By Jim Wiesemeyer
via a special arrangement with Informa Economics, Inc.
South Korean protests continue, while both sides spin latest 'commercial' accord
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Under a managed trade agreement, which is being dubbed as a “private sector deal,” South Korea on Saturday said it will resume imports of U.S. beef after U.S. and South Korean suppliers agreed to block meat from cattle over thirty months (OTM), aiming to soothe health concerns that sparked weeks of demonstrations against new President Lee Myung-bak, but several issues remain before all U.S. beef can again be sent to South Korea.
Protest leaders argued the plan does not far enough and over the weekend staged the latest of their daily candlelight rallies. The rally included thousands of riot police trying to prevent demonstrators from marching to the presidential Blue House.
Importantly, South Korean officials on Sunday said beef imports from the U.S. will not resume soon, after a new import deal failed to quell South Koreans’ concerns about BSE and their policy grievances with President Lee.
The revised beef accord will be put on hold “until the people’s concerns subside,” Hong Joon-pyo, a senior governing party official, said Sunday.
Procedures to put the new import agreement into effect could begin today, South Korea Trade Minister Kim Jong-hoon said, but it was not clear when U.S. beef would reach South Korean markets.
The Bush administration confirmed on Saturday that U.S. beef exporters are set to resume shipments, under certain restrictions, to South Korea. "Korean beef importers and U.S. exporters have reached a commercial understanding that only U.S. beef from cattle under 30 months of age will be shipped to Korea, as a transitional measure, to improve Korean consumer confidence in U.S. beef," U.S. Trade Representative Susan Schwab said in a statement.
On Friday, the U.S. beef industry announced it would be willing to limit beef shipments to those from younger cattle.
Background: A prior April agreement was supposed to include all cuts of U.S. beef, from cattle of any age, but after a massive public backlash in Korea caught the young presidency of Lee Myung-bak by surprise, exporters sought to provide South Korean consumers assurances with the age restriction.
USTR spun what is clearly a renegotiated managed trade agreement this way: "At the request of U.S. exporters, once the protocol goes into effect, the U.S. government will facilitate this transitional private sector arrangement," Schwab said.
As for details, USDA will set up a monitoring system, Schwab's office said, as part of the arrangement. The arrangement, which officials said would take effect shortly, will also allow Seoul to block exports of any specific product or from any plant if it finds "serious" violation of trade rules.
What South Korea is saying. South Korea's Kim said after a news conference that the publication of the notice that would start the legal process to resume quarantine inspections was expected some time this week.
Once the legal notice is published, U.S. beef (around 5,300 tons) that has been in frozen storage in South Korea for months could be inspected and then head to store shelves. This could happen as early as this week, although Kim later said that it might not be so soon because of the sensitivity of the issue for South Koreans -- the South Korean administration will delay posting the new regulations in the government gazette until public outrage over the deal has subsided, a South Korean official said.
Kim said it was now up to South Korean consumers to decide if they wanted the U.S. product that experts said would sell for about half the price of similar cuts of domestic meat. "South Korea can send back shipments that do not have USDA verification... and this (verification) measure will be in place indefinitely unless consumer confidence is restored," South Korea's Trade Ministry said in a statement.
Importantly, a senior Korean official said Sunday that it will take up to two years to fully open up markets to U.S. beef as promised in their April 18 agreement. “It may be one year from now or two years,'' said the top official of the Ministry of Food, Agriculture, Forestry and Fisheries, who was involved in negotiations with the U.S. on the resumption of beef imports. “It is important to regain the confidence of Korean consumers,'' the official said on condition of anonymity during his telephone interview with The Korea Times. “Without it, we will selectively allow imports of U.S. beef parts as agreed during the latest round of talks in Washington.''
The official, however, said that Washington has the right to call for a meeting with Seoul on the subject for reevaluation.
USTR Schwab defined this as “until there is market demand in Korea for such products.'' In a statement, Schwab reiterated that the April 18 beef deal, coming on the eve of the first summit between President Lee Myung-bak and President George Bush at Camp David, was still effective, especially regarding an agreement for Korea to let U.S. gain full access to the Korean market.
Did USTR Schwab buckle? In an interesting development, The Korea Times reported that “Kim balked twice during his weeklong meetings with Schwab, threatening to return home, unless she accommodated his demands. Schwab buckled, resulting in a four-point agreement that will have USDA set up a voluntary quality system assessment program or QSA that will verify shipments exclude beef from cattle older than 30 months; parts from cattle less than 30 months that run a higher potential risk of causing a human form of BSE; allow greater access for Korean inspectors to U.S. slaughterhouses; and will empower Korea to send back shipments that are in violation of the new agreements.”
South Trade Minister Kim Jong-hoon made these remarks in an interview with the Chosun Ilbo on Saturday, upon returning home from the additional beef talks in Washington, which he described as resulting in Korea's favor.
— How did you persuade the U.S.?
— When was the most difficult moment of the talks?
— We understand that you resorted to "brinkmanship" twice.
—What was the reaction from the U.S. side?
— How do you evaluate the outcome of the talks?
It did not take long for some farm-state senators to criticize the latest managed trade agreement – a phrase used specifically by Sen. Saxby Chambliss (R-Ga.), ranking member on the Senate Ag Committee. Chambliss said, “While I am encouraged that the recent announcement will result in the resumption of beef trade between the U.S. and South Korea, I am disappointed we are continuing a regime of managed trade. U.S. beef is safe and the international scientific standards of the World Animal Health Organization (OIE) support this fact. Now is not the time to continue a patchwork process in the beef trade. I will continue to monitor progress and hope we transition into full implementation of the April 18 protocol. As we move past this issue and continue negotiations in the World Trade Organization, we need to remind our trading partners that any deal presented to Congress must be balanced. We can not and should not sacrifice our export interests and domestic farm safety net, for a deal that serves short term political benefit at the expense of long term economic gains.”
Sen. Baucus responds. The new arrangement "effectively changes the April 18 accord struck between Korea and the U.S," the office of Sen. Max Baucus (D-Mont.), who heads the powerful finance committee, said in a statement. "The implications of this agreement set an unfortunate precedent for U.S. beef trade with Korea and other countries," Baucus said. The April beef deal was meant to help a separate bilateral free-trade accord that U.S. congressional leaders threatened to block unless South Korea opened up its market to all U.S. beef imports.
Comments: Limiting U.S. exports to beef from animals under 30 months of age should not be a major hindrance for the U.S. beef industry, since all the processing plants already approved for export to South Korea only ship that category of beef. But this is why most of the U.S. beef industry wanted a similar phased-in approach over a year ago. But this pragmatic approach was rejected by more purist USTR officials.
Now it is unclear whether the same basic approach that the U.S. beef industry pushed some time ago will be accepted by South Korean consumer.
Also, the recent protests had a political overtone as well, being pushed hard by those opposing Lee's administration. And as Americans know all too well in the realm of politics, when a political party has a political issue to their advantage, they don't give it up easily.
Bottom line: The South Korean beef trade issue has been mismanaged by both countries, and is far from being "managed" even with the current "private sector" agreement...which Bush administration and South Korean officials say is not a renegotiated agreement, which it really is.
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