The US and South Korea wrapped up the first round of comprehensive free trade agreement (FTA) negotiations on 9 June, with disagreements over issues including pharmaceuticals, agriculture, and goods produced in a North Korean industrial park. The prospective deal has been hailed as the US' biggest since the North American Free Trade Agreement (NAFTA) in 1994.

While senior officials from both sides expressed cautious optimism, an uphill struggle remains. One of the most sensitive issues is the phase-out of Korea's agriculture tariffs, which average 52 percent, compared to 12 percent in the US. Korean farm unions have warned that tariff cuts would have dire consequences for farming households. At the same time, US farmers are seeking access for beef products, which were banned from Korea following a mad cow disease scare.

Korea's pricing and reimbursement policies for prescription drugs are another sticking point. Assistant US Trade Representative Wendy Cutler expressed "grave concern" over new Korean draft regulations that do not guarantee that the national insurer will reimburse patients for purchases of imported drugs. Some Korean officials expressed concern that US demands on pharmaceutical patents and pricing would increase drug prices and insurance costs.

Seoul wants a deal to cover goods produced at the South Korean-owned Kaesong Industrial Complex in North Korea, which it considers an important component of bilateral economic cooperation. Washington, which imposes economic sanctions on North Korea, opposes this, suggesting that the "FTA should cover the Republic of Korea and the US."

Nevertheless, new US Trade Representative Susan Schwab said that the negotiations were progressing "at a far faster pace than some of our other FTAs in the past."

In order to complete the deal before the Bush administration's 'fast-track' authority to negotiate trade pacts expires in July 2007, the two countries must reach an accord by March. The next round of talks is expected in Seoul in July.

"South Korea US Makes Progress in FTA Talks, With Partial Concerns," FINANCIAL TIMES INFORMATION, 11 June 2006; "Korea trade talks off to a fast start, US says," REUTERS, 9 June 2006; "US and South Korea Open High-Stakes Talks," INTERNATIONAL HERALD TRIBUNE, 6 June 2006; "Statements at a Press Conference Challenging the US-Korean Free Trade Agreement," THE OAKLAND INSTITUTE, 7 June 2006; "Ministry Fears Effects of FTA on healthcare system," THE HANKYOREH, 6 June 2006; "Bumpy Road for US-Korea Talks," ASIA TIMES, 3 June 2006; "US Lauds Progress in First Week of South Korea Trade Talks," AGENCE FRANCE PRESSE, 9 June 2006.

AGOA FORUM: US TO PURSUE FTA WITH AFRICA?

Senior US officials indicated that they were mulling free trade agreement (FTA) negotiations with African countries, during meetings with thirty seven African ministers in Washington for the fifth African Growth and Opportunity Act (AGOA) Forum from 6-7 June. AGOA is a preferential trading scheme that the US offers to 37 eligible African countries (see BRIDGES Weekly, 14 July 2004).

In her opening remarks to the forum, US Secretary of State Condoleezza Rice emphasised that AGOA aimed to combat poverty. Referring to the ongoing Doha Round talks at the WTO, she said that Washington was "at the forefront of a worldwide effort to increase market access for developing country products, including agricultural goods." She urged her own government to do more to help African farmers expand their exports by increasing their capacity to meet US agricultural standards. In calling on African countries to continue diversifying their economies, she pointed to the AGOA Diversification Fund which the US launched last year.

Speaking at an AGOA private sector gathering the day before, Deputy USTR Karan Bhatia indicated that the US was looking to enter into a free trade agreement with Africa. He noted that while preference programs such as AGOA had their benefits, they were in steady decline "as a result of free trade agreements, autonomous liberalisation, a prospective Doha Agreement, and changes such as the end of global apparel quotas." He underscored the need to preserve and build on the momentum created by AGOA by finding other ways to strengthen and deepen US-Africa trade and investment relations. Bhatia further said that while many African countries were probably not yet ready for FTAs with the US, Washington would "work with those key African partners that are interested in taking steps toward a more meaningful trade relationship characterised by mutual commitments."

In a speech to the forum, the Senegalese Foreign Minister Cheikh Tidiane Gaudio cautioned that while Africa was ready for free trade, fair trade was the preferred option.

All speeches from the forum can be found here: http://www.agoa.gov/agoa_forum/agoa_forum5_speeches.html.

ICTSD reporting, "African Nations Wary of Closer Embrace with U.S." YAHOO NEWS, 8 June 2006.