U.S., South Korea Are Nearing Negotiations on Free Trade Pact

The United States and South Korea are about to open talks on a free trade pact that if completed would be the largest since the North American Free Trade Agreement of 1994, U.S. and Korean officials said today.

A trade pact with South Korea, already the United States’ seventh-largest trading partner with about $70 billion in two-way trade annually, would not be as controversial as NAFTA because South Korea is an industrialized country with higher wages than those of some Latin American nations. But there are complications because of Seoul’s warming relations with communist North Korea, and a small but fervent anti-globalization movement within South Korea.

Protests by nearly 100 farmers, some carrying upside-down U.S. flags, forced the suspension today of a public hearing, which is required under South Korean law before formal negotiations on a trade pact can begin.

There had been hope that an announcement on the talks could be made as early as tonight, but now it could be delayed.

A South Korean Foreign Ministry spokeswoman said no date had been set for the resumption of the hearing.

“Clearly it is going to be a tough and challenging negotiation,” said a senior U.S. trade official in Washington who asked not to be quoted by name. “But we think there are a lot of economic gains for both sides. It would definitely be a win-win situation.”

For the United States, a free trade agreement with South Korea would help cement the relationship with an old Cold War ally that recently has been drifting toward China in terms of economic and political ties.

U.S. exports to South Korea could be boosted by as much as 54%, according to a 4-year-old study by the U.S. International Trade Commission. Rice, fruits and vegetables, automobiles, American beef and Hollywood movies would be among the likely winners.

American imports from South Korea are projected to increase 21%, most noticeably textiles, apparel and electronics.

“This would be the largest trade agreement we’ve negotiated since Canada and Mexico, and we are really excited about doing it,” the U.S. trade official said.

U.S. officials said an announcement on the talks was expected as soon as South Korea completed its public hearing. The formal talks would begin in May, with the goal of submitting a treaty to Congress by April 2007.

Tami Overby, president of the American Chamber of Commerce in Seoul, said U.S. officials had been informally discussing a trade pact for more than a year with the administration of South Korean President Roh Moo-hyun.

“If they didn’t feel they had a high degree of probability of completing an agreement, I don’t think either government would move forward right now,” Overby said. “They’ve talked about the tough things up front.”

South Korea last week lowered a screen quota that had restricted the number of days that foreign movies could show in cinemas. The 40-year-old quota had been a long-standing impediment in trade talks between the countries.

Trade Minister Kim Hyun Chong told Korean reporters Wednesday that a free trade agreement with the United States was a necessity.

“For South Korea to sustain growth in exports and GDP, it has to conclude FTAs, the invisible high-speed infrastructure of the 21st century,” he was quoted as saying by the semiofficial Yonhap news agency.

But South Korea may still have a long way to go before it can complete a trade deal with the United States.

“Agriculture will be the hottest, most controversial area,” said Lee Jun Kyu, an economist with the Korea Institute for International Economic Policy who recently wrote a report on a potential trade agreement with the United States. “There will be other issues about culture and identity. Should we open the education market? What about telecommunications standards?”

Another potential problem is the recent migration of some South Korean manufacturers to North Korea, where labor costs are lower.

In some of its other trade pacts, South Korea has been permitted to list products assembled at a new industrial park just north of the demilitarized zone in Kaesong as “made in South Korea.”

Such an arrangement would not be permitted by the Bush administration, which has said it will not do business with North Korea before it dismantles its nuclear program and improves its human rights record.