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US Credibility Seen at Risk Over South Korea Trade Deal

posted on January 16, 2009

SEOUL, South Korea - Congressional rejection of a free trade deal with South Korea would damage U.S. efforts to free up global commerce, the head of a top U.S. business lobby said Thursday.

"I think if we started putting up free trade agreements and voting them down we would lose a lot of our credibility in trying to open markets around the world," Thomas Donohue, president and CEO of the U.S. Chamber of Commerce, told reporters after a speech.

Donohue said he is convinced the landmark agreement with South Korea will pass — no such accord ever put up for a vote in Congress has failed — though may take time and will require some tweaking of issues in the sensitive auto sector.

"This agreement is going to get done," Donohue said, referring to ratification, which is required by lawmakers in both countries for the pact to take effect.

Seoul and Washington signed the deal to slash tariffs and other barriers to trade in June 2007, three months after concluding 10 months of tough negotiations.

But the accord, the largest for the U.S. since the North American Free Trade Agreement, has languished in political limbo, largely sidelined by election politics in both countries and the global financial crisis.

Statements by U.S. lawmakers — including President-elect Barack Obama — have raised fears among supporters of the deal in South Korea that his administration will seek to renegotiate parts of it, most notably the auto sector.

Obama, then an Illinois senator, singled out South Korea during the final presidential campaign debate in October, bringing up the wide imbalance in auto trade between the two nations.

South Korean automakers including Hyundai Motor Co. sold 772,482 vehicles in the United States in 2007, while Detroit sold 6,235 in South Korea, according to statistics compiled by South Korean auto industry groups.

Donohue sought to quell such concerns.

"Hear this and hear it from me," he said in a speech to a general meeting of the American Chamber of Commerce in Korea. "We are not going to formally reopen those negotiations."

But Donohue said "adjustments" would need to be made regarding regulations and standards governing auto trade. He emphasized that such final changes are a regular occurrence in trade deals and do not mean renegotiation.

Foreign automakers have regularly complained that meeting South Korean vehicle regulations and standards adds to the price of their cars in South Korea and that such hurdles effectively serve as non-tariff trade barriers.

South Korean officials have been adamant that they will not renegotiate the agreement.

Bilateral trade in 2007, the last full year for which statistics are available, totaled $83 billion, according to South Korean figures. The U.S. was South Korea's third-largest trading partner after China and the European Union.

The free trade deal has sparked heated debate in South Korea. Lawmakers last month fought a pitched battle at the National Assembly when the ruling party introduced the legislation to a committee.

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