South Korea trade deal delivers Obama a victory

McClatchy NewspapersDecember 3, 2010 

WASHINGTON — President Barack Obama's first major trade deal moved forward Friday as White House negotiators successfully concluded a long-stalled agreement with South Korea.

The accord, which includes South Korean concessions for U.S. automakers, will supplement the trade agreement that the Bush administration negotiated to conclusion with South Korea but which the Democratic-controlled Congress never acted on.

Obama had taken heat from his failure to seal the agreement during his trip to Seoul last month. U.S. automakers and beef exporters opposed the agreement on grounds that it didn't do enough to knock down barriers to U.S. exports. The accord addresses those concerns.

"American manufacturers of cars and trucks will gain more access to the Korean market and a level playing field to take advantage of that access," Obama said. "We are strengthening our ability to create and defend manufacturing jobs in the United States; increasing exports of agricultural products for American farmers and ranchers; and opening Korea's services market to American companies."

The auto provisions won immediate support from the current and incoming chairmen of the House Ways and Means Committee, Michigan Reps. Sander Levin, a Democrat, and Dave Camp, a Republican.

"The changes announced to the U.S.-Korea Free Trade Agreement today are a dramatic step toward changing from a one-way street to a two-way street for trade between the U.S. and South Korea," Levin said in a statement.

However, a potentially significant obstacle arose Friday when Sen. Max Baucus, D-Mont., who hails from a ranching state, said the agreement doesn't do enough to protect American beef producers. He's also the chairman of the Senate Finance Committee, which has jurisdiction over trade pacts.

"I am deeply disappointed that today's deal fails to address Korea's significant barriers to American beef exports, which President Obama identified this June as one of the critical outstanding issues that must be resolved before moving this free trade agreement forward," Baucus said.

But Senate Minority Leader Mitch McConnell, R-Ky., vowed to help Obama pass it.

"We both agree that increasing markets overseas through trade agreements will create good jobs that are greatly needed at this time of high unemployment," he said in a statement. "I intend to support a strong agreement and am hopeful that with a more balanced Congress, we will see renewed support for this, and the other trade agreements that have been languishing for the past two years."

The agreement also won Obama rare praise from the U.S. Chamber of Commerce.

"This agreement will create thousands of new jobs, advance our national goal of doubling exports in five years, and demonstrate that America is once again ready to lead on trade," said chamber CEO Thomas J. Donohue. "The administration has done its part. Now it's time for the new Congress to make passage of (the trade deal) a top priority in January. We will do everything in our power to round up the votes."

"The agreement has been improved dramatically," insisted one official, noting that final talks began Tuesday and ended Friday morning. "We think we put together a package which business and labor, Democrats and Republicans can support."

South Korean automakers Kia and Hyundai sell freely into the U.S. market, with low tariffs on their exports. Ford, General Motors and Chrysler have complained that South Korean tariffs and other barriers have effectively disadvantaged U.S. carmakers in their attempts to sell there.

Under the side accord, South Korea would cut its 8 percent tariff on U.S. automobiles immediately to 4 percent, while the U.S. would maintain its 2.5 percent tariff on Korean-made autos for four years. In the fifth year, both nations would eliminate the remaining tariffs.

Light trucks also were a thorny point. In the original stalled deal, the U.S. would've had to start reducing its 25 percent truck tariff immediately. The side accord maintains the status quo for eight years, then eliminates the tariff over the following two years. South Korea must eliminate its 10 percent tariff on light trucks immediately.

The U.S. also demanded a number of safeguards allowing it to impose new tariffs if U.S. automakers show that Korean products are causing them harm.

U.S. beef and pork producers also won key concessions, White House officials said that South Korea also agreed to open up investment and its services sector. The administration estimates that annual U.S. exports to South Korea, the world's 12th largest economy, should increase by $10 billion or more.

Obama has been missing in action on trade matters for the first two years of his presidency, effectively adopting the "pause" that had been advocated by his Democratic primary rival and now Secretary of State Hillary Clinton. Prior negotiated trade deals with Colombia and Panama still languish.

After midterm elections that turned the House of Representatives back to Republican control, political analysts expected Obama to begin moving trade deals as a means of gaining support from the GOP.

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