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With just hours to go, the United States and South
Korea on Monday reached a free-trade agreement that scraps tariffs
on a huge range of items but excludes rice, as Seoul had demanded.
The pact, secured after 10 months
of tough negotiations, is “an agreement for the 21st century,”
Deputy US Trade Representative Karan Bhatia told a press conference.
“The agreement we have reached
is a strong deal for both Korea and the United States,” he said,
adding it would break down both tariff and nontariff barriers.
The US is counting on the
agreement, which needs approval from the legislatures of both
countries, to shrink its trade deficit with South Korea which
amounted to $16 billion in 2005.
More than 80 percent of that came
from the auto trade. South Korea sold some 800,000 vehicles in the
US last year, while US firms exported only some 4,000 vehicles the
other way.
Seoul has agreed to change its
tax system on autos based on engine size which currently makes US
models more expensive.
The two sides agreed immediately
to lift tariffs—8.0 percent in Korea, 2.5 percent in the US—on
all cars of less than 3,000cc and auto parts. Tariffs on larger
models will be phased out later.
Overall, the agreement will
eliminate nearly 90 percent of each side’s tariffs on industrial
goods immediately, with the remainder to be phased out over three to
15 years, South Korea’s chief negotiator Kim Jong Hoon said.
After a tense final negotiating
session lasting some 26 hours, the pact was approved just in time.
President George W. Bush had to submit it to Congress Monday if it
is to be passed while he still has authority to “fast-track”
trade legislation through a now Democrat-controlled legislature.
Without his authority to compel a
yes-or-no vote without amendments, the approval process could drag
on for years.
The trade deal is the biggest for
the US since the North American Free Trade Agreement in 1993 and its
first with a major Asian economy.
Studies show it could add about
$15 billion to annual two-way trade, which was worth $74 billion in
2006.
Bush notified Congress just one
hour after the deal was agreed, telling legislators it would bring
export opportunities for US farmers, ranchers, manufacturers and
service suppliers.
It would also promote economic
growth and better-paid US jobs while helping American consumers save
money, he said.
“The agreement will also
further enhance the strong United States-Korea partnership which has
served as a force for stability and prosperity in Asia,” Bush
said.
South Korean President Roh Moo
Hyun, who pushed hard for the deal despite opposition from some
political allies, said it would pave the way for his country to
become one of the world’s advanced economies.
On agriculture, South Korea won
its battle to exclude its politically sensitive rice crop while the
US succeeded in opening the beef market wider.
Before a 2003 import ban imposed
over fears of mad cow disease, South Korea was the third largest
market for US beef with annual purchases worth $850 million.
--AFP
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