U.S., South Korea Extend Trade Talks

By BOB DAVIS, EVAN RAMSTAD And JONATHAN WEISMAN

SEOUL—The presidents of the U.S. and South Korea were unable to overcome a combination of cars, cows and domestic politics in order to revive a trade deal the two leaders touted as important for economic growth.

After more than a week of negotiations to amend a Korea-U.S. free trade deal, originally negotiated by the Bush administration in 2007, U.S. President Barack Obama and South Korean President Lee Myung-bak said they had missed their deadline. The talks will continue, the two leaders said, but chances for a deal are bound to diminish. Without presidential pressure and a deadline, there's less pressure to break an impasse, leaving the free-trade deal in limbo.

Officials in both countries said that the discussions over South Korean restrictions on auto and beef imports had proved too vexing. "We aren't at a place where we feel we have gotten the market access that we need and our auto manufacturers deserve," U.S. Trade Representative Ron Kirk said in an interview.

Negotiators on both sides were hindered by difficult domestic political conditions, which limited room for maneuver. In the U.S., free trade has become an electoral liability. "If we rush something that then can't garner popular support, that's going to be a problem," said Mr. Obama, who criticized the Korea trade pact when he was a presidential candidate. "We think we can make the case, but we want to make sure that that case is airtight."

Mr. Lee faces similar pressure in changing an agreement portrayed in the country as a victory over U.S. negotiators when it was first struck. After Messrs. Lee and Obama announced the delay, a spokesman for South Korea's main opposition Democratic Party called on Mr. Lee to drop the deal "if it is true that he is negotiating over whether to give more or give less."

Mr. Obama had hoped to revive the Korea deal as part of a broad effort to jump-start the momentum towards lowering barriers to trade with a goal of doubling U.S. exports by 2015. He set the negotiating deadline to coincide with the Group of 20 leaders' summit as a way to force trade officials to cut deals in the two areas designated for discussion: eliminate import obstacles for U.S. car makers and cattle makers. A deal with South Korea is seen as especially important because it would be the largest bilateral deal the U.S. has completed since the North American Free Trade Agreement with Mexico in 1994—and because South Korea is in the process of approving a trade pact with the European Union, scheduled to go into effect on July 1, 2011.

Accepting expanded imports of U.S. beef was especially difficult for South Korea. Two years ago, civic activists and opposition politicians staged huge protests in central Seoul after Mr. Lee agreed to reopen imports of U.S. beef, which it banned in 2003 after a case of mad-cow disease was found in the U.S.

The failure to reach a deal was a blow to Mr. Obama, who planned to use a Korea deal as a way to reach out to those Republicans who profess to be free-trade advocates, as well as the business community. Partnering with U.S. exporters has been the dominant theme of his 10-day swing through Asia, so much so that many commentators in India complained that Mr. Obama's three days in the world's largest democracy was more about jobs in the U.S. than U.S.-Indian relations.

A trade agreement with South Korea also would have offered Mr. Obama a chance to show the world he can legislate the tough trade issues, not just talk about them. In his first two years, Mr. Obama hasn't sought passage of bilateral trade deals negotiated by his predecessor with South Korea, Panama and Colombia, raising questions overseas about whether the U.S. had turned its back on trade liberalization. The European Union and other U.S. trade competitors, meanwhile, have put together bilateral deals in South America and elsewhere.

A joint Obama-Lee press conference yielded a series of embarrassing moments for both. Not only did they concede they had come up short on trade, but they struggled to explain their own economic policies. Mr. Lee defended the ubiquitous presence of Hyundai cars, LG phones and Samsung televisions in the U.S. by saying Korean companies import some of the components from U.S. firms and pay technology licenses to U.S. inventors, an assertion not supported by trade figures.

The U.S. exported semiconductors valued at $2.6 billion to South Korea last year, accounting for about 10% of overall U.S. exports to the country. The U.S. imported $2.2 billion of South Korean semiconductors and $8.4 billion in finished household goods, including electronics.

South Korean auto standards are a blend of American and European regulations, forcing producers in both regions to make slight modifications to enter the South Korean market. Doing so can be expensive when unit shipments are low, forcing foreign car makers to raise prices or discouraging them from entering the market.

Mr. Kirk didn't comment on Ford's role but said he had consulted widely with companies and lawmakers on the negotiations.

Ford could also count on the backing of two prominent lawmakers from its home state of Michigan who often take different sides on trade issues. "We insist on open, reliable access to another country's markets, as our market is open to their goods," said a statement by House Ways and Means Committee Chairman Sander Levin and Rep. Dave Camp, the senior Republican on the panel. In the next Congress the two men are likely to switch positions, with Mr. Camp becoming Ways and Means chairman and Mr. Levin becoming the top minority member.

The breakdown in talks surprised some Congressional staffers who had been closely following the discussions. According to one, the South Koreans had expected a deal when U.S. negotiators at the last minute pushed hard on better access for U.S. beef. That prompted a walk-out by Korean negotiators. Mr. Kirk didn't comment on the specifics of the talks. "The substance is more important than process," he said. "We won't be driven by artificial deadlines." But it was Mr. Obama who had set the G-20 deadline as a way to force a conclusion to the talks. (Fonte: Wall Street Journal)