Bridges Weekly Trade News Digest • Volume 11 • Number 7 • 28th February 2007
US And South Korea Make Progress In FTA Talks Amid Protests
Prospects for the US and Korea to conclude free trade agreement negotiations in time for a US-determined deadline look somewhat better after negotiators wrapped up the seventh round of talks on 15 February.
Although crucial differences remain unresolved, US lead negotiator Wendy Cutler called the discussions "the most successful negotiating round so far," adding that she was "confident that the talks can be successfully wrapped up by the end of March."
A deal would need to be finalised by then for the Bush administration to be able to meet a mandatory 90-day Congressional review period before its ‘trade promotion authority’ expires at the end of June. Under this mandate, the president can require Congress to accept or reject a trade agreement without seeking specific changes.
The two sides have agreed to eliminate tariffs on 85 percent of industrial goods. During the recent round, they decided to guarantee duty-free access and non-discriminatory treatment to electronically traded products such as software, music, and movies, with provisions on electronic signatures, online consumer protection, paperless trading, and cross-border information flows. They also established rules of origin for chemicals, pharmaceuticals and plastics, and made progress on some technical issues in the services and investment negotiations.
Most controversial issues unresolved
However, agreement continues to elude Washington and Seoul in the precise areas that have been the most contentious throughout the negotiations: agriculture, automotive trade, Seoul’s pharmaceutical policies, and the US’ use of anti-dumping measures on Korean products. Nevertheless, Cutler told reporters that negotiators had established a clear way forward for addressing these issues.
Rice, a highly charged matter for South Korean farmers, has barely been discussed. South Korean officials have vowed to shield rice from any trade deal, while the US wants it included, along with the rest of the agriculture sector. According to a statement from the Korean trade ministry, negotiators were only able to narrow differences on the "relatively less sensitive" farm trade issues during the recent round. High-level agriculture talks will be held on 5-6 March, just before the eighth round, to discuss exemptions from liberalisation as well as the pace of tariff reduction.
Seoul’s policies towards imported US beef have been another sticking point in the negotiations, with the most recent spat triggered when Korean officials denied entry to shipments of meat due to the presence of tiny bone chips (see BRIDGES Weekly, 13 December 2006). However, Seoul’s lead negotiator, Kim Jong-hoon, expressed confidence that the issue could be resolved in a 23 February interview on Korean radio. Beef will be one of the issues discussed during next week’s high-level agriculture talks.
South Korea exports about 800,000 cars to the US, while only about 4,000 cars go in the opposite direction. US carmakers are sceptical that the FTA will change their access to the South Korean market. They argue that Seoul maintains a number of regulatory hurdles that obstruct US cars, including safety and emission standards that only apply to imported vehicles. South Korean officials blamed Washington’s "linkage of automotive tariffs to automotive taxes" for the failure to make progress.
Several civil society groups continue to oppose the potential accord. Protestors from South Korean and US labour unions sat outside the negotiation venue in Washington. Cattle farmers in South Korea also demonstrated against the talks.
The next round of negotiations will be held from 8-12 March in Seoul. If concluded, this FTA would be the US’ biggest since the 1993 North American Free Trade Agreement (NAFTA). Bilateral trade between the US and South Korea currently amounts to more than USD 100 billion annually. The commercial significance of the potential accord has won it support from some Congressional Democrats who have otherwise expressed scepticism about bilateral trade agreements.
ICTSD reporting; "Manufacturers leery of US-Korea trade deal," US NEWS AND WORLD REPORT, 13 February 2007; "Progress at latest US-Korea FTA talks," THE CALTRADE REPORT, 17 February 2007; "US-Korea trade negotiations get nowhere," ONEWORLD, 16 February 2007; "S. Korea, US to hold farm talks next month," YONHAP NEWS, 21 February 2007; "No major breakthrough in US- S. Korea free trade talks," DOW JONES NEWS, 15 February 2007; "FTA could mean nearly full opening of Korean agricultural market," HANKYOREH, 14 February 2007; "S. Korean trade negotiator hints at resolution of beef spat with US," YONHAP, 23 February 2007.