UPDATE 6-S.Korea, US agree on auto deal to save trade pact

* 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 administration, Ford, lawmakers’ comments)

By Doug Palmer

WASHINGTON, Dec 3 (BestGrowthStock) – The United States and South
Korea struck a deal on auto issues on Friday that had blocked
action on their free-trade agreement for three years,
potentially setting the stage for U.S. congressional approval.

President Barack Obama said the revised deal would boost
U.S. exports to South Korea by $11 billion and support at least
70,000 American jobs.

“I look forward to working with Congress and
leaders in both parties to get this done and to ensure that
America competes aggressively for the jobs and markets of the
21st century,” Obama said in a statement.

Even with the changes announced on Friday, the agreement
will likely divide Obama’s fellow Democrats, meaning he will
have to work closely with Republicans to win passage of the
Korea-U.S. Free Trade Agreement.

Both the Senate and House of Representatives must approve
the deal for it to become law. Supporters hope the changes
agreed on this week could lead to action in early 2011.

Action on the agreement has been delayed mainly by U.S.
auto and beef industry concerns.

In a sign of how the deal changed the political landscape,
Ford Motor Co. (F.N: ), previously one of the biggest critics of
the pact, said it now supported it.

“These new provisions provide Ford greater confidence that
we will be able to better serve our Korean customers. We deeply
appreciate the tireless efforts of the Obama Administration and
Congress to improve this agreement and open the Korean auto
market,” said Ford’s chief executive, Alan Mulally.

One of Ford’s strongest allies, the outgoing Democratic
chairman of the House of Representatives Ways and Means
Committee, also voiced support for the deal.

“It is important for American manufacturing and American
jobs. It is also an important step toward a global rules-based
trade system,” said Michigan Representative Sander Levin.

But Senate Finance Committee Chairman Max Baucus, a Montana
Democrat, said he was “deeply disappointed” his concerns about
access to the South Korean beef market were not resolved and
would reserve judgment on the deal until they were.

Republican lawmakers said approving the deal would provide
a critical counterbalance to China in the fast-growing Asian
region. It also would help U.S. companies remain competitive
with European firms when a European Union-Korea Free Trade
Agreement goes into force next year.

“This is a big win for American employers and workers,”
said Representative Dave Camp, a Michigan Republican who will
chair the House Ways and Means Committee next year. Camp echoed
some of Baucus’ concerns on beef.

SLOWER PHASE-OUT ON U.S. TARIFFS

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.

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 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.

As part of the revisions agreed over several days of talks
this week in Columbia, Maryland, South Korea will let the
United States keep a 2.5 percent tariff on Korean-built cars
for five more years, rather than cut it immediately.

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.

Seoul will still immediately eliminate a 10 percent tariff
on U.S. trucks under the revised pact.

South Korea was given an additional two years — until 2016
— to eliminate duties on some U.S. pork products.

“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.

Kim said he hoped this week’s work would allow U.S. and
South Korean lawmakers to approve the trade deal in 2011.

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 two countries agreed to work with Baucus to address his
concerns about remaining restrictions on imports of U.S. beef,
but South Korea did not commit to any immediate action,
sources familiar with the talks said.
(Editing by Peter Cooney)

UPDATE 6-S.Korea, US agree on auto deal to save trade pact