Bridges Weekly Trade News Digest • Volume 14 • Number 24 • 30th June 2010

US Announces New Attempt to Finalise Korea FTA

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One of the more unexpected developments to emerge from the G-20 summit in Toronto was US President Barack Obama’s announcement that his administration would attempt to solve outstanding disagreements on a free trade agreement with South Korea by November.

Washington and Seoul signed an FTA in June 2007. But it has languished unratified since then, despite the fact that it would represent the United States’ most commercially significant FTA since the North American Free Trade Agreement in 1994.

Congressional concerns about the accord’s provisions for beef and auto trade, particularly among Democrats, made the Bush administration reluctant to put the accord to a vote in Congress. And the Obama administration had heretofore not set any clear timelines for dealing with the Korea FTA or similar pending deals with Colombia and Panama.

Part of the motivation for the Obama administration’s renewed interest in the Korea FTA is political: Washington wants to show support for Seoul at a time of increasing tension with North Korea.

There are also new economic reasons: the EU concluded talks on an FTA with Korea late last year.

Nevertheless, this does not mean that resolving differences will be easy. Korean Trade Minister Kim Jong-hoon on Wednesday categorically rejected any amendment to the agreement. “Adding or removing even a dot from the accord is making an amendment, but such a thing will not occur,” he said, according to a report in the Korea Herald.

But, in a nod to the sort of accommodations that have smoothed political obstacles to trade deals elsewhere, Kim said that while renegotiation was not on the cards, an adjustment of some sort was possible, reports Arirang, a Korean news service.

For both beef and automobiles, it is non-tariff measures rather than import duties that are at issue.

Seoul maintains a partial import ban on US beef that has incensed US ranchers and lawmakers. It banned imports of US beef altogether in 2003, after a case of mad cow disease was found in Washington state. In 2008, it tried to end the ban but was forced by public protests to limit imports to beef from younger cattle, thought less likely to carry the disease. US beef producers argue that the policy has no basis in reasonable safety concerns, and is instead designed to protect the Korean beef industry.

As for auto trade, the US automotive industry believes that the proposed FTA does not do enough to address Korean regulations favouring engine sizes uncommon to US automobiles.

US labour groups oppose the prospective agreement with South Korea. “We remain deeply concerned about and strongly opposed to the US-South Korea trade agreement as negotiated by the Bush Administration,” said AFL-CIO President Daniel Trumka this week. “The agreement would exacerbate our already lopsided trade relationship with South Korea, putting at risk thousands of good US jobs in the auto, steel, and other industrial sectors.”

The National Foreign Trade Council (NFTC), on the other hand, supports the White House’s new push to secure Congressional approval for the FTA with Korea. “The [Korea-US FTA] is the most commercially significant agreement in 16 years, and with the president’s goal of doubling exports and creating two million US jobs in five years, ratification of the FTA is part of achieving that objective,” said NFTC President Bill Reinsch.

In 2007, the US International Trade Commission estimated that the reduction of Korean tariffs and tariff-rate quotas would boost US exports to Korea by $10 billion annually, adding a comparable figure to the US’s GDP.

ICTSD reporting; “U.S. Vows New Push in Korean Trade Pact,” WALL STREET JOURNAL, 25 June 2010; “Trade Minister: No Changes to be Made in Korea-US Free Trade Agreement,” ARIRANG, 30 June 2010; “Trade minister rules out amending Korea-U.S. free trade accord,” KOREA HERALD, 30 June 2010.