Last updated: March 30, 2007 7:18 pm

US says S Korea talks ‘not going well’

US and Korean negotiators were scheduled to resume free trade talks on Saturday after failing to reach an agreement Friday night.

The White House had earlier warned that free trade talks with South Korea were “not going well” as negotiators for the two countries raced against the clock to seal a deal that would boost bilateral trade by as much as $20bn a year and give them preferential access to each others’ markets.

The deal needs to be concluded this weekend to take advantage of President George W. Bush’s authority to fast-track deals through the US Congress with a simple yes or no vote.

Mr Bush and his Korean counterpart, Roh Moo-hyun, discussed the deal over the phone on Thursday night Seoul time and reiterated their commitment to reaching an agreement.

The two agreed to empower their negotiators to conclude a deal in time with ”maximum flexibility,” said Yoon Seung-yong, the Korean president’s spokesman.

Mr Bush and Mr Roh ”exchanged views on the remaining obstacles, including automobiles, agriculture and textiles, and shared the view that the deal should be concluded in a mutually beneficial manner,” he said.

However, significant gaps remained on Friday.

Officials in Washington raised the prospect that the talks would end in failure.

A White House spokesperson said: ”The talks are not going well. Unless the negotiations show some sign of progress in the next few hours this agreement will most likely not come together.”

After 10 months of intensive negotiations, the two sides had reached agreement on only three of the 17 areas under review – competition, customs and government procurement – although earlier this week they said they were ”very close” to deals on eight other chapters, including financial services, labour and the environment.

There has been no sign of any breakthrough on those areas as Kim Hyun-chong, South Korea’s trade minister, and Karan Bhatia, the deputy US trade representative, took over as lead negotiators.

The deal must be agreed by the March 31 deadline to take advantage of Mr Bush’s ”fast-track” authority.

With bilateral trade exceeding $70bn, the deal would be the US’s largest since the Nafta accord was signed with Canada and Mexico more than a decade ago and would give the US an important bridgehead into Asia.

For South Korea, the deal would give it much greater access to the markets of its second-largest trading partner and would enable it to steal a march on regional rivals such as Japan.

Some studies have estimated the deal could increase annual trade between the two countries by as much as $20bn.

However, disputes remain in the most difficult but important areas. In agriculture, where South Korea is running a $1.9bn deficit with the US, Seoul is seeking to phase out tariffs on several sensitive commodities, while Washington wants an immediate end to tariffs.

The US has been pushing Korea to include a timetable for allowing access to the rice market but Seoul has insisted rice – a sensitive, emotionally-charged sector in Korea – must be excluded from the deal.

Although beef is not part of the deal, US negotiators have warned that an FTA will not be ratified unless Seoul allows the full resumption of meat imports that were suspended following an outbreak of mad cow disease in the US but have now been deemed safe.

The sides also disagree about US anti-dumping laws, which South Korea wants revised, and Seoul’s tax system for imported cars.

There has been opposition to the deal on both sides.

In Korea, farmers and factory workers are worried about the threat to their livelihoods from cheaper American imports, while anti-American activists have decried the ”economic colonialism”.

In the US, big business such as Chevron, the oil company, have claimed the last-minute concessions could water down investment protections and leave US companies vulnerable to have their assets expropriated or the flow of capital restricted.

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