U.S., South Korea Fail To Finalize Stalled Trade Deal
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SEOUL, South Korea — South Korea and the United States failed to score a breakthrough on a long-stalled free trade agreement and will keep negotiating, their presidents said Thursday, in a sharp setback to hopes of speedily ratifying the ambitious accord.
The two sides have been holding negotiations this week to jump-start the deal to slash tariffs and other barriers to trade that was signed in 2007 when previous administrations were in power. It remains unratified by lawmakers in both countries.
Progress has been slowed by U.S. demands that South Korea reduce its surplus in auto trade and further open its market for American beef. The global financial crisis in 2008 and recession that followed also sapped momentum.
"We share the view that we need more time," South Korean President Lee Myung-bak said at a joint press conference with President Barack Obama.
Obama had hoped to announce a deal on the pact while in South Korea for a summit of the Group of 20 economic powers, but instead he will return home empty-handed.
"We have asked our teams to work tirelessly in the coming days and weeks to get this completed," Obama said.
"We don't want months to pass before we get this done," he said. "We want this to be done in a matter of weeks."
The leaders did not say what issues prevented an agreement, but South Korean news reports said earlier this week that the U.S. was pressing Seoul to loosen auto fuel and emissions standards to help boost U.S. sales of cars to South Korea.
Kim Dong-cheol, a lawmaker with South Korea's opposition Democratic Party and a member of the parliamentary foreign affairs and trade committee, told The Associated Press before the presidents spoke that he received a call from Trade Minister Kim Jong-hoon on Thursday that indicated the talks might be unsuccessful.
Trade Minister Kim reported to President Lee Myung-bak that "it would be difficult to reach a deal on the FTA before the G-20 due to unreasonable U.S demands," according to the lawmaker.
Lee told his trade minister that "if so, it would be better to discuss it later," according to Kim Dong-cheol, the lawmaker, who did not provide further details.
The White House says the deal could add at least $10 billion to U.S. gross domestic product and boost exports to South Korea by $10 billion to $11 billion a year. It would be the largest U.S. trade deal since a 1994 agreement with Canada and Mexico.
Bilateral trade between South Korea and the U.S. totaled $66.7 billion in 2009, down sharply from $84.7 billion in 2008 as global commerce suffered during the economic downturn.
American businesses have warned that the U.S. risks losing out to rivals, including the European Union, which signed a free trade agreement with South Korea last month. Seoul and Brussels are aiming to have it take effect in July of next year, pending ratification.
"Time is of the essence," Thomas Donohue, president of the Washington-based U.S. Chamber of Commerce – the biggest U.S. business lobby – said in a statement Thursday expressing disappointment that an agreement was not reached. "American jobs are on the line."
South Korea, which has been aggressive in pursuing free trade deals, has pacts in effect with India, the 10-member Association of Southeast Asian Nations and other countries. It is also negotiating other agreements.
Cars have been a particular concern of the United States in trade relations with South Korea, home to Hyundai Motor Co. and Kia Motors Corp., which together form the world's fifth-biggest automotive group.
Figures compiled by auto industry groups in South Korea show that it exported 449,403 vehicles to the U.S. last year, while South Koreans purchased 6,140 vehicles made by American manufacturers, based on vehicle registrations.
U.S. automakers Ford Motor Co. and Chrysler Group LLC have criticized the trade imbalance, arguing that the Korean market has been closed off to American-made cars by arbitrary regulations. General Motors, which owns a majority stake in Korean automaker Daewoo, has remained neutral in the talks.
The South Korean figures do not include the 200,371 vehicles sold in the U.S. last year by Hyundai that were made at its American plant nor the 114,845 sold in South Korea by GM Daewoo Auto & Technology Co., the South Korean unit of General Motors Co.
Hyundai builds its popular Sonata midsize car, its Elantra compact and the Santa Fe crossover vehicle at plants in Alabama and Georgia. Kia builds the Sorento crossover vehicle in Georgia.
Ford CEO Alan Mulally said he was appreciative of Obama's efforts "to negotiate a meaningful free trade agreement with Korea. I know the U.S. government negotiated in good faith to improve the agreement for American automakers and workers."
Chrysler said in a statement it supported the administration's effort to finalize "an enforceable agreement that provides meaningful market access for American-made vehicles in South Korea."
The U.S. auto market is about 10 times bigger than South Korea's. There were 10.4 million vehicles sold in the United States last year. There were about 1.4 million sold in South Korea in 2009, according to the Korea Automobile Manufacturers Association.
Regarding beef, South Korea halted imports of American beef after a Canadian-born cow infected with mad cow disease was discovered in the U.S. in 2003. Seoul eventually agreed to resume imports, but huge street demonstrations in response forced the government to backtrack and limit shipments to younger cows considered less at risk. The U.S. says its beef is safe.
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AP White House Correspondent Ben Feller, Associated Press writers Kwang-tae Kim, Hyung-jin Kim and Ken Thomas, and AP Auto Writers Tom Krisher and Dee-Ann Durbin in Detroit contributed to this report.
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KELLY OLSEN 11/11/10 04:27 PM ET Associated Press