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US, South Korea near free-trade talks

Washington Post

U.S., South Korea Near Free-Trade Talks

By Paul Blustein

Washington Post Staff Writer

26 January 2006

The United States and South Korea are very close to launching negotiations for a free-trade agreement, which would be the most economically significant free-trade pact for Washington since the North American Free Trade Agreement, according to people familiar with the matter.

Officials in Washington and Seoul have been discussing the idea of a trade accord for more than a year, fueled by a mutual desire to deepen an already extensive commercial relationship. Two-way trade was $72 billion in 2004, making South Korea the United States’ seventh-largest trading partner. The United States is the second-largest market for Korean exports.

But both sides have been reluctant to start formal talks until they are reasonably confident that the negotiations would end in agreement. South Korea’s farmers are bitterly opposed to opening their country’s agricultural markets, and their political clout could scuttle a deal.

Most of the other countries the United States has free-trade pacts with have much smaller economies than South Korea and are thus much less important markets for U.S. products. They include Chile, Singapore, Jordan, Israel, Australia, Morocco, Bahrain, and the six countries in the Central America-Dominican Republic Free Trade Agreement, which squeaked through Congress in July. For example, combined U.S. exports to the six CAFTA-DR countries were $15 billion in 2004, whereas exports to South Korea reached $26 billion.

Only the NAFTA countries — Canada and Mexico — surpass South Korea among current and likely free-trade partners as a market for U.S. exports. Canada bought $190 billion in U.S. products in 2004, and Mexico bought $110 billion.

Free-trade agreements have proliferated in recent years and involve a variety of provisions. The United States has generally insisted on eliminating or phasing out all tariffs and other impediments to bilateral trade, including agriculture, though it has sometimes allowed exceptions or long phase-out periods for a handful of products. Korea would certainly insist on maintaining some protections for its rice market, said Jeffrey J. Schott, a scholar at the Institute for International Economics who has written a book about the benefits of a U.S.-Korea deal.

A 2001 study by the U.S. International Trade Commission estimated that a U.S.-Korea free-trade agreement could increase U.S. exports to Korea by $19 billion and U.S. imports from Korea by $10 billion. As large as those numbers are, they would not have an appreciable impact on U.S. gross domestic product, which is in the $11 trillion range.

Although plans to launch the U.S.-Korea talks could still founder, officials and other sources who have spoken recently with negotiators said an announcement is likely to materialize before long. Asked about the prospects, one administration official replied, "How do you say ’soon’ in Korean?" The source spoke on condition of anonymity because the final decision has not yet been made.

Rob Portman, the U.S. trade representative, heightened the speculation Friday when he told reporters, "We’ll be announcing some additional [free-trade agreement] partners soon. As I think you will notice, they will not be with small economies because I do think we need to move on to some larger economies."

Yesterday, Neena Moorjani, a spokeswoman for Portman, said it was "premature" to say whether the formal talks with Korea would be launched.