[Ip-health] [ICTSD Report] US FTA NEGOTIATIONS WITH KOREA, MALAYSIA STRUGGLING

[heeseob nam]

What I am concerned about regarding the negotiations between US and
Korea is that an agreement be made through a big deal at the level of
top officials. Their aim is just the conclusion of the talks and
public sectors are to be sold for the deal.

http://www.ictsd.org/weekly/07-01-24/story4.htm

US FTA NEGOTIATIONS WITH KOREA, MALAYSIA STRUGGLING

US negotiators failed to make substantial progress in recent bilateral
free trade agreement (FTA) talks with their counterparts from South
Korea and Malaysia. This has called into question whether Washington
can reach an accord with either country in time for a key deadline at
the beginning of April.

"There are still many differences on important issues," said South
Korean lead negotiator Kim Jong-hoon on 19 January, at the end of a
week-long round of discussions in Seoul. He added that there had been
"no progress" on the three most divisive issues - anti-dumping rules,
automobiles, and pharmaceuticals.

A round of talks between the US and Malaysia in San Francisco the week
before had proved similarly inconclusive. Malaysian Trade Minister
Rafidah Aziz said on 17 January that outstanding differences, notably
on the liberalisation of services trade and government procurement
contracts, were unlikely to be bridged in a few months.

Disagreements over agricultural commodities have been another
obstacle. Both Asian nations are seeking to exclude rice from trade
liberalisation under eventual agreements, in the face of demands to
the contrary from Washington Meanwhile, US officials have insisted
that an FTA with Korea would be impossible unless Seoul fully reopens
its market to US beef exports.

Washington's urgency arises from the end-June expiry of the Bush
administration's 'trade promotion authority' (TPA). The president must
notify Congress of his intent to sign a trade agreement by 2 April,
ninety days before this mandate runs out, in order to require
lawmakers to vote yes-or-no on the deal without the possibility of
amendment.

Without TPA, governments are reluctant to sign trade deals with the
US, since Congress would be free to subsequently pick them apart and
vote down politically uncomfortable concessions.

Korea: US chief negotiator still confident

While many of the US' recent FTAs have been with relatively small
economies such as Morocco or very open ones like Chile and Singapore,
Korea is the world's tenth largest economy and has several protected
sectors, notably agriculture.

Launched in February 2006, the talks have struggled since the outset,
and analysts believe that political will to conclude a deal has faded
in both Washington and Seoul. A deal with Korea would be Washington's
largest since the North American Free Trade Agreement (NAFTA) over a
decade ago.

During the recent round of talks, the negotiating groups on
anti-dumping, automobiles, and pharmaceuticals were not even scheduled
to meet, due to past disagreements. However, the chief negotiators for
each side did discuss these contentious issues.

Seoul wants the US to agree to restrict its use of anti-dumping
measures against Korean exports, which have been used to place extra
duties on some high-tech manufactured goods from the Asian country. US
officials have rejected these demands. Korea, in turn, has rejected
Washington's calls for it to open its market to US exports of
automobiles and pharmaceutical products. It also wants the US to relax
rules of origin which currently give textiles duty-free market access
only if they are made with US-produced yarn. Korean textiles tend to
be made from cheaper Chinese yarn.

The week saw an embarrassing turn of events for Seoul, when a leaked
government document revealed that it was willing to drop demands on
anti-dumping. Instead, the paper said, Korean negotiators should try
to parlay this perceived concession into gains in other areas of the
talks. According to the Yonhap news agency, Korean government
officials expressed regret that the classified report had been leaked
to the press, and promised to keep pushing for reform to US trade
remedies.

Agriculture continues to bog down the talks. Washington argues that
Korea is using unfair pretexts to keep out US beef imports, even after
dropping a three-year import ban it imposed after mad cow disease was
found in the US (see BRIDGES Weekly, 13 December 2006). Although the
trade spat is not formally part of the negotiations, US officials
maintain that resolving it is a prerequisite for an eventual accord.
The Korean government reiterated during the recent round of talks that
it wanted to exclude rice from the scope of a future FTA.

