By Bruce Odessey
Washington File Staff Writer

Washington - Agriculture and auto trade will be among the toughest issues in U.S.-Korea free-trade agreement (FTA) negotiations, the lead U.S. negotiator says.

“Agriculture is going to be a difficult issue in these negotiations," Wendy Cutler, assistant U.S. trade representative, said in a June 5 teleconference with reporters.  "Achieving increased access for U.S. car companies in Korea is going to present challenges as well."

Cutler made the remarks at the start of the first round of negotiations, scheduled June 5-10 in Washington.  The next round is scheduled for July 10-14 in Seoul.  Cutler said the first round should clear away the easiest issues and identify those requiring more attention. 

She expressed optimism that the two sides would achieve a good agreement, in part because they prepared extensively for negotiations in 2005.  The aim is to conclude by the end of 2006, well before the mid-2007 expiration of U.S. trade negotiating authority.

"The political will is clearly there on both sides," Cutler said, "and there's bipartisan support in both countries for the FTA."

She acknowledged opposition to an FTA, however, as Korean farmers protested loudly on a Washington street just outside the site of negotiations.

U.S. farmers want completely free trade in rice, requiring removal of Korean quotas that are now in place through 2014.  They also want Korea to eliminate what they view as unnecessary and unscientific health and safety regulations on agricultural imports and to drop what U.S. farmers call unnecessary restrictions on perishable imports.

Cutler said the United States expects Korea will soon reopen its market to U.S. boneless beef, currently shut out because concerns about bovine spongiform encephalopathy (BSE) or mad cow disease. "And we made it very clear to the Koreans that, even once the market is open to boneless, we are going to be urging them without skipping a beat to further open their market” to cover other U.S. beef products, she said.

U.S. automakers want better access to the Korean market.  In 2005, Korea imported only about 31,000 foreign-made autos, including about 5,800 made in the United States, while exporting 730,000 autos to the United States. Among the barriers cited by U.S. automakers are Korea's 8 percent tariff on auto imports, a domestic sales tax applied to the full price of autos including tariffs, and taxes based on engine size, which are a disadvantage to the larger U.S.-made autos.  (See related article.)

The two sides have organized 17 negotiating groups plus two more special working groups, one on auto-sector issues and one on pharmaceuticals and medical devices.  Regarding the latter concern, Cutler criticized a "very unhelpful announcement made by the Ministry of Health and Welfare a few weeks ago about its plans to move to what is called a positive list of reimbursement pricing for pharmaceuticals."

What the Korean ministry proposed May 3 would depart from an approach that now automatically authorizes government reimbursement for medicines and medical devices unless the government specifically excludes them from a list of products. The proposed switch would require government approval for reimbursing any new medicine or device, potentially giving advantage to generic drugs made by Korean companies over innovative treatments coming mostly from the United States, Europe and Japan.

"We made it clear to the Koreans that in the FTA negotiations we're not interested in getting back to the status quo," Cutler said.  "We're really looking for improvements, and that really holds for the pharmaceutical sector."

In remarks to the Korea Importers Association in Seoul on June 2, U.S. Ambassador Alexander Vershbow described the FTA as “one of the most important developments in U.S.-Korea relations in the 52 years since the signing of our Mutual Defense Treaty.”

Citing the lack of an institutional framework for U.S.-Korean commerce, Vershbow said,  “I think a Free Trade Agreement will help to fill this vacuum, by letting our two countries reach a mutual consensus regarding the mutual obligations and responsibilities in our trading relationship, just as the Mutual Defense Treaty fulfilled this role for our security alliance.”

The full text of Vershbow’s speech is available on the Web site of the U.S. Embassy in Korea.

For additional information on U.S. policy, see Trade and Economics.