U.S., South Korea Trade Talks End Early

Protesters hold anti-FTA placards during a rally against a proposed South Korea-U.S. free trade agreement in Seoul, South Korea Thursday, July 13, 2006. South Korea and the United States have made little progress in their free-trade talks, Seoul's chief negotiator said Thursday, as the two sides approach the end of their second round of discussions. (AP Photo/Vincent Yu) (Vincent Yu - AP)

SEOUL, South Korea -- South Korea and the U.S. cut short their second round of free trade talks Friday amid bickering over pharmaceuticals, but promised to keep working toward a final agreement both sides say they want.

The talks, which began with smiles and a handshake Monday, deteriorated into tit for tat retaliations, culminating in the final day of negotiations being canceled.

"While our differences in views in the pharmaceutical sector are challenging and difficult, they are not insurmountable," Assistant U.S. Trade Representative Wendy Cutler, the chief American negotiator, told reporters.

Kim Jong-hoon, her South Korean counterpart, acknowledged the disagreements at a separate news conference, but agreed they won't derail the negotiations. He blamed the trouble on U.S. "misunderstanding."

The two countries announced their plan to launch free trade talks in February in Washington amid fanfare and optimism, saying they wanted a "win-win" agreement that would increase trade and growth in the world's largest and 10th-largest economies.

If successful, the accord would be the would be the biggest for Washington since the North American Free Trade Agreement in 1993.

They held their first round of talks last month in Washington, and have set a goal of concluding an agreement they can submit to their respective legislatures by the end of this year.

President Bush's authority to "fast track" the trade deal _ enabling U.S. envoys to negotiate an agreement that can be submitted to Congress for a yea-or-nay vote without amendments _ runs out in mid-2007.

This week's talks were held amid tight security, with 20,000 police deployed on the streets of Seoul to prevent disruptions by protesters opposed to the agreement.

About 30,000 farmers, laborers, office workers and students rallied Wednesday, some clashing with riot police. Farmers oppose any reductions in protections for the country's rice market, saying their livelihoods are at stake.

The U.S. sees as discriminatory South Korea's planned drug reform, which includes adoption of a so-called "positive list" system, whereby only drugs included on the list are reimbursable under the country's health insurance system. It currently employs a "negative list," in which only certain drugs are excluded.

"In short, Korea's decision precluded meaningful negotiations at this time," Cutler said.

Kim countered that while introduction of the system itself isn't negotiable, he assured the U.S. it has nothing to worry about.

"We've explained that this will be implemented in a way that is never discriminatory against new drugs," he said.

Despite the snag over pharmaceuticals, both Cutler and Kim cited progress in other areas, including timeframes to phase out tariffs, and said the two sides will meet for a third round of talks in Washington in early September.

Besides pharmaceuticals and agriculture, the status of South Korean goods manufactured in communist North Korea is seen as another sticking point in hammering out the agreement.

Washington has adamantly opposed the idea, saying a deal should only cover goods manufactured in the Republic of Korea, the South's official name.

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Associated Press reporters William Foreman, Jae-Soon Chang and Kwang-Tae Kim in Seoul contributed to this report.