Negotiations On United States-South Korea Trade Pact Break Down

Negotiations on a United States/South
Korea free trade agreement (FTA) have broken down primarily because of differences over trade in
textiles and apparel, and farm commodities. The suspension of talks and the wide differences that
still exist on what the agreement should encompass make it extremely unlikely the two governments
can reach an agreement in time to meet a year-end target. That target is important, since President
George W. Bush’s authority to negotiate agreements under procedures that require only an up or down
vote in Congress expires in July.

South Korea is strongly opposed to increasing imports of rice and other agriculture
commodities, and it complains the United States is unwilling to open its markets for textiles and
apparel free from a strict rule of origin that would prohibit inputs from non-participating

Going into the four days of negotiations, Assistant US Trade Representative Wendy Cutler
said the United States, in “a clear desire to make progress,” had offered a set of improved tariffs
covering textiles and apparel, industrial goods and farm products. Cutler said the offer places
more than $1.3 billion in a shorter time frame for tariff reductions.

US textile manufacturers have expressed considerable concern about a United States/South
Korea FTA in view of Korea’s highly developed textile industry. They would not like to see an
agreement at all, but if one is negotiated, they will press for a tight rule of origin. Textile and
apparel importers, on the other hand, see a Korea FTA as an opportunity to develop a network
between Korea and other countries that have FTAs with the United States, and those linkages could
result in greatly expanded trade.

At this point, it will require a good bit of give and take by both countries before an
agreement can be reached that will satisfy the legislatures of both countries.

October 31, 2006