FTA: TRADE MINISTER KIM DISCUSSES BEEF, RICE, AND

UNCLAS SEOUL 002634

SIPDIS

SENSITIVE
SIPDIS

PASS USTR FOR CUTLER, AUGEROT, AND ENRIGHT
STATE FOR EAP/K AND EEB
NSC FOR TONG

E.O. 12958: N/A
TAGS: ETRD ECON EAGR PREL KS
SUBJECT: FTA: TRADE MINISTER KIM DISCUSSES BEEF, RICE, AND
AUTOS WITH CONGRESSMAN POMEROY


1. (SBU) SUMMARY: On August 29, newly appointed Trade
Minister Kim Jong-hoon reviewed major KORUS-FTA trade issues
with Congressman Earl Pomeroy (D-ND) and the Ambassador. TM
Kim said the FTA remained on track for submission to the
National Assembly in early September -- and President Roh was
strongly pushing for its passage before he departed office in
February. Stressing Congress was deeply engaged in
addressing Iraq-related issues, Congressman Pomeroy indicated
Congress is likely to defer FTA action for some time.
However, he spotlighted U.S. beef, rice, and autos as key
concerns that need to be addressed to foster a more receptive
Congressional climate. TM Kim responded that (1) the bone-in
beef import protocol would likely be wrapped up in October,
thereby permitting the full resumption of U.S. beef imports;
(2) rice, although excluded from the FTA, could be revisited
once the current WTO rice quota arrangement expired in 2014;
and (3) the U.S. auto sector's objections to the ten-year
phase-out of the light-truck tariff should be balanced
against overall U.S. gains from the agreement, the ROKG's
unprecedented steps to meet U.S. demands on auto tax and
standards issues (including the dilution of emissions
standards),and the need for U.S. companies to address their
own internal competitiveness issues. Pomeroy reiterated the
importance of resolving the U.S. beef issue soon. "Beef
needs to move," Pomeroy said, not only to enhance Korea's
reputation as a reliable trading partner but to bring down
high prices for its consumers. END SUMMARY.

HIS THIRD WEEK IN OFFICE
--------------

2. (SBU) In his third week in the job, Trade Minister (and
former FTA Chief Negotiator) Kim Jong-hoon welcomed
Congressman Pomeroy's 8/29 visit just as the KORUS-FTA was
facing its critical "last hurdle," the ratification phase.
Referring to a Presidential meeting the day before, Kim said
the ROKG would formally introduce the FTA to the National
Assembly in early September. He reaffirmed President Roh's
strong commitment to seize every opportunity to pass the
KORUS-FTA before the end of 2007 and, by the latest, before
Roh left office in late February. In response, Congressman
Pomeroy said the USG is currently wrestling with critical
Iraq-related issues that would likely defer Congressional
action on the FTA for some time. However, Congress also
needed a strong ROKG signal that Korea will deal fairly on
trade issues. He spotlighted beef, rice and autos as major
issues that need to be fully addressed to foster a more
favorable climate for Congressional action.

U.S.BEEF
--------------

3. (SBU) Pomeroy turned first to recent U.S. packing-plant
mistakes (a total of six boxes out of thousands) that had
involved bones or bone fragments in their shipments to Korea.
He noted these mispacks had entailed the unfortunate
consequence of slowing down the ROKG's consideration of a new
bone-in import protocol and thus disappointed many American
(including North Dakotan) farm families who relied on beef
exports for their livelihood. While acknowledging the
mispacks should have consequences for the packing plants,
Pomeroy stressed these mistakes were not life-threatening
since the OIE had determined on May 22 that U.S. beef was
safe. As a result, it was critical for the ROKG not to allow
these mistakes to defer fulfilling their commitment to revise
the existing beef import protocol. Failure to move soon to
resume the flow of U.S. bone-in beef into Korea would be
widely perceived by the American public and Congress as a
sign that the ROKG would not abide my its trade commitments
and internationally accepted standards.


4. (SBU) TM Kim responded that the ROKG stood by President
Roh's March commitment to President Bush to follow the OIE's
rulings and negotiate a new protocol that would allow bone-in
beef into Korea as soon as possible. He indicated that the
ROKG was currently canvassing consumer groups as required
under a eight-step risk-assessment process and remained on
track to begin negotiatons on a new import protocol after the
new Agriculture Minister took office September 5. Kim
admitted the mispacks had fueled public concerns over the
U.S. commitment to abide by the ROKG's import protocol, just

as the U.S. public had its own perceptions of Korean
sincerity. However, Kim predicted the new bone-in import
protocol would be in place by October and U.S. beef shipments
flowing smoothly thereafter.

RICE
--------------

5. (SBU) Turning to rice, Pomeroy said this issue had been
left out of the FTA. This omission had disappointed major
rice growers in California and worked against the perception
that the KORUS-FTA was a balanced, comprehensive agreement.
Kim replied that Korea's domestic political climate was
highly protective of its small, rapidly aging farm population
(only six percent of its total population, producing only
three percent of GDP). Widely viewed as deserving
"affirmative action," rice farmers had attracted enough
public support to make the issue untouchable at this time.
However, Kim indicated that the ROKG would revisit the rice
issue once the 2004 WTO arrangement on rice quotas expired in

2014.

AUTOS
--------------

6. (SBU) Congressman Pomeroy pointed to the FTA's ten-year
elimination of light-truck tariffs as being as problematic
for U.S. constituencies as rice was for Korean ones. He
invited Kim's comment. Kim replied that U.S. concerns were
understandable in light of the current imbalance in the
U.S.-Korea auto trade. However, the tariff needed to be put
into the broader context of the "unprecedented" ROKG
commitments embodied in the agreement. The ROKG had
committed to lower its higher auto tariffs, to simplify its
auto tax codes, and to amend its auto standards (including
the dilution of emission standards that undercut Korea's
clean environment goals). The ROKG sold these measures to
its own constituencies based on the premise that all auto
trade would be encompassed under the FTA. On balance, the
measures created "a lot of leeway" for U.S. auto sales to
Korea on a fair playing field. Kim added that if Congress
had any doubt about the ROKG's long-term commitment, it
should take note of the FTA's snap-back provision. This
measure called for restoring previous U.S. tariff levels, in
the event an accelerated dispute settlement panel found the
ROKG had set up a new non-tariff trade barrier.


7. (SBU) In closing, Kim indicated U.S. auto sector concerns
stemmed largely from their own internal competitiveness
issues rather than any issues "caused by Korea." He
therefore hoped the U.S. auto sector's objections would be
balanced against overall U.S. gains in the auto provisions
and other parts of the FTA.

CONCLUSION
--------------

8. Congressman Pomeroy thanked TM Kim for his assessment and
closed by underscoring the importance of fully resuming U.S.
beef imports into Korea soon, so that U.S. agricultural
interests could focus on the benefits of the FTA. "Beef
needs to move," he said, not only to enhance Korea's
reputation as a reliable trading partner but to bring down
high prices for its own consumers.


9. (U) Congressman Pomeroy reviewed this message.
VERSHBOW