U.S. inks major free trade deal with South Korea

Joe Zanger eats sweet potatoes and debates ordering the sautéed bugs from a street food cart in Seoul, South Korea. The San Benito County grower represented the California Farm Bureau Federation during trade negotiations last month.

After a marathon negotiating session, the United States and South Korea successfully concluded a free trade agreement April 1 that would slash tariffs and other trade barriers, but some commodity groups expressed disappointment about the deal.

If approved by lawmakers in both countries, the $20-billion, bilateral deal would boost trade between the two countries by 20 percent. That would make the agreement the largest for the United States since the 1994 North American Free Trade Agreement with Canada and Mexico. For South Korea, the 10th-largest economy in the world, the trade deal would be its biggest ever and would make South Korea the first Asian country to reach a free trade deal with the United States.

Under the agreement, more than $1 billion worth of U.S. farm exports to South Korea would become duty-free immediately, with more than 90 percent of all U.S. exports to the country being duty-free within three years. Most remaining tariffs and quotas would be phased out during the first 10 years the agreement is in force.

The deal was struck after 10 months of negotiations that came down to the wire on April 1 to beat a U.S. legislative deadline for President Bush to notify Congress that he plans to sign a trade agreement 90 days before his special Trade Promotion Authority expires June 30. Missing the deadline would mean Congress would be able to seek changes to any proposed deal, greatly reducing chances of passage.

"The question will be, is something better than nothing," said Rayne Thompson, California Farm Bureau Federation director of trade. "We will analyze what opportunities the agreement creates for California. The negotiations were a struggle. There are commodities that are pleased but some are disappointed that the struggle did not deliver more."

In the end, both sides had to compromise on major issues, with some of the most contentious points relating to agriculture. South Korea agreed to lower tariffs on agricultural goods such as some fruits and vegetables—but it would not budge on rice, a sore issue for the country's heavily subsidized rice farmers who fear that opening the market to the United States would be a threat to their domestic industry.

"The very fact that it took right to the very end and they finally came up with something, that both sides made concessions they didn't want to make because they both wanted a deal, is a sign they saw it's for the best interest of their countries as a whole," said Joe Zanger, CFBF chairman of the trade advisory committee, who was in South Korea last week during the talks.

Korean negotiators agreed to end the ban on U.S. beef, but only if the World Organization on Animal Health declares it safe in a ruling scheduled in May. The National Cattlemen's Beef Association said it is withholding its support for the trade agreement until such time. South Korea also agreed to phase out the 40 percent tariff on U.S. beef over 15 years.

"America's cattlemen deserve access to the South Korean marketplace," said Gregg Doud, chief economist for the NCBA. "U.S. beef and beef products are the safest in the world, and Korean consumers should have access to the same delicious U.S. beef they enjoyed prior to December 2003. There is simply no justifiable reason for the South Korean government to continue to ban imports of U.S. beef."

South Korea closed its markets to U.S. beef after a case of bovine spongiform encephalopathy was found in December 2003. It now accepts beef from cattle under 30 months of age but continues to prohibit beef containing bone material.

Prior to the ban, South Korea was California's second-largest export market for beef and the third-largest for the United States, valued at $815 million in 2003. A fully open South Korean market for U.S. beef would be worth about $1 billion a year, according to the NCBA.

During negotiations, the United States had insisted on a full opening of South Korea's market for U.S. beef and wanted South Korea to relax customs rules such as rejecting individual shipments that contain bone parts.

"We have relied too many times on agreements making promises of resolving phytosanitary issues only to continue negotiating after the finalization of an agreement, without results," CFBF President Doug Mosebar said in a letter to U.S. Rep. Kevin McCarthy, R-Bakersfield, on March 29 during the week of talks. "A clear protocol, or time line, for the acceptance of U.S. beef into Korea must be established prior to conclusion of the agreement."

The California Farm Bureau Federation joined the American Farm Bureau Federation, Sunkist Growers, Northwest Horticultural Council, the California Table Grape Commission, National Cattlemen's Beef Association, Sun Maid and other organizations in Seoul, South Korea, on March 19 to 21 to influence trade negotiations.

"We met with U.S. trade negotiators every morning and night to review that day's negotiations and provide reaction and feedback to the U.S. team on the impacts to our sectors," said Thompson.

Discussions that week mainly focused on roughly 280 outstanding agricultural tariff lines that remained unresolved, including market access for fruits, nuts, vegetables and beef.

While progress had been made on many of the commodities, the talks belabored sensitive issues regarding market access for U.S. beef, oranges and rice. One major sticking point concerned South Korea's refusal to phase out tariffs on U.S. oranges during its "in-season" period. It finally agreed to reduce tariffs for "out-of-season" U.S. oranges.

South Korea is California's No. 1 export market for fresh oranges, which currently face tariffs ranging from 40 percent to 144 percent. The average tariff on California fruits and vegetables is more than 50 percent.

In 2004, the South Korean market represented 4 percent of California's total $8 billion in agricultural exports, with citrus, cotton, almonds, rice and hay being the state's top agricultural exports to that region. That same year, South Korea imported $10.6 billion in agricultural products to satisfy the demand from its 48 million increasingly affluent consumers.

(Ching Lee is a reporter for Ag Alert. She may be contacted at clee@cfbf.com.)