[A2k] Bridges Weekly: AGREEMENT ELUDES US AND KOREA IN FTA TALKS, DESPITE PROGRESS

[Thiru Balasubramaniam]

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[ Picked text/plain from multipart/alternative ]

  BRIDGES Weekly Trade News Digest - Vol. 11, Number 9 14 March 2007

  AGREEMENT ELUDES US AND KOREA IN FTA TALKS, DESPITE PROGRESS

South Korea and the US failed to conclude a free trade agreement during
their final scheduled round of negotiations from 8-12 March in Seoul,
although officials report substantial progress.

It is still not clear whether the two sides will manage to reach a deal
in time for Washington's 31 March deadline. US agriculture negotiators
are staying on in Korea this week in a push to bridge differences on
the highly contentious issue.

During this, the eighth round of talks, officials managed to wrap up an
accord on competition policy, government procurement, and customs
affairs. They also agreed to simplify and expedite customs clearance
for each others' goods. Eight other issues are very close to
completion, including electronic commerce, telecommunications,
investment, technical barriers to trade, labor and the environment.
Both sides also agreed to exclude Korea's state-run banks from the
FTA's provisions on financial services. However, the principal sticking
points remain unresolved: agriculture, automotive trade, and Seoul's
pharmaceutical policies among them.

US negotiators want to complete the deal by the end of March so that
the Bush administration can submit it to Congress for a mandatory 90
day review followed by a yes-or-no vote without revisions before its
trade promotion authority mandate expires on 1 July. Chief US
negotiator Wendy Cutler said that the "=85unprecedented progress we have
made this week in the eighth and final round gives me increasing
confidence that we can do this."

Despite her optimism, she acknowledged that "we still have our work cut
out for us," according to a report in the Wall Street Journal.

Seoul still insists that rice, and other selected agricultural
products, must be excluded from the deal despite Washington's
insistence that there be no exceptions. South Korea has offered to
break the standstill by lowering tariffs on other farm commodities in
which the US has an interest. The two sides also need to resolve their
spat over beef - Washington accuses Seoul of using spurious pretexts to
deny US beef exports entry into its market (see BRIDGES Weekly, 13
December 2006, http://www.ictsd.org/weekly/06-12-13/story6.htm). Cutler
called on South Korea to make progress on the beef issue, warning that
it could affect Congress' willingness to accept an accord. Some Korean
lawmakers have also threatened to withhold their approval if beef trade
is not resolved to their satisfaction.

Washington wants the early elimination of Seoul's 8 percent tariff on
automobiles, yet is seeking to remove its own tariffs on South Korean
vehicles only gradually. Korea's vast surplus in automotive trade with
the US - over USD 10 billion in exports, compared to USD 750 million in
imports - has been one of the major irritants in the negotiations for
Washington, which blames the imbalance on a raft of Korean tariffs and
taxes. South Korea did agree to abolish the engine capacity-based tax
levied on US cars.

Seoul ceded to US demands to structure the rules of origin for textiles
to ensure that garments made in South Korea with cheap yarn from China
would not be considered for tariff-free access. On 10 March, two US
legislators urged US Trade Representative Susan Schwab to pursue the
longest tariff phase-out possible for textile products, raising fears
of a flood of Korean imports.

Small, informal, high-level meetings will be held in the next few weeks
to try to find compromises on the sensitive issues that remain. These
include pharmaceuticals and anti-dumping remedies (see BRIDGES Weekly,
28 February 2007, http://www.ictsd.org/weekly/07-02-28/story5.htm). In
addition to the discussions this week in Seoul, high-level agriculture
talks are scheduled for 19-21 March in Korea to attempt to reach a
compromise on sensitive products.

Cutler and Chief South Korean negotiator Kim Jong-hoon will meet in
Washington next week. But Cutler cautioned that "no matter how hard we
work=85 there will be, even after our work in Washington next week, a
handful of issues that will probably need to be elevated above the
chief negotiators level," implying that ministerial intervention may be
necessary.

Korea's famously militant farmers, along with labour and other civil
society groups, continued their protests against the negotiations in
Seoul.

South Korea is anxious to expand its export markets, particularly to
the US where its most expensive products, like cars and computer chips,
are sold. If concluded, this FTA would be the US' biggest since the
1993 North American Free Trade Agreement (NAFTA).

"S. Korea, US head for high-level FTA talks to overcome remaining
obstacles," YONHAP NEWS, 12 March 2007; "Riot police break up protest
in Seoul," THE ASSOCIATED PRESS, 10 March 2007; "S. Korean Catholics
ask God to stop FTA," THE ASSOCIATED PRESS, 9 March 2007; "US, South
Korea near trade deal as deadline looms," REUTERS, 12 March 2007; "US
and South Korea make headway on free-trade pact," INTERNATIONAL HERALD
TRIBUNE, 12 March 2007; "Top-level talks in card for breakthrough in S.
Korea- US FTA talks," YONHAP NEWS, 11 March 2007; "US lukewarm on main
demands," THE KOREA TIMES, 11 March 2007; "US, South Korea trade deal
in doubt," ALL HEADLINE NEWS, 13 March 2007; "Legislators speak out
against US-SK trade deal," THE HANKYOREH, 14 March 2007, "Korea, US
trade FTA concessions," THE KOREA TIMES, 13 March 2007; "S.Korea will
not give up key farm goods at FTA talks with US: official," YONHAP
NEWS, 14 March 2007; "U.S.-South Korea Talks Stumble," WALL STREET
JOURNAL, 13 March 2007.

=A0

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org
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