Korean Officials Stress Need For U.S. To Table Formal Proposals In Talks

(Via Inside U.S. Trade)

In meetings in Seoul with U.S. business representatives last week, South Korean government officials said it was of the utmost importance that the Office of the U.S. Trade Representative provide formal negotiating proposals on autos and beef market access, and expressed frustration that this has not yet happened, sources said.

U.S. trade officials have already informally outlined their ideas on possible ways forward on beef and autos with their South Korean counterparts, but these Korean officials appear to want the U.S. to offer more concrete proposals to help the two sides reach a deal by the G-20 summit in mid-November, sources said.

One private-sector source this week doubted that the U.S. would formally present South Korea with a proposal until either after the Nov. 2 elections, or at least not until right before. The U.S. does not want a leaked proposal to damage its election prospects by turning off union supporters that are critical of the bilateral trade deal, this source said.

While the meetings last week in Seoul did not delve into specifics on automobiles and beef, several sources said the Korean officials in those meetings took what they considered to be a surprisingly tough line on beef. The officials signaled their reluctance to take any measures to further open up the Korean market to U.S. beef exports, sources said.

Several sources said these officials conveyed the impression that further opening up the market to beef poses a more difficult hurdle than further opening up the Korean market to U.S. automobile exports. One source said it was unclear if South Korea would be willing to take any measures on beef in the context of the free trade agreement negotiations.

However, this source said that these officials may have been responding to the possibility that the U.S. would ask South Korea to take steps on beef in the near term to open up its market. Sources have long said the U.S. will likely suggest that the two sides set up a pathway on beef that will lead to full market opening sometime in the future.

Sources said these Korean officials did not rule out that the two sides could reach an accommodation on beef, and one source said it was not clear to what extent the message from Korean officials last week represented “posturing” in the negotiations.

These negotiations are linked to the U.S.-South Korea FTA, in that the two sides must reach an accommodation to increase market access for U.S. beef and auto exports before the FTA can come before the U.S. Congress for a vote.

The tough line on beef contrasts with the commonly held view among observers in Washington that the auto issue will be the most difficult to address. Both Ford and Chrysler have both come out in opposition to the FTA due to its current auto provisions, but leading groups representing U.S. beef producers support the FTA as it now stands.

In addition, House Ways and Means Chairman Sander Levin (D-MI), a key player in these talks, is most focused on the auto issue. At this time, Levin does not appear to have reached an accommodation with the administration on what demands it should include in a formal proposal on autos, sources said.

Levin appears to be considering whether to go to South Korea to attend the final negotiations that may take place around next month’s G-20 summit, or send senior committee staff in his place, according to private-sector sources.

On beef, Finance Committee Chairman Max Baucus (D-MT) is leading the charge to attain greater access to the South Korean market. Baucus has pressed USTR to refrain from submitting the Korea FTA for a congressional vote before obtaining a pledge from the South Korean government that it will accept imports of all cuts of U.S. beef from all ages of cattle (Inside U.S. Trade, Aug. 6).

The U.S. negotiated full market access for beef from cattle of all ages under the FTA, but a subsequent backlash in South Korea resulted in a government-sanctioned industry agreement that restricted that access to beef from cattle under 30 months of age.

Tami Overby, Vice President for Asia at the U.S. Chamber of Commerce, said that the bilateral talks on beef may produce “a clearer road map of what constitutes ‘confidence building’ and at what point will the market fully reopen,” in reference to efforts to build confidence among South Korean consumers of the safety of U.S. beef.

In an interview posted this week by the Korea Economic Institute, Overby said that at some point, there will be a road map that says when the two sides believe the market confidence in Korea is such that the age restrictions can be removed for a fully open Korean market. She said talks are ongoing to determine when that will take place.

Overby also conceded that South Korea will likely ask for U.S. concessions in return for moving on beef and autos. She suggested that South Korea could ask for concessions in the areas of antidumping (AD) or countervailing duties (CVDs), or submit a request for more H1B1 visas.

The FTA as now negotiated does not change trade remedy law, but does alter some of the legal processes surrounding trade remedy cases. For example, the FTA obligates the U.S. government to notify and consult with South Korea when a trade remedy petition is filed, consistent with each party’s law.

The FTA also establishes a bilateral Committee on Trade Remedies, which has several functions. These include improving cooperation among the two governments on trade remedies, promoting information exchange on relevant issues, and overseeing the implementation of the FTA’s trade remedy chapter.

These U.S. concessions fell short of Korean demands, but were opposed by cleared advisers representing the steel industry under the argument that they risk weakening U.S. trade law.

The U.S. business representatives conveyed the message in South Korea last week that it is critical for the two sides to reach a deal on beef and autos by the time of the G-20 summit on Nov. 11-12, sources said. After the summit, there will not be an action-forcing event for a deal in the near term, one source said.

Doing so will enable the process of considering the FTA in the U.S. Congress to start in early January, and will help ensure that the U.S. Congress votes on the FTA before August 2011. If the vote were to slip past August, these representatives fear that it could be harder to hold a vote due to the proximity to the Nov. 2012 presidential elections.

Despite this unified message, many U.S. business representatives privately do not believe that the two sides will be able to reach a final deal on beef and autos by the time of the G-20 summit. These sources suggest that the two sides may announce some sort of agreement in principle (Inside U.S. Trade, Sept. 24).

U.S. business representatives also stressed in their meetings that it will not be easier to strike a deal with the Obama administration on autos and beef if Republicans take control of the House in November. However, some U.S. business representatives privately believe just the opposite, sources said.

But they made that argument in South Korea to counteract what they believe to be the perception of some in the South Korean government that it would be easier, for instance, to strike a deal if Ways and Means Ranking Member Dave Camp (D-MI) were slated to take over Levin’s spot as chairman of that committee.

That said, Camp’s office has put out the message that the two leaders are united in their views on the negotiations, and that the two representatives are both seeking greater market access for U.S. auto exports, sources said.

The message from business representatives that it is vital for the two sides to reach a deal by the G-20 summit also in part responds to the perception among these representatives that not all South Korean officials view the G-20 summit as a firm deadline to complete a deal, sources said.

But these sources emphasized that the South Koreans meeting with the U.S. business delegation last week did not say this was their view. One source said it was difficult to discern any concrete reaction from the officials in response to the message that a deal must be wrapped up by the G-20 summit.

The business representatives met with the South Korean trade minister, the deputy trade minister, the finance minister, and various Blue House aides, among others, sources said.

Participating in the trip were representatives from the Boeing Company, Citi Group Inc., Goldman Sachs, Chevron, McLarty Associates, MetLife, Prudential Financial, ACE Insurance Group, the National Pork Producers Council, the American Farm Bureau Federation, the National Association of Manufacturers, Applied Materials, Coalition of Services Industries, TwinLogic Strategies, and General Electric. — Jamie Strawbridge

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