Korean and U.S. negotiators wrapped up the final round of their free trade negotiations yesterday, unable to bridge gaps on key areas such as farm products and automobiles.
A free trade accord between the world`s largest and 10th-largest economies now hinges on senior negotiators, who will meet next week in Seoul and in Washington to carve out compromises on the unresolved issues.
As the parties raced to conclude bargaining on the last day of the official negotiation round at the Hyatt Hotel in Seoul yesterday, progress was made in less sensitive areas.
"Across the board, we have made significant headway," said Wendy Cutler, U.S. chief negotiator.
The two sides sealed three important chapters of the proposed FTA - competition laws, government procurement and customs administration - and they have nearly closed eight additional chapters.
"Only one or two outstanding issues" remain on the eight chapters, Cutler explained.
The eight chapters include financial services, market access, telecommunications, e-commerce, technical barriers to trade, trade remedies and transparency.
Lee Hye-min, Korea`s No. 2 negotiator, also said: "Providing that the two countries show more flexibility on those points (in the upcoming high-level talks), I would say that a deal is now within sight."
On financial services, Seoul agreed to allow U.S. firms cross-border access to credit information of Koreans after a two-year grace period, in exchange for exclusion of Korea`s state-run financial institutions from the free trade deal. Under the agreement, the Korea Development Bank and the Industrial Bank of Korea would not be subject to the bilateral accord.
"We have agreed not to open up the Korean market for U.S. credit rating agencies (such as Standard & Poor`s and Moody`s) without a commercial presence in Korea. Instead, we decided to ease Korean regulations on the commercial presence of the U.S. firms," said Shin Je-yoon, Seoul`s lead negotiator on financial services.
"The remaining issues will have to be tackled in high-level discussions," Shin added. Unresolved issues involve the Korean government`s safeguard measure against capital flight to the United States in case of a financial crisis, and the Korean postal authority`s insurance business.
Kim Jong-hoon and Cutler have been leading the talks as chief negotiators for Korea and the United States since last June to slash tariffs and trade barriers between the two countries. If they succeed, it will be the biggest such deal since the North American Free Trade Agreement in 1993.
The two sides hope to strike a deal by the end of this month to take advantage of U.S. President George W. Bush`s special trade promotion powers that make getting a deal through Congress easier.
"Beef and automobiles could remain on the table" after the formal negotiations were over, Cutler said. "They still require more work and careful attention," she said.
He and Cutler will meet in the week of March 19 for three or four days in Washington to try to strike a package deal on unresolved issues, Korean and U.S. officials said.
Based on the results of the discussions, more high-level talks may be scheduled in order to meet the March 30 deadline.
Separately, negotiators on farm goods are scheduled to meet from March 19-21 in Seoul. Farm trade was one of the thorniest issues hindering the bilateral trade agreement.
Washington is pushing hard to open the Korean market to U.S. farm exports, particularly rice and beef. Seoul wants to keep rice off the table and to only import beef free of bone fragments. Tangerines, apples, onions, garlic, pears and red peppers are also included in the list of super-sensitive items.
There is also a wide gap over auto tariffs. Washington wants the early elimination of Korean levies on American cars given that very few are sold here compared with the hundreds of thousands moving the other way. Other key differences yet to be resolved include trade remedies and Seoul`s tariff and nontariff barriers in the pharmaceutical sector.