Bloomberg News

Lee Says U.S.-Korea Trade Agreement Will Be Force for Stability

October 13, 2011

Oct. 14 (Bloomberg) -- A free-trade deal with the U.S. will be a force for stability in Northeast Asia as nations pressure Kim Jong Il to abandon North Korea’s nuclear-weapons program, South Korean President Lee Myung Bak said.

Speaking to the U.S. Congress during a visit to Washington after meeting with President Barack Obama, Lee said yesterday the pact with the U.S., reached in 2007 and approved on Oct. 12, opens a “new chapter” in the relationship between the two nations.

“For Korea, America is not a distant land,” he said in the speech in the House chamber. “America is our neighbor and our friend."

The trade deal, which goes to Obama for his signature and must be approved by South Korea’s National Assembly, may increase U.S. exports as much as $10.9 billion in the first year that it’s in full effect, according to the U.S. International Trade Commission. The accord may increase imports from South Korea by $6.9 billion, according to the commission.

"Our free trade agreement has significance because it will be a force for stability," Lee said. "Because lasting stability, again, depends on economic opportunity being open and robust. Our relationship can the catalyst that generates growth all along the Pacific Rim."

The two Koreas, facing off across the world’s most heavily armed border, never signed a peace treaty after a 1950-53 conflict. The U.S. has troops in South Korea as a legacy of the Korean War, when China fought alongside North Korea.

Lee rolled back his predecessor’s ‘‘Sunshine Policy” of engaging with North Korea when he took office in 2008, saying the policy rewarded Kim Jong Il’s regime for provocative behavior -- a view echoed by the Obama administration.

Torpedo Attack

Relations with North Korea have soured. Last year North Korea shelled Yeonpyeong Island, killing four people, and was blamed for a torpedo attack on a South Korea warship that claimed 46 lives.

In an interview with Bloomberg News in New York last month, Lee said plans to build a natural-gas pipeline across the divided peninsula are realistic, signaling a potential easing of tensions between the two nations. Lee said yesterday that North Korea must give up its nuclear ambitions and that the two nations need to achieve a “peaceful reunification.”

“A unified Korea will be a friend to all and a threat to none,” Lee said. “We therefore must achieve the denuclearization of the Korean Peninsula.”

The trade agreement between the U.S. and South Korea removes duties on almost two-thirds of American farm exports, and phases out tariffs on more than 95 percent of industrial and consumer exports within five years.

Chemicals, Autos

The South Korean tariff phase-outs increase market access for U.S. chemical, automobile, medical device and drug companies, and the end of duties on a range of agricultural exports would aid producers of meat, dairy, vegetables and fruits and nuts. Banks and communications companies would also gain opportunities through reductions in regulatory barriers.

The South Korea government expects to approve its own bill on the agreement soon, enabling the trade pact to take effect on Jan. 1, the nation’s foreign ministry said yesterday in a statement on its website. Obama said at a news conference with Lee yesterday that he will sign the agreement “in the coming days.”

The U.S. Department of Energy said yesterday that the U.S. and South Korea established a partnership to strengthen cooperation in clean-energy and technology research and development.

“As our countries move down this path, we will be moving even closer together,” Lee said.

--Editors: Steve Geimann, Judy Pasternak

To contact the reporter on this story: Eric Martin in Washington at emartin21@bloomberg.net

To contact the editor responsible for this story: Steve Geimann at sgeimann@bloomberg.net


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