WASHINGTON, June 10 (AFP): The United States and South Korea "hit the ground running" on an ambitious free-trade pact this week but major hurdles remain, not least in agriculture and autos, a US official said Friday.
The two countries concluded their first week of negotiations on what would be the largest free trade agreement (FTA) clinched by the United States since the NAFTA North American deal in 1994.
"Overall I think we've accomplished much more than usual for the first round of an FTA negotiation," Assistant US Trade Representative Wendy Cutler told reporters.
"Some very difficult issues remain to be resolved, but we've definitely hit the ground running," she said.
Teams led by Cutler and South Korean chief trade negotiator Kim Jong-Hoon succeeded in harmonising their agendas, so that they can at least talk from the same page in their race against time to clinch a deal this year.
South Korea is America's seventh-biggest trading partner and Asia's fourth-largest economy. Bilateral trade last year totalled 72 billion dollars, with South Korea enjoying a surplus of 16 billion.
Supporters on both sides argue that a deal would boost growth, create jobs and secure a new level of ties between strategic allies who together face a threat from Stalinist North Korea.
But the FTA talks must be wrapped up by the end of this year if US President George W. Bush's administration is to get a deal through Congress before it loses its "fast-track" trade promotion authority in July 2007.
"We know we're on an accelerated track," US Trade Representative Susan Schwab said. "We seem to be progressing ... at a far faster pace than some of our other FTAs in the past," she said.
The Washington talks were dogged by a number of protests by Koreans angry at the prospect of South Korea turning into the "51st US state".
Drum-beating and chanting demonstrators claimed that an accord would drive up profits for US drug firms and create "terror" for South Korean rice farmers.
Two of the most difficult chapters -- agriculture and automobiles -- were barely touched by the negotiators, with the two sides agreeing to get down to thornier issues at their next round of talks starting July 10 in Seoul.
The United States wants concessions in the auto market, alleging that South Korean taxes discriminate against larger foreign cars. US carmakers are meanwhile losing sales to Asian rivals such as South Korea's Hyundai and Kia.
Kim has ruled out any change to the tax regime, and has also dismissed US calls for South Korea's heavily protected rice market to be thrown open to foreign competition.
Cutler said her team did express its "grave concern" at a recent move by South Korea's health ministry to move to a so- called "positive list" for reimbursing patients when they buy medicines.
South Korea's health system now pays out only to patients who take pharmaceuticals that have been positively approved for use in the country. Drugs made by US makers, for instance, that are not yet on the list cannot be reimbursed.
The United States was also unhappy at a South Korean decision this week to prolong a ban on US beef imports, levied over fears of mad-cow disease.
The US Department of Agriculture is working to address South Korean concerns "and we're hopeful that the market will be reopened very soon", Cutler said.
South Korea pressed for Kaesong, a special economic zone in North Korea that is being run by South Koreans, to be included in the FTA.
But Cutler reiterated that the pact could only cover the United States and South Korea.