Korea, U.S. Reach Deal on FTA

Korea, U.S. Reach Deal on FTA
Korean and U.S. trade representatives finally reached a deal that is expected to ease passage of their bilateral free trade agreement, which had been bogged down in both parliaments since 2007. Several rounds of talks in recent months were slow to overcome disagreements over U.S. demands for easier terms for car exports, but Korea in Saturday's agreement cedes some points in tariffs on cars in return for some benefits for agricultural products and pharmaceuticals. It now seems likely that both the U.S. and European Union, which together account for more than half of the world's GDP of around US$58 trillion, will cut or abolish tariffs on Korean imports under separate FTAs starting next year. "We reached agreement in renegotiations with the U.S. government in areas including automobiles and decided to proceed with steps to ratify the FTA so that it will take effect on Jan. 1, 2012," Trade Minister Kim Jong-hoon, who led the Korean negotiators, told reporters Sunday.

In the original FTA, the U.S. was to abolish its 2.5 percent tariff on Korean automobiles with engine displacements of less than 3,000 cc immediately and two years later for cars of more than 3,000 cc. Under the revision, the U.S. will abolish tariffs on all Korean cars, regardless of engine displacement, four years after the deal takes effect. In return Korea, which was required to scrap its 8 percent tariff on American car imports immediately, will maintain a 4 percent tariff and abolish it four years later. Critics here say the revisions benefit American carmakers since Korea exports 490,000 vehicles to the U.S. a year but imports only around 7,000 American cars. But the U.S. ceded to Korean demands in agricultural and pharmaceutical exports. Korea will be allowed to maintain a 25 percent tariff on U.S. pork imports until 2016, two years later than the original FTA, and Korean workers assigned to U.S. offices will be given a five-year visa rather than the current one year. "We made some concessions in the automotive sector, which is a key part of the Korea-U.S. FTA, but the agreements will greatly benefit the Korean economy since both sides decided to let the deal take effect sooner," said a senior Korean government official. The revisions will be contained in an addendum. They need to be ratified by lawmakers in both countries. The government plans to submit the revisions to the National Assembly early next year.

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