considered the safest because the disease, when present, is in bones.

But South Korea has rejected the first two multi-ton shipments of U.S. beef, the latest on Friday, after X-ray examinations found a

coin-size bone fragment in the first shipment and three sliver size pieces in the second. The bone fragments posed no health hazard, but South Korea wants assurance it is receiving boneless beef.

A proposed free-trade agreement is particularly contentious in South Korea because it represents a major break with the country’s economic history. South Korea set up sizable trade barriers in the 1960s and 1970s to assist its transformation from a poor, agrarian backwater into a wealthy industrial power. An FTA with the U.S. would remove many of those barriers and open the door for other countries to seek better trade terms with it.

In autos, South Korea imposes an 8% duty on imports and assesses taxes, based on engine size, that fall hardest on imports. And in food, duties affect virtually every import, from 8% on candy to 42% on beef to 600% on popcorn. U.S. duties on Korean goods are lower in almost every case.

The two countries traded $72 billion in goods and services last year, with South Korea selling about $16 billion more to the U.S. than the U.S. sold to it. Most economic research estimates that an FTA would increase the value of two-way trade by 10% to 20% over five years, with South Korea maintaining a surplus, though a smaller one.

A deal with South Korea would be the largest free-trade agreement in value for the U.S. since Nafta, the North American Free Trade Agrement, was reached 12 years ago. Mr. Bush’s administration is also hoping to complete FTAs with Malaysia, Panama and Thailand before its negotiating authority ends.

Though nearly invisible in the U.S., the FTA negotiations are in the news almost every day in South Korea as protesters, supporters and economists argue about the potential effect of a pact. Farmers and trade-union members recently stepped up the frequency and size of their protests.

Free-trade supporters in both countries worry their message is being drowned out. “In Korea, business groups and other supporters are not prepared to beat up the passionate opposition, while, in the U.S., we do that,” said Myron Brilliant, president of the U.S.-Korea Business Council.

Prospective consumer benefits from free trade, such as lower food prices, are rarely discussed in South Korea, said Han Duck Soo, a former finance minister who now leads a government committee to promote FTAs. “If we say this too much, we may be criticized for being too cruel to people who many think should be protected,” he said.

South Korean President Roh Moo Hyun has repeatedly expressed commitment to forging an FTA with the U.S. The country has completed FTAs with Chile and Singapore and is negotiating one with Canada, which has drawn token protests. On a trip to Australia this week, Mr. Roh is expected to announce that South Korea will begin free-trade talks with that country.