Washington The U.S. and South Korea have reached an agreement on America’s largest trade pact in more than a decade, a highly coveted deal the Obama administration hopes will boost U.S. exports and create tens of thousands of jobs at home.
After a week of marathon negotiations, representatives from both countries broke through a stalemate Friday morning on outstanding issues related to the automobile industry, which have been a sticking point in the talks. The agreement would be the largest U.S. trade deal since the 1994 North American Free Trade Agreement (NAFTA) with Canada and Mexico, and would bolster U.S. ties with the fast-growing South Korean economy.
South Korea is agreeing to allow the U.S. to lift a 2.5 percent tariff on Korean cars in five years, instead of cutting the tariff immediately. The agreement also allows each U.S. automaker to export 25,000 cars to South Korea as long as they meet U.S. federal safety standards and allows the U.S. to continue a 25 percent tariff on trucks for eight years and then phase it out by the 10th year. South Korea would be required to eliminate its 10 percent tariff on U.S. trucks immediately.
President Barack Obama hailed the agreement as a “landmark trade deal” that would support at least 70,000 U.S. jobs.
“We are strengthening our ability to create and defend manufacturing jobs in the United States, increasing exports of agricultural products for American farmers and ranchers and opening Korea’s services market to American companies,” Obama said in a statement.
The White House had hoped to strike a deal last month during Obama’s trip to Seoul for the G-20 economic summit, but both countries were unable to broker a compromise on issues pertaining to trade of autos and beef. U.S. Trade Representative Ron Kirk and his counterpart, Korean Trade Minister Kim Jong-hoon, resumed negotiations outside Washington this week.
The agreement did not address issues with the beef trade. The U.S. had sought greater access to the beef market in South Korea, which restricts imports of older U.S. meat. A senior administration official said discussions on beef are ongoing. The official insisted on anonymity to discuss private negotiations.
The wider agreement would eliminate tariffs on more than 95 percent of industrial and consumer goods within five years, a move that the U.S. International Trade Commission estimated would increase exports of U.S. goods by at least $10 billion. The deal would also open up South Korea’s vast $560 billion services markets to U.S. companies.
The agreement must still be ratified by lawmakers in both countries. Administration officials offered no timeline for ratification on Capitol Hill.
The South Korea deal has been widely supported by those in the private sector and the U.S. Chamber of Commerce, which has criticized other administration policies as antibusiness.
“This agreement will create thousands of new jobs, advance our national goal of doubling exports in five years, and demonstrate that America is once again ready to lead on trade,” Chamber President Tom Donohue said Friday. Ford CEO Alan Mulally said the deal was,“a transformational agreement” that would open one of the most closed auto markets in the world to U.S. manufacturers.
The agreement won Obama some rare support from the GOP.
Senate Minority Leader Mitch McConnell said the agreement was, “a positive development” toward promoting economic growth and private sector job creation. Rep. Eric Cantor, R-Va., said the agreement would make U.S. exports more competitive and create more opportunities for American companies to create jobs.