South Korea, US agree last-minute trade deal

The United States and South Korea agreed the biggest US trade pact for 15 years yesterday with only minutes to go before a deadline.

In one major surprise, the United States agreed to give, at least in principle, preferential treatment to South Korean products made in North Korea.

The deal came after nine months of negotiations and sometimes violent protests in South Korea, mostly over fears that the country's heavily subsidised farmers could not survive a flood of cheaper US farm products.

"We expect the... (agreement) would provide a stepping stone that would catapult Korea into an advanced economy," a press official quoted President Roh Moo-Hyun as saying.

US negotiators were equally enthusiastic.

"I'd give it an A plus," US chief negotiator Wendy Cutler told reporters after the agreement.

Seoul agreed in the end to phase out its 40 per cent tariff on US beef over 15 years, but did not budge on the most sensitive, and heavily protected, farm product - rice.

On another major sticking point, the two agreed to open their markets more to each other's autos.

The accord between the United States and Asia's third-largest economy was struck just minutes before time ran out for the White House to use legislation allowing it to present a deal to Congress that can be rejected or accepted, but not changed.

Some estimates say an agreement could add $20 billion to the already more than $70 billion of two-way trade each year.

In the talks' big surprise, the US agreed in principle to give certain products from North Korea preferential treatment. That would accede to South Korea's request that goods it makes in an industrial park just inside North Korea get similar treatment to those made at home.

The United States had previously balked at the idea following North Korea's missile and nuclear tests last year.

The agreement comes with conditions, including progress in international talks to end North Korea's nuclear weapons programme.

US President George W. Bush, in a letter to Congress released by the White House, said agreement would bring export opportunities for a range of US businesses, promote economic growth and provide jobs.

"(It) will also further enhance the strong United States-Korea partnership, which has served as a force for stability and prosperity in Asia," he said.

Much of the final bargaining focused on whether the parties could concede enough to each other on farm goods and cars, with both sides seeking lower tariff and other barriers to auto imports.

The two both agreed to open up their markets to each other's autos, a move which auto analysts say will largely benefit South Korea.

Expectations that the two sides would strike a deal helped boost South Korea's stock market to a five-week high, especially auto stocks.

"If industries wake up and restructure and are reborn to compete more globally, that's good for the companies that survive and to their shareholders," said Thomas Choi, head of research at PCA Asset Management.