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Democrats threaten the South Korea trade deal

WASHINGTON—Congressional Democrats threatened Monday to quash the Bush administration's new free-trade deal with South Korea unless the Asian tiger does more to open its market to U.S. automobiles and beef.

"This is an entirely unacceptable outcome. I will oppose the Korea free-trade agreement, and in fact I will not allow it to move through the Senate, unless and until Korea completely lifts its ban on U.S. beef," said Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee, which oversees trade agreements.

The outlook was no sunnier in the House of Representatives.

Rep. Sander Levin, D-Mich., the chairman of the Ways and Means trade subcommittee, complained that the talks fell short on access for American beef, rice and automobiles.

"In automotive, the Koreans got what they wanted, immediate elimination of the U.S. tariff on most autos and on all auto parts, as well as eventual elimination of the tariff on trucks," he said in a statement. "The U.S. did not get what was needed—an agreement that assures that the U.S. automotive industry will no longer face barriers to their products, that trade will truly be a two-way street."

The tough talk from Capitol Hill followed the announcement Monday that the Bush administration had concluded marathon negotiations in Seoul for a free-trade agreement with South Korea, the globe's 10th largest economy and seventh-largest U.S. trading partner. Two-way trade last year exceeded $72 billion. The pact would be the biggest since the North American Free Trade Agreement took effect in 1994.

Deputy Trade Representative Karan Bhatia said Baucus' concerns had been heard.

"I don't think the Congress will approve an FTA with Korea without the full reopening of Korea's beef market. We have made that very clear to Korea. The indications we have gotten from Korea is they understand that," Bhatia said.

South Korea was the third-largest U.S. market for beef until 2003, when it closed its market after a "mad cow" disease scare raised fears that U.S. officials say are unfounded.

Once Congress gets around to voting on the pact, commercial and geopolitical concerns may weigh more heavily. Democrats must consider whether to turn their backs on a major deal with a strategic ally, where U.S. troops have helped secure stability since 1953. They also must weigh the downside of killing the first free-trade pact with an Asian power, one that could strengthen the U.S. presence in a region increasingly dominated by the fast-growing Chinese economy.

"It would be a severe blow to U.S. relations with Korea and U.S. credibility in Asia more broadly," said C. Fred Bergsten, who heads the pro-trade Petersen Institute for International Economics.

The U.S. Chamber of Commerce backs the deal and the AFL-CIO opposes it.

U.S. officials disputed a South Korean assertion that goods from an industrial park in the North Korean border city of Kaesong could benefit under the deal.

"What we have agreed to do is create a committee ... and within that committee we are willing to discuss" economic development issues, Bhatia said. "I would caution you against reading too much into that."

Stephan Haggard, a North Korea expert at the University of California-San Diego, said: "You wonder if the two governments are on the same planet on this issue."

Trade policy is at a crossroads in Congress. Growing numbers of lawmakers, as well as the public, question whether trade deals are net winners for Americans.

Democrats want to add language to the deal requiring observance of international labor and environmental standards, which they want to serve as a template for other trade agreements.

"We made very clear to the Korean side that ... there may be the need to revisit some of the provisions to obtain congressional passage," Bhatia acknowledged.

The pact's fate may depend on Rep. Charles Rangel, the New York Democrat who chairs the House Ways and Means Committee.

"There are a lot of talks with Rangel," the White House official said, expressing optimism about a compromise. "I think it will take a little bit of time because we all need to make sure both sides will be able to deliver what they promised to deliver, and that we mean the same things when we use certain words. That's the toughest thing when you are negotiating with someone you haven't had to deal with before."

That's an admission that the Bush administration kept Democrats in the dark on trade talks. Now Democrats are trade's gatekeepers.

"My sense is ... the administration does not want to give in to what the Congress wants, and that's a problem," said David Lewis, a trade expert with the consultancy Manchester Trade Ltd. "I think there's a bit of stand-up-manship going on."

The proposed U.S.-Korea free trade agreement would:

_Make duty-free within three years about 95 percent of bilateral trade in consumer and industrial products, with most other tariffs eliminated within a decade.

_Make duty-free immediately about $1 billion worth of U.S. farm exports, eliminating most tariffs and quotas over a decade. U.S. beef and rice are still an issue.

_Eliminate engine-displacement taxes that impede U.S. automakers' access to Korean markets. Create review mechanisms to help ensure that Korean regulations and taxes don't discriminate against U.S. auto exporters.

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(c) 2007, McClatchy-Tribune Information Services.

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