April 18, 2008 / 1:47 AM / in 10 years

South Korea relaxes U.S. beef import rules

SEOUL (Reuters) - South Korea on Friday agreed to open up to U.S. beef imports after Washington pledged to raise safety standards, boosting prospects for a sweeping trade deal ahead of a summit between leaders of the allies later in the day.

It removes a big obstacle to U.S. congressional approval of the trade deal, the biggest since the North American Free Trade Agreement went into force in 1994, and should brighten the atmosphere as leaders prepare to discuss North Korea’s nuclear ambitions, trade and military cooperation.

South Korea’s farm ministry said in a statement that imports of U.S. beef will be expanded gradually and it would allow in bone-in beef from cattle under 30 months as a first step.

Beef from cattle older than 30 months can come in once U.S. safety standards are improved.

Once the third-largest import market for U.S. beef, South Korea imposed a blanket ban on American imports in 2003 following an outbreak of mad cow disease in the United States. It later eased the ban by allowing imports of boneless beef from cattle younger than 30 months.

The agreement comes just hours before South Korean President Lee Myung-bak, in the United States on his first overseas trip since taking office in February, meets U.S. President George W. Bush at the Camp David presidential retreat.

U.S. lawmakers have said a landmark trade pact the two countries struck about a year ago would be scuttled unless South Korea opened its market fully to U.S. beef.

Analysts have estimated the trade deal, which needs approval by legislatures in both countries, could boost their two-way, $78 billion annual trade by about $20 billion.

But even after the beef deal, a free trade pact faces stiff opposition from the two Democratic presidential candidates, Senators Hillary Clinton and Barack Obama, who have concerns about the openness of the Korean auto market.

It is traditionally difficult for major legislation to pass through Congress in an election year and Clinton and Obama have seized on the backlash and made their opposition to the deal their top selling point in Michigan, home to General Motors, Ford Motor and Chrysler.

“CONTROLLED RISK” STATUS

U.S. beef, under the new rules, will be allowed in as early as mid-May but South Korea said it will stop imports if the United States lost its “controlled risk” country status.

The World Organization for Animal Health (OIE), which has established international standards for mad cow disease, said last year that the United States is a controlled risk country.

After the ban on U.S. beef, sales of Australian beef in South Korea more than doubled to 148,000 tonnes in 2007 from 64,000 tonnes in 2003. Australian beef now accounts for nearly three-quarters of imports in South Korea after overtaking U.S. beef as No. 1 in 2004.

The deal with Washington will particularly hurt Australian importers and local producers, who have benefited from the country’s protective measures for domestic farmers.

“You’ll see some very cheap U.S. frozen beef around the market for a month,” Glen Feast, local manager for Australian meat industry marketing body Meat & Livestock Australia, told Reuters.

“There’ll be an initial huge hiccup in the market ... and you’ll see an unsettled market for three to even six months.”

A U.S. beef industry welcomed the news.

“Resumption of trade is a long overdue but very welcome development,” American Meat Institute President J. Patrick Boyle said in a statement.

The Lee administration and his conservative Grand National Party hope parliament will ratify the trade deal in a session that runs for about a month from April 25, a GNP official said.

A deal with Seoul 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.

Additional reporting by Jack Kim in Seoul, Michael Byrnes in Sydney; Editing by Jonathan Thatcher and Alex Richardson

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