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US and South Korea reach Free Trade Agreement

  Trade  -   POSTED: 2007/04/02 09:14

United States and South Korea and reached a major free trade agreement Monday that will drastically boost their exports, officials from both sides said. Han Dong-man, a spokesman at Korea's Ministry of Foreign Affairs and Trade, said the talks were successfully wrapped up after overnight nonstop negotiations that involved top level officials from the two countries.

"The agreement has been made," Han said, adding South Korean Trade Minister Kim Hyun-chong and Deputy U.S. Trade Representative Karan Bhatia will hold a joint news conference at 2:30 p.m. to formally announce the deal.

U.S. Trade Representative spokesman Steve Norton also confirmed the agreement.

The deal was reached minutes before the U.S. legal deadline of 1 p.m. Monday ran out, ending nearly 10 months of tough negotiations that were marred by violent protests.

The deadline requires U.S. President George W. Bush to notify Congress of his intention to sign a deal under his "fast-track" trade promotion authority.

That authority requires a mandatory 90-day congressional review of a deal before voting for or against without amendments. South Korea has no time limitations for getting approval from its parliament where supporters are believed to outnumber opponents.

Details of the FTA agreement were not officially known but Korean government sources said the last-minute hurdles included automobiles and beef. Other prominent issues such as textiles, pork and oranges had been cleared earlier, they said.

The deal will knock down tariff and non-tariff barriers between the world's largest and 10th-largest economies, which did $74 billion in two-way trade in 2006. Some studies show that a deal would boost total trade by up to 20 percent.

For the U.S., a deal with South Korea would be its biggest since the North American Free Trade Agreement with Mexico and Canada in 1994.

The talks have been marred by violent protests. On Sunday, a 56-year-old Seoul taxi-driver doused flammable liquid over his body and set it ablaze to protest against the proposed deal. Doctors said he was in serious condition.

Under the deal, the two countries will open up large areas in agriculture, merchandise and investments, with partial openings in broadcasting, telecommunications and pharmaceuticals.

Following the deal, Korean consumers will enjoy cheap American oranges and vehicles, but will have to pay more to buy American pharmaceuticals.

The deal will strengthen intellectual property rights, thus criminalizing acts of copyright infringement of online content. Television stations will also be obliged to show more American movies and programs.

Korean rice growers will not be affected by the deal as the staple food was excluded from the accord.

Agriculture was the most serious stumbling block to the 10-month-long FTA talks, together with textiles, anti-dumping, automobiles and pharmaceuticals.

Two major issues - beef and automobiles - delayed the conclusion of the deal hours before the Monday 1 a.m. deadline.

The U.S. demanded that Korea eliminate tariffs on American cars immediately, while the U.S. said it would abolish tariffs on all Korean vehicles within 10 years, and within three years for passenger cars.

Washington has been calling for Seoul to revise its auto tax system by levying taxes according to prices, not engine capacity. Under the deal, "Japanese'' cars produced in American plants will likely be exported to Korea.

Negotiators were locked in a tug-of-war on whether Korea will import American beef unconditionally after May when the World Organization for Animal Health (OIE) announces its final review on the status of the U.S. in combating mad cow disease.

At a news conference early Sunday, lawyer Song Ki-ho said, "It is unnecessary for Korea to import U.S. beef containing bone fragments even if the OIE announces U.S. beef is safe to eat in May.''

"Korea and the U.S. have already reached a verbal consensus in which Korea will soften its beef quarantine rules in several months,'' said Park Sang-pyo, chief of the Veterinarian Solidarity for Public Health.

Park also said that Korea has reached a behind-the-scenes deal on beef imports, quoting J. Patrick Boyle, president of the American Meat Institute (AMI).

If the deal is signed Monday, President George W. Bush can take advantage of his fast-track authority, which expires on July 1, after notifying the Congress of his plan to sign an accord with Korea.

Before the Monday deadline, Bush and Secretary of State Condoleezza Rice separately talked with President Roh Moo-hyun and Foreign Affairs and Trade Minister Song Min-soon to put final touches to the accord.

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