U.S. fails to reach free-trade pact with South Korea

Despite a furious round of negotiations the last few days, the U.S. failed Thursday to work out a free-trade agreement with South Korea, denying President Obama a deal he had hoped would be a strong kickoff to a key economic summit of world leaders.

Obama said he still hopes for a pact within weeks, and believes that representatives of the top 20 industrialized and developing economies will reach “a broad-based consensus” on reconciling trade imbalances while they are meeting here this week.

Though there are disagreements among leaders dealing with unique problems of their individual countries, Obama said, they share his belief that American prosperity is crucial to them all.

“I don’t think you’ll get any objection to their belief,” he said, “that if the U.S. isn’t growing, that’s not good for the rest of the world.”

The G-20 summit taking place here Thursday and Friday won’t be easy for the president. World leaders are at odds over how, exactly, to promote growth and keep the worldwide recovery going.

The leaders appear to be nearing a generalized agreement on a joint communique that would set common standards for evaluating trade balances among nations, an administration official said Thursday.

Still, the failure to make a deal with South Korea takes some of the wind of out Obama’s sails, as he argues that trade and currency inequities are ultimately bad for the global recovery.

In a solemn press conference after his meeting with South Korean President Lee Myung-bak, Obama articulated the case.

“The most important thing that the United States can do for the world economy is to grow, because we continue to be the world’s largest market and a huge engine for all other countries to grow,” said Obama. “Countries like Germany that export heavily benefit from our open markets and us buying their goods. That’s true for every G-20 member.”

It’s difficult to keep doing that “if we start seeing the huge imbalances redevelop that helped to contribute to the crisis we just went through,” he said.

Standing next to Lee for the news conference, Obama did not name South Korea as an offender. But Lee was asked by an American reporter how he explains the “one-way trade” relationship between the two countries.

“One thing I wish to point out to the American consumers,” said Lee, “is that there is really no trade imbalance when the U.S. talks about its trade relationship with the Republic of Korea.”

Hidden U.S. fees and royalties make up the trade imbalance of $8 billion a year between the two countries, he said.

After the meeting, a Korean official said Lee had adopted a “wise negotiation stance.”

“We shouldn’t make unnecessary concessions because we’re pressed for time,” said Won Hee-ryong, secretary general of Korea’s ruling Grand National Party.

Public officials have the right to push for the best deal they can get, said U.S. Trade Representative Ron Kirk.

“But at the same time, President Obama has been clear that we want the same access to their free markets as they have to ours,” said Kirk.

Sales of automobiles and beef have been cited as areas of contention.

In the run-up to the summit, advocates for an agreement believed the negotiations this week were going well and that the parties shared an understanding of its importance.

“Strengthening ties with our democratic ally South Korea is critical not only to grow the American economy, but also to serve as a strong counterweight to China’s growing influence and aggression in the region,” said Rep. Peter Roskam (R-Ill.), co-chair of a bipartisan congressional working group on the free-trade agreement.

“In the trade arena, if we are not moving forward, we are being left behind,” said Roskam, who is in Seoul to support the talks. “Korea recently signed a trade accord with the European Union, and American manufacturers cannot afford to get shut out of this growing marketplace.”

Immediately after the press conference, Obama went into a meeting with Chinese President Hu Jintao, where he planned to press for the Chinese government to allow the value of its currency to appreciate so that U.S. goods and services can compete in the region.

cparsons@latimes.com