Korea-US FTA faces rough road ahead

By Kim Tong-hyung
Staff reporter

Leaders of South Korea and the United States agreed to push for the speedy ratification of the two countries' free trade agreement (FTA) over the weekend but the devil is in the details, and that always carries the possibility of torpedoing their efforts.

President Lee Myung-bak and his American counterpart Barack Obama vowed during their meeting held on the sidelines of the G-20 summit in Toronto, Canada, to fine-tune their differences over the agreement by November.

Although Trade Minister Kim Jong-hoon said that the FTA, which was made three years ago, will be subject to "adjustments," not "renegotiations," the issues of beef and automobiles are likely to pose the biggest hurdles again.

Although the proposed FTA suggested lowering tariffs and other market barriers for products from both countries, the U.S. Congress has been balking at the remaining barriers for U.S. auto and beef exports. And the Korean government isn't submitting the agreement to the National Assembly before the U.S. approves it first.

The Obama administration's renewed bid to jump-start the so-called KORUS FTA represents a sense of urgency on the U.S. part as Korea continues to push for trade agreements with China, Japan and the European Union. Obama appears to be jockeying for a better opportunity to push the deal to Congress after the Nov. 1 mid-term elections are finished, when it finds itself in a better position to deal with auto unions and cattle ranchers.

Korea's completion of free trade pacts with other major economies first could result in a significant amount of lost business opportunities for the U.S.

For the two countries to achieve in the next four months what they couldn't in the past three years, significant changes will have to take place with regard to the conditions reached on the treaty in 2007.

Korean officials were quick to downplay the possibilities of a dramatic change to the preliminary agreement, stressing that Obama chose to describe the new round of talks as an attempt for an "adjustment," not "renegotiation."

However, with the U.S. clearly intending to address the issues raised by American carmakers and ranchers over accessing the Korean auto and beef markets, the talks between the two countries will likely turn nervy.

In the preliminary agreement, Korea promised to eliminate the 8 percent tariff on imported American cars in exchange for the U.S. lifting its 2.5 percent tariff on cars with an engine capacity of less than 3,000 cc. However, U.S. automakers have been complaining about Korea's remaining non-tariff regulations, which they claim favor engine sizes more commonly found in cars produced by Korean companies such as Hyundai Motor.

The beef negotiations could be even trickier. The Lee government was brought to the brink of collapse by mass protests in 2008 after deciding to lift the ban on U.S. beef imports, which was imposed in 2003 after a mad-cow disease outbreak. This forced the Korean government to reintroduce import restrictions, allowing only U.S. beef from cattle less than 30 months old to reach Korean shelves.

American farmers have claimed that the restrictions are unnecessary, but it remains to be seen whether the Lee government will be willing to revisit an issue that had previously brought its darkest hour.

U.S. officials are vague on whether beef will be a critical issue in the upcoming talks, while a spokesman from Korea's Ministry for Food, Agriculture, Forestry and Fisheries resolutely said that beef would not be a subject of discussions at all.

"To put it simply, South Korea can't change too much from the preliminary agreement reached in 2007. Policymakers will likely use the ongoing free trade negotiations with Europe, China and Japan to gain leverage in the talks with the U.S.," said Park Beom-sun, a researcher from the Samsung Economics Research Institute.
thkim@koreatimes.co.kr