Obama fails to seal trade deal with South Korea

President Obama has failed to overcome obstacles to a free trade agreement with South Korea, as he and South Korean President Lee Myung-bak stumbled Thursday over disputes on American beef and motor vehicle exports to Asia's fourth-largest economy.

Mr. Obama, after a long working lunch with Mr. Lee on the sidelines of the G20 summit, emerged to say the United States will be working “tirelessly in the coming weeks days and weeks” to reach final agreement with Korea on a deal that was negotiated and signed in the waning months of the presidency of George W. Bush.

Obama and Lee sought to appear optimistic about overcoming obstacles. But Obama also warned the agreement needed “popular support” and it was necessary “to make sure the case is airtight” – a reference to the problems the deal is expected to face in the US Congress.

Devil in the details

US automobile manufacturers, as well as labor leaders, charge that the agreement would ruin their booming domestic sales of pickup trucks if tariffs on South Korea-made automobiles were eliminated. They say Korean SUVs and cars would pour into the US in ever greater numbers while Korea still slowed the flow of US exports into Korea by a wide range of tests, standards, and taxes aside from tariffs.

Over the first nine months of the year, the US exported 10,162 vehicles to Korea while Korea shipped 449,303 vehicles to the US – not to mention 326,573 made by Korea’s Hyundai Motor Group in the US.

US beef exports to South Korea have been restricted since 2003 amid an outbreak of mad cow disease, though the US still accounted for 37 percent of Korea's beef imports over the first nine months of the year.

The agreement needs ratification by the US Congress, many of whose members strongly oppose it. Underscoring how the agreement is good foreign policy but bad domestic politics, both Obama and Secretary of State Clinton denounced it as senators from large industrial states but now support it.

Pressure from Europe-Korea trade agreement

Lee said his trade minister and the US special trade representative would have “more time so that they can finalize the technical issues” – and they would “work together so that we can have a mutually acceptable agreement at the earliest possible date.”

Those diplomatic words masked fears here that the free trade agreement might not survive negotiations – and that Obama might not present it for ratification when a new Congress convenes in January.

Amy Jackson, the president of the American Chamber of Commerce here, warned that European products could edge out Americans completely as a result of a European Union-Korean free trade agreement that’s already been approved. This could put pressure on the US Congress to support a new trade deal with Korea, says Han Kyoung-sung, a research fellow at the Korea Institute for International Economic Policy.

“If the Korea-EU FTA becomes effective, that will affect US industry,” he says, adding: "It is important to implement the Korea-US FTA as soon as possible” – ideally by July 1, the same day the Korea-EU will take effect.

US support on North Korea

Despite the failure to agree on the free trade agreement, Obama and Lee spoke confidently of the US-Korea alliance in terms reminiscent of the language of a succession of US presidents when they visit Korea.

Obama assured Lee in the Blue House, and US troops earlier in the day at Veterans’ Day observances at the main US military base here, that the US would “never waver in our commitments to the security of the Republic of Korea."

He also stressed that the US was “prepared to provide economic assistance to North Korea and help it integrate into the international community – if only North Korea meets its obligations... to eliminate its nuclear weapons program.”

“Only by meeting its responsibilities – and not threatening others – will North Korea find real security and respect," Obama said.

Those were welcome words to Lee, who has said ever since his inauguration in February 2008 that South Korea would provide tremendous economic aid to the North if it gave up its nuclear program.