* Deal allows longer phase-out of U.S. auto tariffs
* Also address non-tariff barriers to Korean market
* Deal expected to boost U.S. exports up to $11 bln
(Adds reaction, background, previous COLUMBIA, Maryland)
By Doug Palmer
WASHINGTON, Dec 3 The United States and South
Korea have reached a deal on auto issues that have blocked
congressional approval of a free trade agreement for three
years, sources familiar with the talks said on Friday.
As part of the deal, South Korea agreed to let the United
States keep a 2.5 percent tariff on Korean-built cars for five
more years, rather than cut it immediately, the sources said.
The agreement breathes life into President Barack Obama's
trade agenda, which has been in doubt since the two countries
failed last month to resolve problems with the pact by a
The failure renewed questions about Obama's commitment to
the Korea-U.S. Free Trade Agreement and other pending trade
deals supported by U.S. business groups, but which have been
opposed by some of Obama's staunchest supporters.
The two countries signed their original trade deal, which
is known as KORUS, on June 30, 2007.
It would be the second largest U.S. free trade agreement
after the North American Free Trade Agreement with Canada and
Mexico in the mid-1990s.
Both the U.S. Senate and House of Representatives would
have to approve the deal for it to become law. Supporters hope
the changes agreed on this week could lead to action on the
pact in early 2011.
Action on the agreement has been delayed mainly by U.S.
auto and beef industry concerns.
The United States exported 7,663 cars and light trucks to
South Korea in 2009, while it imported 476,857 from automakers
there, according to U.S. Commerce Department figures.
Ford Motor Co (F.N) and its supporters in Congress complain
the lopsided trade is due to South Korean tax and regulatory
barriers that KORUS fails to address adequately.
They also were unhappy with the schedule for phasing out
U.S. car and truck tariffs under the pact.
The new supplement agreement allows 25,000 cars per U.S.
automaker to qualify for entry into the South Korean market
based on U.S. safety standards. That is about four times the
amount agreed to under the deal struck in 2007.
It also allows the United States to keep a 25 percent
tariff on trucks until the eighth year, instead of beginning to
reduce it in the first year. The United States will still have
to eliminate the duty in year 10 of the pact.
South Korea is no longer required to eliminate immediately
its 8 percent tariff on U.S. auto imports, but will reduce it
to 4 percent for four years before eliminating it, the sources
said. Seoul will immediately eliminate a 10 percent tariff on
U.S. trucks, they added.
U.S. negotiators wrapped up several days of talks with
South Korean officials early on Friday in Columbia, Maryland,
in a jubilant mood.
"We made substantial progress in our discussions," U.S.
Trade Representative Ron Kirk said in a statement after his
final meeting with South Korean Trade Minister Kim Jong-hoon.
"It's time for the leaders to review this progress before
we move forward," Kirk said.
Once that has been done, "then we will synchronize the same
time and date to go into a detailed announcement," South Korean
Trade Minister Kim Jong-hoon said before going to the airport.
South Korea is the United States' seventh largest trading
partner and eighth largest export market. Last year, the United
States exported $28.6 billion worth of goods to South Korea and
imported $39.2 billion of products from that country, for a
U.S. deficit of $10.6 billion.
The U.S. International Trade Commission has projected the
agreement will boost U.S. exports to South Korea by $10 billion
to $11 billion, while increasing U.S. imports from that country
by $6.4 billion to $6.9 billion.
Kim said he hoped this week's work would set the stage for
the U.S. and South Korean legislatures to approve the trade
deal in 2011.
The two countries agreed to work with Senate Finance
Committee Chairman Max Baucus to address his concerns about
remaining restrictions on imports of U.S. beef, but South Korea
did not commit to any immediate action, the sources said.
U.S. beef exporters have already recovered much of their
lost market share in South Korea under a voluntary industry
agreement to address lingering concerns about several cases of
mad cow disease found in the U.S. cattle herd.
Much of the beef industry is eager to have the pact
approved because it phases out a 40 percent South Korean tariff
on U.S. beef and because a major competitor, Australia, is
negotiating its own free trade pact with South Korea.
(Editing by Peter Cooney)