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USTR Kirk says Skouras trade pact needs new auto deal

By Doug Palmer

WASHINGTON (Reuters) - South Korea must do more to open its market to U.S. cars before President Barack Obama will send a free trade agreement signed in June 2007 to Congress for a vote, the chief U.S. trade negotiator said on Thursday.

The remarks offered only faint hope of a breakthrough during Obama's trip to Asia this month that might lead to congressional action on the pact, which is strongly opposed by many lawmakers from auto-producing states.

"Our market is open to Korean autos. All we are asking for is for our own auto companies to be able to compete on a level playing field in the Korean market," U.S. Trade Representative Ron Kirk said in a speech to the U.S.-Korea Business Council.

Kirk, who will meet with South Korea's trade minister next week in Singapore, said his office was developing proposals to address concerns about South Korea's barriers to U.S. autos, beef and other products.

"Precisely because our political and economic relationship is so important, we have to get this right. And we need the broadest political support to move forward," no matter how long that takes, Kirk said.

But he also noted Obama and South Korea President Lee Myung-bak would have the opportunity this month to discuss the agreement and said business groups had a "legitimate question" when they asked why an agreement so potentially beneficial to the two countries was taking so long to get approved.

Obama will visit Seoul on a 10-day Asian trip starting next week in Singapore, where both he and Lee will attend the annual Asia Pacific Economic Cooperation summit.

Obama opposed the U.S.-South Korea free trade agreement during last year's election campaign, but also pledged in his previous meetings with Lee this year to work toward approval of the pact.

MANY DEMOCRATS DISLIKE TRADE DEALS

Trade agreements are unpopular with many of Obama's fellow Democrats in Congress, whose support he needs for his top domestic priority of passing healthcare reform.

Tami Overby, president of the U.S.-Korea Business Council, said she hoped the Obama-Lee meetings would inject new urgency in efforts to resolve the U.S. auto sector's "very real and legitimate concerns."

The most realistic option would be a side deal since it would be very difficult politically for South Korea to renegotiate the actual pact, Overby said.

South Korea's trade ministry had no immediate reaction to Kirk's comments, but repeated Seoul's position that it is up to Washington to make a proposal and then they can discuss it.

South Korea has repeatedly refused to renegotiate the auto provisions of the agreement.

Officials in Seoul point out the country will immediately eliminate an 8 percent tariff on U.S. autos under the agreement, while the United States is allowed to phase out its remaining 2.5 percent tariff on gasoline and diesel-powered cars over three years.

The agreement also requires the United States to phase out a 25 percent tariff on pickup trucks over 10 years.

Ford, Chrysler and the United Autoworkers Union say the pact fails to tear down non-tariff barriers that have kept American cars off the Korean market for years.

But defenders say it does make progress in those areas and also includes an expedited dispute settlement procedure that allows U.S. tariffs on South Korean cars to "snap back" into place if expected market openings do not occur.

Seoul is pressing for U.S. congressional approval of the agreement by the end of June. Otherwise, it fears the November 2010 congressional elections could delay action on the pact until 2011 at the earliest, South Korea's ambassador to the United States Han Duk-soo said on Wednesday.

Kirk said congressional leaders have told Obama "time and again" that they see approval of the pact as one way to strengthening ties with South Korea, but they still have concerns over specific elements of the deal.

However, many business groups argue it has become more urgent to pass the agreement now that the 27-nation European Union has struck its own free trade pact with Seoul.

"As the economy struggles to rebound, this agreement is an immediate job-creating stimulus," said Myron Brilliant, outgoing president of the U.S.-Korea Business Council.

(Additional reporting by Jack Kim in Seoul; editing by Mohammad Zargham)

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