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Some Democrats vow to fight Obama on South Korea trade

By Doug Palmer

WASHINGTON (Reuters) - A group of President Barack Obama's fellow Democrats on Wednesday vowed to fight him on a proposed trade deal with South Korea the White House wants passed by July 1.

"The war on the middle class continues. It's greatest battle of 2011 will be the Korea free trade agreement," said Representative Brad Sherman at an event with eight other House of Representatives Democrats.

The trade deal with South Korea would be the biggest for the United States in more than 15 years.

The White House says it would help create tens of thousand of new jobs, but opponents wave their own study saying it would cost 159,000 jobs.

Most Republicans, who now control the House and have made significant gains in the Senate, support the deal as a way to boost exports. The Obama administration can also count on votes from a substantial number of Democrats after negotiating changes to address U.S. auto industry concerns about the pact.

Sherman and the group including Representative George Miller, a close ally of House Democratic Leader Nancy Pelosi, charged that "rules-of-origin" provisions in the agreement open the door to South Korean goods containing as much 65-percent Chinese content to enter the United States duty-free.

In addition, those goods could potentially be assembled by low-wage Chinese workers in South Korea under that country's "guest worker" program, Sherman said.

He also complained that an annex of the pact created the possibility that goods produced in a North Korean industrial park near the border with South Korea could eventually be eligible for duty-free treatment.

"The agreement is not what you think it is. It is not an agreement just to allow South Korean-made products into the United States. It is an agreement that will allow North Korean-made products and Chinese labor and Chinese products into the United States duty-free," Sherman said.

A U.S. trade official, speaking on condition of anonymity, took issue with Sherman's description of the agreement.

While the rules-of-origin do allow for some non-South Korean content, "they do not allow a product with 65 percent of its value from Chinese materials to be eligible for preferential treatment," the official said.

In addition, South Korean labor laws, including minimum wage standards, apply to all workers in South Korea regardless of nationality, the official said.

Congressional approval would also be needed to extend tariff benefits of the agreement to products made in the Kaesong industrial zone in North Korea, the official said.

Representative Mike Michaud, chairman of the House Trade Working Group, said he did not have a hard estimate of how many House lawmakers were opposed to the Korea deal.

However, opponents plan an education effort to build opposition to the pact, he said.

(Reporting by Doug Palmer; editing by Todd Eastham)

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