U.S., South Korea agree to launch talks on free trade

Friday, February 3, 2006

The negotiations are expected to take at least a year, and it's an open question whether they will succeed.

WASHINGTON -- South Korean cars, cell phones and other consumer goods should drop in price if the United States and its Asian partner complete the biggest free trade deal since America tore down barriers with Mexico and Canada.

The start of talks to link the United States with its seventh-largest trading partner were announced Thursday in a ceremony at the U.S. Capitol.

The negotiations, which can begin after a 90-day consultation period with Congress, are expected to take at least a year, and it's an open question whether they will succeed. There is strong resistance, especially among South Korean farmers, to giving up some protections, and there have been violent street protests.

And approval by Congress could face stiff opposition from critics of the administration's free trade policies. Americans would benefit by seeing cheaper prices for such products as South Korean cars, cell phones, televisions and other consumer goods, but critics are concerned that more U.S. jobs might go overseas.

From an economic standpoint, the deal would dwarf any previous U.S. free trade pacts except the 1993 North American Free Trade Agreement that tore down barriers between the United States, Canada and Mexico.

U.S. trade representative Rob Portman and his Korean counterpart, Hyun-Chong Kim, announced the negotiations during a ceremony in the Capitol attended by senators and House members who had urged the administration to pursue a deal with Korea.

Portman said he recognized that completing the talks in a year was an ambitious goal but they needed to be wrapped up by the end of 2006 to be sure the deal could be voted on under fast-track procedures that are due to expire in mid-2007.

Both Portman and Kim insisted that the completed deal would be comprehensive and that there was no understanding going into the talks that agriculture, which is particularly sensitive in South Korea, would be spared.

"We will continue to work to convince our farmers that they will have to find some niche products" that can be exported, Kim said.

President Bush issued a statement saying a free trade pact with South Korea "will provide important economic, political and strategic benefits to both countries and build on America's engagement in Asia."

Bush has aggressively pursued free trade deals, pushing the number of foreign countries with such agreements from four -- Canada, Mexico, Israel and Jordan -- when he took office, to 16 currently.

He has reached deals with Chile, Singapore, Australia, Morocco, Bahrain, Oman and the six nations of covered by the Central American Free Trade Agreement -- Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua, which won congressional approval this summer after a hard-fought battle but has not yet gone into effect.

South Korea has the 11th largest economy in the world and U.S. exports into that market totaled $25.1 billion through November of last year, up 4.6 percent from the same period in 2004. The biggest U.S. sales came in computer chips and industrial machinery.

South Korea, meanwhile, shipped $40.1 billion in products to the United States through November, down 5.4 percent from the same period in 2004. The leading South Korean products sold in the United States were passenger cars household goods, a category that includes cell phones, computer chips and televisions.

America's trade deficit with South Korea totaled $15 billion through November, a gap that analysts said could present problems getting a deal through Congress, especially at a time when America's trade deficits with the world have soared to record levels.

Rep. Sander Levin, D-Mich., complained that South Korea continues to protect its domestic auto industry with high barriers that keep out American autos and auto parts while South Korean producers such as Hyundai enjoy wide access to the U.S. market.

In 2004, South Korean automakers sold 688,700 vehicles in the United States, or 4.1 percent of the U.S. market, while American automakers sold only 5,415 vehicles in South Korea, Levin said, citing government figures.

Other U.S. sectors, including farmers, are likely to complain about the high barriers they now face trying to crack the South Korean market, since South Korea has some of the world's highest agriculture barriers.

"Korea is a very protected economy. It will be a fight in this country and in South Korea to get it ratified," said Gary Hufbauer, senior economist at the Institute for International Economics, a Washington think tank.

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