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 with Canada and Mexico, and would bolster U.S. economic ties with South Korea, the world's 15th-largest 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.
The White House had hoped to strike a deal last month during President 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.
Digital Access For Only $0.99
For the most comprehensive local coverage, subscribe today.
A senior administration official said discussions on beef are ongoing, though South Korea has agreed to lift its existing 40 percent tariff on U.S. beef exports, which the White House said would result in $90 million in annual savings for U.S. producers. 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 Motor Co. CEO Alan Mulally said the deal would give the automaker "greater confidence that we will be able to better serve our Korean customers."