S. Korea, U.S. Reach Trade Deal
Last-Minute Pact Faces Tall Hurdles

By Peter S. Goodman
Washington Post Staff Writer
Tuesday, April 3, 2007

The Bush administration yesterday touted the benefits of a landmark trade deal struck overnight with South Korea, asserting that it would pry open markets in the world's 10th-largest economy for a range of U.S. goods, from pork and vegetables to pharmaceuticals and automobiles.

Administration officials portrayed the deal -- which faces stiff opposition in Congress and in South Korea -- as a milestone in a U.S.-led campaign to eliminate tariffs and reduce trade barriers globally. It would be the largest trade deal adopted by the United States since the North American Free Trade Agreement took effect more than a decade ago.

"This is a historic moment for our two countries," U.S. Trade Representative Susan C. Schwab said in a statement released shortly after the deal was announced in Seoul, ending an eight-day negotiating round that barely achieved agreement before a deadline of late Sunday night, Washington time.

Lawmakers will have final say over the deal in both countries. In Washington, it lands in a Congress newly controlled by Democrats who are challenging the administration on multiple fronts, threatening to derail pending trade pacts with Peru, Colombia and Panama. Key Democratic leaders and labor unions swiftly assailed the South Korea deal as bad news for American farmers and workers.

Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, which will vote on the trade deal, threatened to block passage if South Korea does not quickly ease the path for shipments of U.S. beef. Baucus, whose home state is a major beef exporter, has criticized South Korea for slamming the gates closed after mad-cow disease was discovered in the United States four years ago.

"This is an entirely unacceptable outcome," Baucus declared in a statement. "I will not allow it to move through the Senate, unless and until Korea completely lifts its ban on U.S. beef."

In a conference call with reporters, negotiator Karan Bhatia, who led the U.S. team, said he understood that the Korean government plans to reopen its market to U.S. beef when a new set of international standards on mad-cow disease is released in May.

"I don't think the Congress will approve a [free-trade agreement] with Korea without the full reopening of Korea's beef market," Bhatia said. "We have made that very clear to Korea, and I think Korea understands that."

Autos are another flashpoint. Last year, U.S. companies sold about 4,000 cars in South Korea, while Korean firms sold 800,000 cars in the United States, according to the Office of the U.S. Trade Representative.

Administration officials said the deal would give U.S. automakers a boost, immediately eliminating South Korean tariffs on foreign cars, which average 8 percent. U.S. tariffs on cars, which average less than 3 percent, would also be scrapped. The deal would replace a tangle of regulations that have curbed sales of foreign vehicles in South Korea.

But in an interview, Rep. Sander M. Levin (D-Mich.), who chairs a House subcommittee on trade, said he was dissatisfied with the auto provision and vowed to oppose the deal unless there are changes.

"They have to make sure there's real and assured market access for our products," he said.

Labor leaders took a similarly combative stance. "We have no confidence in the Bush administration to negotiate a good deal for American auto workers," said Thea Lee, legislative policy director at the AFL-CIO, whose affiliates include the United Auto Workers union. "This is shaping up to be an enormous political problem for the Bush administration."

Business groups roundly praised the deal.

"A lot of industries are going to be quite happy," said Myron Brilliant, president of the U.S.-Korea Business Council and vice president of the East Asia program at the U.S. Chamber of Commerce. "Korea has not been an easy market for a lot of American companies."

In Seoul, the deal is also likely to encounter skepticism from legislators. Korean farmers and labor groups have for months demonstrated against linking their fortunes to trade with the United States. Negotiators maintained trade protections for Korean rice farmers in the final deal -- much to the consternation of American agribusiness -- but protests go on.

By itself, the deal with South Korea would change little in the American economy. South Korea is already the seventh-largest trading partner of the United States, with U.S. exports to the Asian nation exceeding $32 billion last year and imports reaching $46 billion, according to the Commerce Department. Economists suggested the deal might expand American exports to South Korea by about half, while boosting South Korea's exports to the United States by about 25 percent.

But as a test of relations between the Bush administration and Democratic leaders, the Korea deal shapes up as a big moment, analysts said. The three pending Latin American trade deals have been stalled partly by claims that previous trade pacts have hurt American workers by encouraging the shift of factory production to poor countries where labor is exploited. House leaders are negotiating with the administration over labor rules Democrats have demanded.

South Korea, by contrast, is a relatively prosperous and developed country defined more by high-tech computer chip factories than low-wage garment sweatshops.

"This is the most likely deal to get through," said Gary C. Hufbauer, a senior fellow at the Peterson Institute for International Economics in the District. "There are hardly any labor issues with Korea because their labor laws are quite friendly to unions. They're like France."

The Bush administration had to rush to complete the deal by April 1, cognizant of the looming expiration of the president's so-called fast track authority -- the power to negotiate trade deals and submit them to Congress for a simple up-or-down vote without alteration. That authority runs through the end of June, but it requires that the administration notify Congress 90 days before sending a trade deal up for a vote.

The White House has encountered resistance in its bid to extend fast-track authority, meaning the administration either had to sign and submit the best deal it could get in Seoul over the weekend or run the risk of getting no deal.

"It looks to me like the Koreans used the deadline to their advantage," said Grant Aldonas, a former Bush administration undersecretary of commerce, who participated in previous trade negotiations. In terms of winning Democratic votes, the Bush administration "didn't get what they needed," he said.