The two sides did manage to agree to eliminate duties within ten years
on some industrial goods that had not yet been slated for tariff cuts.

In spite of the lack of breakthroughs - and the downbeat assessment of
the talks from by her Korean counterpart -- lead US negotiator Wendy
Cutler sounded a more optimistic note, insisting that "this deal can
be done."

Malaysia believes TPA deadline impossible

The US' negotiations with Malaysia have also been languishing.
Principal stumbling blocks remain services sector liberalisation and
the Malaysian government's affirmative action policy for public
procurement.

The latter policy gives special privileges for contracts, jobs, and
housing to majority 'bumiputra' ethnic Malays, as a way to help them
compete with the wealthier Chinese minority. Though often credited
with promoting social peace in the country, the strategy has
complicated FTA negotiations. This is because in addition to shutting
out domestic non-bumiputra companies from competing for government
contracts, it also excludes US and other foreign businesses.

Trade minister Aziz said last week that differences remained
substantial, suggesting that hurrying simply in order to meet the Bush
administration's TPA expiry date might not be in Malaysia's interests.
"If they want to finish by July, I do no see it happening because
there are so many issues to cover," she said, according to the
Associated Press. "I am not optimistic. Malaysia has no deadline
constraints. We can take another year if need be. Let's do it very
carefully." She insisted that the government had "stood firm" on the
government procurement restrictions during recent discussions.

Washington insists that Malaysia can provide some commercial
opportunities in the sector to US companies without completely gutting
its decades-old preferential policies. "I think there are ways to find
resolution to these issues that don't undermine the policies that have
been in place for a long time and allow the Malaysian government to
open the market," US lead negotiator Barbara Weisel told Reuters.
Weisel, the Assistant US Trade Representative for the Asia-Pacific,
offered a more upbeat view on the talks: she said that the two sides
were "within striking distance of concluding within the next few
months."

Services and investment liberalisation are also proving contentious,
due to a fundamental difference in approach: while Malaysia wants a
'positive list' that would identify the specific sectors to be fully
opened to foreign competition, the US wants a 'negative list' of
sectors where limitations can be maintained, with the rest
liberalised.

Trade minister Aziz continued to insist that rice and tobacco would
not be part of an agreement, according to Bernama, the state news
agency.

Negotiations to cut tariffs on industrial goods are proceeding more
smoothly, with the exception of Malaysia's heavily protected auto
sector.

Korea and the US seventh round of negotiations will be held in
Washington from 11-14 February, with officials likely to focus on the
most contentious issues. The next round of talks between Washington
and Kuala Lumpur will also be next month, in Malaysia.

ICTSD reporting; "Free-Trade Pact Stuck on Beef," ASSOCIATED PRESS, 22
January 2007; "S. Korea retracts key demand on anti-dumping rules:
leaked gov't report," YONHAP, 18 JANUARY 2007; "US-South Korea Trade
Talks Head for Seventh Round," BLOOMBERG, 19 January 2007; "S. Korea
won't include rice in FTA with US: minister, YONHAP, 12 January 2007;
"US negotiator upbeat on FTA," KOREA HERALD, 20 January 2007;
"Prospects for Seoul-Washington FTA look shaky," HANKYOREH, 12 January
2007; "Key Issues Remain in U.S.-S.Korea Talks," ASSOCIATED PRESS, 19
January 2007; "Don't raise non-existent issues on US-Malaysia FTA,"
BERNAMA, 17 January 2007; "Malaysia says FTA deal with US cannot be
completed before July deadline," ASSOCIATED PRESS, 17 January 2007;
"US-Malaysia trade deal possible by March," REUTERS, 12 January 2007.


--
HeeSeob Nam
IPLeft (www.ipleft.or.kr)
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