South Korea's Lee could bring U.S. good news on beef

By Doug Palmer and Arshad Mohammed

WASHINGTON (Reuters) - South Korean President Lee Myung-bak could bring President George W. Bush good news this week about a long-running beef spat that has held up a free trade pact between the two countries, a U.S. business leader and senior Bush administration official said on Tuesday.

"I fully expect they're going to come with an announcement that shows positive direction on the beef issue," said Myron Brilliant, president of the U.S.-Korea Business Council and the U.S. Chamber of Commerce's vice president for Asia.

A senior Bush administration official, who asked not to be named because of the sensitivity of the negotiations, said he hoped, and had reason to believe, that Lee could deliver a long-awaited solution to the beef spat.

"I do. I mean, we are in very serious negotiations this week. ... We have our fingers crossed," the official said.

An agreement would remove a major obstacle to congressional approval of the trade deal, the biggest since the North American Free Trade Agreement went into force in 1994.

An official in Seoul said the two sides were still at odds but that negotiations were continuing.

"They had a meeting until late Tuesday night and are scheduled to meet again today, but it's very unclear whether an agreement can be reached, as their differences are so wide," a spokesman at South Korea's farm ministry told Reuters.

South Korea, once the third-largest importer of U.S. beef, currently refuses to admit anything but U.S. boneless beef from cattle younger than 30 months following the first case of U.S. mad cow disease more than four years ago.

Seoul has offered a compromise to accept both bone-in and boneless beef but only from cattle younger than 30 months, while Washington insists its Asian partner accept all cuts from all ages.

A deal is important for Washington, which could use it as leverage to boost its trade with Japan and China and help rebuild its beef trade in Asia, the destination for about 55 percent of all U.S. beef exports in 2003.

Japan currently imports U.S. beef from cattle 20 months or younger.

BEEF FOR FREE TRADE

Even if the beef spat is resolved, it could still be an uphill battle to win approval of a U.S.-Korea trade accord because Democratic presidential candidates Barack Obama and Hillary Clinton are strongly opposed.

They say the agreement does too little to open South Korea's market to more U.S. auto exports, while eliminating remaining U.S. tariffs on South Korean cars.

Brilliant said he believed auto industry concerns about the agreement could be managed if the beef spat were resolved.