July 14, 2006

South Korea-US free trade talks hit snag

By Jon Herskovitz

SEOUL (Reuters) - The second round of free trade talks
between South Korea and the United States hit a snag, leading
some working groups to halt discussions a day early, the chief
U.S. negotiator said on Friday.

Wendy Cutler said talks in the pharmaceuticals working
group were suspended as well as those in services and trade
remedies, but she thought the gaps could be bridged.

"No negotiating groups met today," Cutler told reporters at
a briefing in Seoul.

The talks started on Monday and had been scheduled to end
on Friday. Summing up the week, Cutler said: "We made
reasonable progress."

"The difference in views in the pharmaceutical sector are
challenging and difficult. They are not insurmountable," she

The United States was not satisfied with a system proposed
by Seoul for insurance reimbursements for drugs proposed by
South Korea, saying it would discriminate against innovative
drugs, which are a specialty of U.S. manufacturers.

Cutler's counterpart, Kim Jong-hoon, also said the
disagreement would not break the talks.

"There have been ups and downs and I expect there will be
more," Kim told reporters. But Seoul was determined to push
forward with its insurance plan for drugs, he said.

"It is our strong position that the practice of
irresponsibly prescribing expensive medications with little
effectiveness, putting a burden on the insurance plan, must be

The latest talks were marred by protests in Seoul, where
tens of thousands of demonstrators took to the streets to fight
with riot police.

South Korean farm and labor activists say opening their
country's market to more goods and services through a reduction
of tariffs and other barriers would endanger the livelihood of
millions of South Korean workers and farmers.

Dubbed KORUS, the pact under discussion would be the
biggest U.S. free-trade deal since NAFTA, the North American
Free Trade Agreement, which took effect in 1994.

"We remain as convinced as ever that the KORUS FTA is the
right path for the United States and Korea, both now and for
the coming generations," Cutler said.

Cutler and Kim said the next round of talks is scheduled
for early September in Washington.

Negotiators are pushing for a deal by January so the U.S.
Congress can vote on it before the expiry of White House
authority to negotiate trade agreements that cannot be amended.
That authority runs out in mid-2007.

South Korea was the world's 11th-largest economy in 2005,
according to the World Bank, and seventh-largest U.S. trading
partner. Two-way trade in goods totaled some $72.5 billion in
2004, when Seoul had a surplus of $19.8 billion.

(Additional reporting by Jack Kim)