South Korea trade deal gets mixed response in U.S.

WASHINGTON (Reuters) - A major trade deal between the United States and South Korea received a mixed response on Monday as some U.S. business leaders and politicians complained it fell short on boosting U.S. auto and agriculture exports.

U.S. trade officials called the bilateral deal a strong, innovative pact that would improve market access for American cars, beef, oranges and financial industries.

They pointed to the elimination of tariffs within three years on almost 95 percent of consumer and industrial products, and the phasing out over a decade of most other tariffs.

But the deal, which officials wrapped up in a last-minute negotiating marathon, has already raised hackles in Congress.

Sen. Max Baucus, chairman of the influential Senate Finance Committee, threatened to block the deal, saying negotiators failed to ensure sufficient access for U.S. beef exports.

"I will not allow it to move through the Senate, unless and until Korea completely lifts its ban on U.S. beef," he said.

Baucus, who has excoriated Seoul for rejecting three U.S. beef shipments with trace bone chips since last year, said South Korea must open its markets to all U.S. beef, including meat from animals of any age, both bone-in and boneless.

That dispute was not formally part of the trade talks agenda but became a litmus test for the U.S. agriculture.

The agreement comes at a delicate moment for the Bush administration, whose trade-negotiating powers expire at the end of June and which is hoping to win congressional approval for additional trade deals with Peru, Colombia and Panama.

Trade officials have been engaging Congress to bridge divisions. Some Democrats want to see trade deals redone to include stronger protections for workers and the environment.

DISAPPOINTMENT OVER AUTOS

Lawmakers have also honed in on auto exports to South Korea. The office of the U.S. Trade Representative said the deal would revise Korean taxes, reduce non-tariff barriers and set down rules for handling disputes.

But Rep. Sander Levin, who heads the House Ways and Means subcommittee on trade, said the deal failed to lift Korea's "iron curtain" on foreign auto imports.

The Democrat from the auto-manufacturing state of Michigan vowed to oppose the agreement unless it was tweaked to ensure "two way trade" in vehicles.

The Automotive Trade Policy Council, which includes the big U.S. manufactures, also said the deal fell short.

"The Korean government missed its last, best chance to undo the protectionist policies that ... have kept the Korean auto market off limits," Steve Biegun, Ford Motor Co.'s vice president for international governmental affairs, said in a statement.

Meanwhile, the beef industry wants beef trade to resume fully with South Korea, the third-largest customer for U.S. beef until mad cow disease was discovered here in 2003.

For now the American Farm Bureau Federation, the largest U.S. farm group, is withholding its support for the deal.

Deputy U.S. Trade Representative Karan Bhatia told reporters he expected South Korea would use world food-safety standards to judge U.S. beef imports in the future.

That might mean a policy change after the world animal health organization OIE makes a ruling, expected in May, on the safety status of U.S. meat.

Another sore point was that U.S. negotiators bowed to South Korea's demands to exclude rice from the deal.

But Myron Brilliant, vice president at the U.S. Chamber of Commerce, called the deal a "home run" for U.S. business. Especially favorable, he said, were provisions on financial services and intellectual property rights.

(Additional reporting by Paul Eckert and Jeremy Pelofsky in Washington)