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Key sticking points in talks for South Korea-US free trade deal

Yonhap - 2007/03/18

Key sticking points in talks for South Korea-U.S. free trade deal

WASHINGTON, March 18 (Yonhap) — Chief trade negotiators from South Korea and the United States are set to meet in Washington on March 19-21 to settle their differences over sensitive issues as they are eager to conclude a free trade deal by the end of this month.

Here are some of the key issues that will be on the table as the chief negotiators try to make a package deal by linking the issues to each other.


South Korea, a net importer of food, is one of the U.S.’s largest export markets for farm goods. South Korea’s average agricultural tariff is 52 percent, more than four times the U.S. average.

Before forging the proposed free trade agreement (FTA), South Korea is trying to obtain a tariff phase-out period of more than ten years for certain sensitive products such as corn, pork, soybeans, oranges and other fruits, while the U.S. wants an immediate tariff reduction.

In 2005, South Korea posted a US$1.92 billion deficit in agricultural trade with the U.S., importing U.S. farm products worth $2.8 billion.

According to the Seoul-based Korea Rural Economic Institute, U.S. exports of agricultural goods to South Korea could more than double under the proposed deal, forcing about 130,000 farmers to lose their jobs.


Rice, the staple of 48 million South Koreans, has been cited as one of the "deal breakers" in FTA talks between the two nations.

South Korea’s chief negotiator Kim Jong-hoon and other government officials have said rice should be excluded from the proposed deal, emphasizing they have no room to compromise over rice. However, U.S. chief negotiator Wendy Cutler has reiterated that rice would be discussed at some point.

Despite the apparent showdown, rice hasn’t been officially discussed so far and some analysts say the commodity might be excluded from the pact, given the crop’s political sensitivity in South Korea.

Under the 2004 agreement with the World Trade Organization (WTO), South Korea agreed to increase rice imports to 8 percent of consumption by 2014 from the current four percent level. While U.S. rice is being imported for now under the WTO agreement, it doesn’t seem to pose a major threat because South Koreans prefer to eat homegrown rice, despite higher prices, since they consider it to be better in terms of quality and taste.


South Korean automakers such as Hyundai Motor Co. and Kia Motors Corp. have achieved competitive success in the U.S. market, while American rivals have been less successful in gaining shares of the Korean domestic market.

In 2006, South Korean automakers sold more than 800,000 vehicles, or $10.8 billion worth, in the U.S., while U.S. companies exported about 4,000 vehicles, or $750 million, to South Korea. U.S. automakers blamed various Korean regulations for the trade gap.

The U.S. requested South Korea to revise its engine displacement-based tax system for imported cars, alleging it discriminates against U.S.-made cars, which are generally larger than domestically-produced Korean ones.

The U.S. also demanded South Korea eliminate its 8 percent tariff on American cars, while South Korea requested the U.S. to "immediately" cut its 2.5 percent tariff on Korean cars.


Though the row between South Korea and the U.S. over bone fragments in U.S. beef shipments is not technically being addressed in the FTA talks, Washington’s officials say a trade deal cannot be approved by their legislators if there is no amicable resolution of the dispute.

Last year, South Korea resumed imports of U.S. beef but only boneless shipments, ending a three-year ban prompted by an outbreak of a mad cow case in the U.S. It later turned back three shipments totaling 22.3 tons after bone chips were found in them.

South Korean officials defended their action as purely health-oriented but U.S. officials accused Seoul of using its quarantine regulations to block U.S. exports.

Last week, South Korea softened restrictions on imports of U.S. beef, proposing to return only boxes of bone-in beef and to allow remaining beef to be sold in South Korea.

However, the U.S. requested South Korea to "fully" reopen its market to the American meat.

South Korea, once the third-largest overseas market for U.S. beef, had imported some $850 million worth of the product.

North Korean industrial park

Located in the North Korean border city of Kaesong, the South Korean-built Kaesong industrial park is considered a model for reconciliation and cooperation between the two Koreas.

South Korea requests the U.S. to include Kaesong-made goods in the proposed pact, but Washington’s trade officials have publicly snubbed the idea, saying the pact won’t apply to goods made in a third country.

Currently, about 11,000 North Korean workers, who are cheap but skilled, are employed at 21 South Korean companies in the complex, according to the Unification Ministry’s Web site.

If further expansion is made by 2012, the complex will house about 300 South Korean companies with about 70,000 North Korean employees.

Other issues

South Korea is demanding revision of U.S. antidumping laws, which it believes have often been used unfairly to curb its exports. The U.S. is seeking to protect its pharmaceutical patent rights and to request South Korea to guarantee the lowest price for new medicines.

 source: Yonhap