CLOSING PRESS STATEMENT

KORUS FTA – ROUND TWO

JULY 14, 2006

Assistant U.S. Trade Representative Wendy Cutler

· Thank you. First, I would like to thank the Korean Government and the management and staff of the Shilla Hotel for doing such a wonderful job in hosting me and my delegation this week.

· I spent all of my time at the hotel this week, but if I had to be stuck in one building for an entire week due to our busy schedule and the weather, I can’t think of a place as nice and friendly at this hotel.

· We wrapped up the second round of the KORUS FTA negotiations today. This was a busy week, with the teams working around the clock.

· Overall, we made reasonable progress this week. We continued to develop a better understanding of each other’s position and to bridge differences, and in trade jargon, remove brackets in many of these areas.

· We agreed on the timeframes for tariff phase-outs for industrial goods, which is a very significant step and we are nearing agreement on the timeframes for tariff phase-outs for agricultural and textiles goods, setting the stage for the exchange of tariff offers by mid-August.

· We also exchanged initial offers in services and investment, and made progress in a number of other negotiating groups.

· FTA negotiations are complex, particularly when you are talking about two large and sophisticated economies like the United States and Korea. In any FTA, it is customary for the early negotiating rounds to focus on the less complex issues, That is an accurate characterization of our meetings this week.

· Each FTA also has its share of difficult and controversial issues. The KORUS FTA is no exception.

· On pharmaceuticals, I’m sure you’re aware that thing did not go as planned. First, let me make clear, the United States position is not to challenge the basic premise of Korea’s national healthcare system nor are we trying to block reform. That is not our objective. We recognize Korea faces an aging population and rising health care costs – the United States and other countries around the world faces similar challenges. What we are saying is any reform should be transparent and fair, and not disproportionately target foreign pharmaceutical products.

· Going into these negotiations, we had agreed to establish a dedicated working group to discuss pharmaceutical trade issues. To our surprise, upon our arrival in Seoul, we were informed that Korea was going to switch to a positive list system for the reimbursement of pharmaceutical products before we had the opportunity to have meaningful negotiations on these issues.

· In our view, the decision to proceed with this plan is inconsistent with both the mandate of the Pharmaceutical Working Group and the market-opening spirit of the FTA. In short, Korea’s decision precluded meaningful negotiations at this time. Therefore, in order to ensure continued balance in the overall negotiations, we felt that it was appropriate to suspend work in two additional groups: trade remedies and services.

· We believe that this was a balanced and measured response that appropriately reflected our level of concern.

· Clearly, our preference would have been for all the groups to have met this week as scheduled. But, under the circumstances, we were left with no choice.

· That said, while our differences in views in the pharmaceutical sector are challenging and difficult, they are not insurmountable. Ambassador Kim and I have agreed to continue to work together to get things back on track with respect to pharmaceuticals so as to allow for a productive third round during the week of September 4th.

· For our part, the United States continues to believe the FTA will generate significant commercial, economic, and strategic benefits for both our countries.

· We remain as convinced as ever that the KORUS FTA is the right path for the United States and Korea, both now and for the coming generations.

Q: Although you sound optimistic, isn’t it fair to say that the talks have essentially broken down?

· Some groups didn’t meet and clearly that was not a good situation. In the broader picture most of the groups met and we made some significant progress.

· We’re dealing with some tough issues, and none of us thought this was going to be easy. But our two countries have strong and deep ties, and we’ve both put together great negotiating teams. This FTA is an important opportunity that offers both countries real benefits. It’s the right thing to do, and we’re going to work hard to make these negotiations a success.

· Trade is often a very sensitive topic, not just in Korea and the United States, but around the world. I know some people in Seoul expressed their views about the KORUS FTA very forcefully this week.

· But, I was also struck that most of the Koreans I spoke with – not just government officials on the negotiating team, but National Assembly members, members of the business community, and even everyday citizens, as well – told me they thought that overall, the FTA would be good for Korea and help Korea strengthen its long-term competitiveness in Asia.