S. Korea, U.S. To Hold Trade Talks
The United States and South Korea announced Thursday that they will launch negotiations on a free trade agreement.
A successful deal would be the biggest free trade pact the United States has reached since 1993, when agreement was reached to tear down barriers with Mexico and Canada.
Negotiations are expected to take at least a year 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.
The agreement to start negotiations was announced in a ceremony at the U.S. Capitol by U.S. Trade Representative Rob Portman and his Korean counterpart, Hyun-Chong Kim.
Portman said a completed deal would be "the most commercially significant" since the United States reached the 1993 North American Free Trade Agreement with Canada and Mexico.
"Few countries better represent the promise of open markets, democracy and economic reform than Korea," he said in a statement.
In addition to opposition to free trade opponents in the United States, South Korea's government was expected to face stiff opposition, especially from South Korean farmers, who have staged violent street protests in an effort to keep the trade protections they now enjoy.
President Bush has aggressively pursued free trade deals, pushing the number of 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, $4.2 billion; industrial machinery, $1.4 billion, organic chemicals, $1.3 billion, and civilian aircraft at $953 million.
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, $7.2 billion; household goods, a category that includes cell phones, at $5.7 billion; computer chips, $2.8 billion, and computer accessories, televisions and VCRs at $3.9 billion.
The United States' 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 that the car deficit makes up almost half of the U.S. trade deficit with South Korea.
"This agreement presents an opportunity for the Bush administration to stand up for our automotive sector," Levin said in a statement.
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.
Because of these factors, some trade experts cautioned that it may not be possible to reach a deal with South Korea before the administration's trade promotion authority — which allows for up-and-down votes in Congress with no amendments — expires in the middle of 2007.
"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.
By Martin Crutsinger