Saturday, December 04, 2010
Trade Deal Is Reached by U.S. and South Korea - NYTimes.com
By SEWELL CHAN
WASHINGTON — American negotiators have completed a free-trade agreement with South Korea that will eliminate most tariffs on exports and solidify one of the nation’s most significant alliances in Asia, the Obama administration said on Friday.
The agreement, which requires approval by the legislatures in both countries, is a first for the administration and would be the largest trade accord since the North American Free Trade Agreement took effect in 1994.
South Korea is America’s seventh-largest trading partner.
The deal comes three weeks after a negotiating team visiting South Korea failed to nail down the deal. The breakthrough, which occurred the same day the government announced an increase in the unemployment rate to 9.8 percent, will expand American exports of goods by at least $10 billion a year and “support tens of thousands of jobs,” the Obama administration predicted.
Trade has been a crucial test of the White House’s ability to find common ground with Republicans after the drubbing Democrats took in the midterm elections. Friday’s announcement got important backing on Capitol Hill, where the prospects for the agreement seem good.
“This is a big win for American employers and workers,” said Representative Dave Camp, a Michigan Republican who will become chairman of the powerful House Ways and Means Committee, which sets tariffs.
But Senator Max Baucus, the Montana Democrat who is chairman of the Senate Finance Committee, said he was “deeply disappointed” that the deal did not further reduce barriers to American beef exports, which have been a particularly volatile issue in South Korea.
The deal is technically a supplement to an agreement negotiated by the Bush administration in 2007 but never finished. It was completed Friday morning, after three days of negotiations outside Washington that ended when both sides agreed in essence to give themselves more time to eliminate their tariffs on autos.
The United States will phase out its 2.5 percent tariff on imported Korean autos over five years. The 2007 version would have eliminated the tariff right away on 90 percent of Korean autos, with the remaining tariffs, on larger vehicles, phased out over three years.
Of the Detroit automakers, Ford was the most vociferous in opposing the 2007 agreement; Chrysler expressed reservations and General Motors, which owns Daewoo, the third-largest Korean automaker, stayed out of the fray. Hyundai-Kia is the No. 1 automaker in South Korea and Samsung is No. 2.
The transition period will allow the Americans to ensure that South Korea is holding up its end of the deal with regard to nontariff barriers.
“This development provides leverage to assure that Korea opens its market and provides time for our industry to root itself in the Korean marketplace,” said Representative Sander M. Levin, a Michigan Democrat and the current Ways and Means chairman, whose support is seen as crucial in swaying liberals in Congress.
The United States Chamber of Commerce, the business lobby that poured tens of millions of dollars into defeating Democrats in last month’s elections, offered rare praise Friday for Mr. Obama. “This agreement will create thousands of new jobs, advance our national goal of doubling exports in five years, and demonstrates that America is once again ready to lead on trade,” its president, Thomas J. Donohue, said in a statement.
“We will do everything in our power to round up the votes,” he added.
The Ford Motor Company, which had placed full-page newspaper ads noting that the United States exported fewer than 6,000 vehicles to South Korea last year compared with nearly 500,000 that it imported, threw its support behind the agreement.
“These new provisions provide Ford greater confidence that we will be able to better serve our Korean customers,” its chief executive, Alan R. Mulally, said.
The latest round of talks was scheduled before North Korea’s recent shelling of a South Korean island, an episode that drew the two countries together and added momentum on both sides to bolster the alliance between Washington and Seoul.
“Strengthening ties with our democratic ally South Korea will not only grow the American economy, but it will also serve as a strong counterweight to China’s growing influence and aggression in the region,” said Representative Peter Roskam, an Illinois Republican and co-chairman of a bipartisan group of lawmakers who have monitored the talks.
In June, Mr. Obama announced at a meeting of leaders of the Group of 20 economic powers that he would try to complete modifications to the agreement by November and then submit the deal to Congress. But that deadline passed three weeks ago, casting a pall over Mr. Obama’s attendance at the G-20 summit meeting in Seoul last month.
The United States trade representative, Ron Kirk, and his Korean counterpart, Kim Jong-hoon, met Tuesday in Columbia, Md., for a two-day round of talks that extended into Thursday.
After a final meeting on Friday morning, both sides finally said an agreement was close. “It’s time now for the leaders to review this progress before we move forward,” Mr. Kirk said as the Korean negotiators returned home to brief their president, Lee Myung-bak.
In the agreement, both sides are getting more time to remove their auto tariffs.
South Korea will immediately cut its tariff on American autos to 4 percent from 8 percent, with the remainder ending over five years. Under the 2007 deal, the tariff was to end immediately.
The new agreement, the administration said, also contains other significant terms related to the auto industry:
¶It exempts 25,000 American-made vehicles a year from each manufacturer, from costly South Korean safety regulations that critics said were intended solely to discriminate against imports.
¶It gives American automakers that now have only a toehold in South Korea more leeway to comply with regulations on greenhouse gas emissions and fuel economy as they expand their market share.
¶It gives the United States more time to phase out a 25 percent tariff on trucks and requires Korea to more quickly reduce its tariff on electric cars.
¶It includes a safeguard, specific to the auto industry, that would allow tariffs to be reimposed if there were a sudden, unanticipated surge in South Korean auto imports as a consequence of the agreement.
In focusing so much on autos, the Obama administration did not press as hard as Mr. Baucus, and other lawmakers from agricultural states, would have liked on access to American beef.
South Korea banned American beef imports in 2003 after an outbreak of bovine spongiform encephalopathy, or mad-cow disease, in Washington State.
Shortly after taking office in 2008, the South Korean president moved to open the country’s market to American beef, but he was confronted with major antigovernment protests and riots that threatened to bring down his government. South Korea continues to limit American imports to beef from cattle under 30 months old, a restriction that Mr. Baucus and other American officials consider unreasonable because no mad-cow disease in humans has been attributed to American beef.
The beef issue is still volatile for the South Koreans — it prompted a walkout during last month’s talks — but the economic impact of the 30-month limit is slight since consumers tend to prefer cuts from younger cattle.
Mr. Baucus’s office said he would oppose the agreement unless his concerns were addressed. Other Democrats were skeptical of the deal.
The leader of a group of lawmakers who want protections against jobs moving abroad, Representative Michael Michaud, a Maine Democrat, said, “The deal reached today, while beneficial to the auto industry, falls far short of that goal.”
The Senate minority leader, Mitch McConnell of Kentucky, called the South Korea deal “a positive development” but urged progress on trade deals with Colombia and Panama negotiated by the Bush administration that have languished in Congress.