Bridges Weekly Trade News Digest • Volume 10 • Number 42 • 13th December 2006

US-Korea Trade Negotiations Stumble


Trade talks between South Korea and the US came to a stand-still on 9 November, when negotiators were unable to agree on key issues including intellectual property and trade remedies. The failure to make meaningful progress during the fifth round of free trade agreement (FTA) negotiations has called into question whether the two sides will be able to strike a deal.

Talks on trade remedies and pharmaceuticals have been indefinitely suspended, South Korea’s chief trade negotiator Kim Jong-hoon told reporters after the latest round of talks.

His US counterpart, Wendy Cutler, expressed disappointment that Korea has not addressed Washington’s concerns about patent protections for American pharmaceutical companies. The US feels that Korea’s current health care system, which reimburses citizens only for drugs on a government-approved list, unfairly discriminates against US drug exporters (see BRIDGES Weekly, 26 July 2006).

Korea complains of being unfairly targeted by US anti-dumping procedures, and would like to see Washington reform its anti-dumping rules to make it harder to place extra duties on Korean exporters such as Samsung electronics. Cutler told the Associated Press that anti-dumping legislation "is an extremely sensitive issue for us." She said that Congress’ trade negotiating mandate to the Bush administration gave it "limited flexibility" on the issue.

The negotiations were launched with high hopes last June, projected to be the US’s biggest FTA since the 1994 North American Free Trade Agreement (NAFTA). Projections suggested that Korean exports to the US would increase by USD 5.4 billion, or twelve percent, under the deal.

However, the glut of unresolved differences between the two countries makes it seem increasingly unlikely that the initially contemplated agreement will be passed.

For instance, Washington is unhappy over Korea’s tariff and tax system for automotive imports, which it claims unfairly discriminates against US-made cars. Korea exported 750,000 cars to the US last year, while importing fewer than 6,000. Korean negotiators walked out of automotive discussions after the US pressed them to change the current system.

Several other important trade areas have yet to concluded, such as tariffs, rules of origin, safeguards, and anti-circumvention, as well as opening Korea’s politically sensitive agricultural sector.

Another cloud over the negotiations has come from trade in beef. US beef exporters accused Korea of unfairly blocking imports when the Asian nation turned away tonnes of beef last month after finding it to contain bone chips measuring less than 1 mm in length. Korea had only recently agreed to resume imports of boneless US beef, following a three-year ban due to fears of mad cow disease.

In spite of the troubled state of the talks, the two nations scheduled a sixth round of discussions for 15 January in Korea. Washington-based publication Inside US Trade reports that the January session, which will revisit automotive and pharmaceuticals trade, will be preceded by informal meetings. A seventh round of negotiations is tentatively planned for February.

US and Korean negotiators have a tentative end-March deadline for concluding an agreement. If a deal is not reached by then, the presidential administration will not be able to submit it to Congress under its "fast-track" negotiating authority — which allows it to seek an up-down vote from Congress with no possibility for changes made to be made to the trade agreement in question.

Despite the setbacks, negotiators made progress on a number of secondary issues, including services and other intellectual property rights issues, as well as a mutual agreement to eliminate tariffs on certain products. In press conferences after the week-long round, the top trade officials from both sides both expressed optimism and stressed their commitment toward the eventual conclusion of a mutually-beneficial deal.

"Seoul, Washington Suspend Major Areas of Free-Trade Talks," VOICE OF AMERICA, 7 December 2006; "South Korea’s Trade Talks With US to Resume in January," DEUTSCHE PRESSE-AGENTUR, 10 December 2006; "US-South Korea Trade Talks Go On," THE ASSOCIATED PRESS, 8 December 2006; "US-South Korea Trade Talks Head for the Rocks," THE FINANCIAL TIMES, 9 December 2006