Agricultural issues poised to heat up in 3rd FTA talks

Original Publication Date: 
3 September, 2006

Despite the expected challenges, Seoul will push for certain exemptions over sensitive agricultural products during the upcoming third round of free trade agreement talks with Washington, the Korean government said.

"We will request complete exemptions in certain cases, and longer-term elimination of tariffs on sensitive agricutural products," the Trade Ministry said in a statement.

The Ministry of Agriculture, backing up the statement, said that it will stress the importance of receiving "exceptional" treatment for major sensitive products, such as beef and rice, during the negotiations. The third round of FTA talks is taking place from Sept. 6-9 in Seattle.

In their proposals exchanged on Aug. 15, Seoul officials said they asked Washington for the exceptional treatment of 288 agricultural products, or 20 percent of 1,452 farm produce. But Washington wants Korea to widely open up its agricultural market within 10 years after the FTA pact takes effect. Seoul admits it will not be easy to persuade Washington.

"Looking at existing U.S. FTA pacts, as well as the process of negotiation between U.S. and Korean negotiators, we expect the U.S. to strongly demand for the immediate removal of tariffs on all our agricultural products, without exceptions, and for us to open up the market," the Agriculture Ministry highlighted in a statement yesterday.

In Korea, farmers have been most belligerent towards free trade, as they fear market opening would wipe them out of business. Among the Organization for Economic Cooperation and Development members, farming income is generated through subsidies or trade protections at more than twice the OECD average.

Seoul government officials said they hope to gain U.S. sympathy by thoroughly explaining the background of their proposal. They noted that they plan to stress the importance of receiving exceptional treatment for sensitive products.

Korean negotiators plan to better understand the categories that are of U.S. interest and use this in future negotiations, the Agriculture Ministry said.

Experts here said they expect agriculture to emerge as the most contentious issue in the third round of talks.

"Now that both sides have exchanged drafts on their desired time frame for reducing and eliminating tariffs for each of the areas and items of their concern, the extent to which both sides are willing to open up their market is expected to be the main issue in the next round," Cheong In-kyo, an economics professor at Inha University, recently told The Korea Herald.

"I think agriculture will be the most challenging issue for Korea in the next round, especially now that both sides have revived talks on pharmaceuticals," he said. "Both sides will have to hold rational discussions. The U.S. is really going to push Korea to open up its agricultural market." Suh Jin-kyo, a researcher with the Korea Institute for International Economic Policy, agreed that it would be difficult for Washington to accept Korea`s agricultural concessions.

"The `undefined` category accounts for about 20 percent of Korea`s agriculture list, which is quite a lot; it is out of the norm of free trade agreements," Suh told The Korea Herald. The undefined category refers to items for which a specific time frame for the elimination of tariffs has not been declared.

The second round of FTA talks, held from July 10-14 in Seoul, ended earlier than scheduled because of disagreements over Korea`s new drug-pricing policy. But a working-level meeting held in the interim helped dispel the stalemate.

While agricultural talks are expected to intensify in the next round, the services and investment sectors, including financial services, are expected to enter full-fledged talks, the Trade Ministry said.

Cross-border financial services will be one of the major issues. During the second FTA talks, both sides reached a consensus on opening the whole sale market for financial products and professional services, which is relatively free from consumer protection issues.

Negotiators are expected to decide the list of specific financial industries to be opened. Seoul expects Washington to demand for the opening up of Korea`s insurance brokerage and asset management markets.

In addition to finance, ongoing uncertainties over the auto sector are expected to spill over. Asia`s third-largest economy levies an 8 per cent tariff on American car imports and is often accused of discriminatory regulations that add taxes depending on engine sizes. Foreign automakers say that such trade barriers are biased against imported cars.