Seattle talks a defining moment in U.S.-Korea trade

The Seattle talks to negotiate a U.S.-Korea Free Trade Agreement have the tension of a third date. It either starts to happen here or both sides agree to see other economies.

Two tepid get-acquainted sessions this summer in Washington, D.C., and Seoul did not stir any passion. The early rituals of tariff negotiations — the initial offer, the percentage reduction and the period of implementation — never reached the hand-on-the-knee moment of "staging basket."

So, the meetings at the Washington State Convention and Trade Center, which run through Saturday, will define the future course of negotiations scheduled for South Korea in October and back to the United States in December.

South Korea sees itself waging an entirely defensive battle, for good reason.

The country has sky-high agricultural tariffs that not only keep out U.S. farm products, but they are patently unfair to Korean consumers denied access to quality goods at competitive prices.

The U.S. is keen to sell more cars and pharmaceuticals in South Korea, and to get a fair chance at banking services and to crack open an armor-plated insurance market.

South Korea is determined to exempt its rice crop from the tariff talks or stretch reductions over a long, slow phaseout. The U.S. is being challenged to offer more flexibility on anti-dumping regulations and to open textile and apparel markets, and not be so picky about rules of origin for the yarn that goes in those goods.

For all of the arcane mercantile language and huge financial stakes, these are also political documents that have their own accounting procedures for tallying winners and losers.

The quip circulating among South Korean negotiators is that the U.S. gets cash, and Korea gets a check that may not be paid later.

Steep tariff reductions for the U.S. pay immediate dividends. The results are instantaneous and measurable. South Koreans gain, too, but in the sane and sober fashion of delayed gratification: trade creation, increased benefits for producers and consumers, and domestic reforms that promote transparency, competition and efficiency. Explain the taxonomy of international trade to rioting rice farmers.

Politics rears its head most directly as the Bush administration says it lacks the negotiating authority to let South Korea include products made in the Kaesong Industrial Complex under the umbrella of a free-trade agreement. Kaesong is about an hour north of Seoul across the demilitarized zone in North Korea.

I think Kaesong, with its introduction of jobs and payrolls, is potentially more destabilizing for the North Korean regime than all the military might massed south of the border. Fully built out by 2012, the industrial park will cover 16,000 acres.

So far, 15 or so South Korean companies employ about 6,000 North Koreans making household goods and doing other light manufacturing. Laborers are paid $57 a month, but the money is routed through the North Korean government, and the worker's share is much less.

The U.S. sees only the bankrolling of a demonic regime in Pyongyang and will not discuss allowing goods made at Kaesong to carry a South Korea label.

Here is a direct infusion of capitalism into a recumbent, totalitarian society. Give it a chance to work its magic.

Look at what happened in China. A newly endowed middle class complains about official corruption and protests the government's failure to clean up pollution.

South Korea worries about a sudden collapse of its neighbor, and fears a floodtide of its cousins heading south.

Political and business leaders might be too clever by half putting an attractive incentive next to their border, but they will live with the consequences of cultivating cheap labor close to home.

Kaesong did not inhibit a trade deal between South Korea and nine of the 10 countries in the Association of Southeast Asian Nations. Nor did it deter four European nations from signing trade agreements with South Korea.

The U.S. accepts goods from Singapore manufactured on Indonesian islands, and the U.S. embraced qualified industrial zones that produce tariff-free products made with labor and financial inputs by Jordan, Egypt and Israel.

Kaesong is an odd stumbling block for the U.S. as it pursues steep concessions from South Korea, and works to build market access with its neighbors.

Lance Dickie's e-mail address is ldickie@seattletimes.com