S. Korea signs trade accord with nine Southeast Asian nations

S. Korea signs trade accord with nine Southeast Asian nations

Jae-Soon chang, Associated Press/Kuala Lumpur

South Korea on Friday signed an accord on eliminating tariffs on goods with nine Southeast Asian nations, leaving out Thailand for now because of dispute over rice, but paving the way for a wider free trade pact with the region.

The accord to free up trade in goods by 2010 and create a market of 548 million people with a combined economy of more than US$1.4 trillion was signed by trade ministers of South Korea and all members of the Association of Southeast Asian Nations except Thailand.

South Korean Foreign Minister Pan Ki-moon called it "an agreement with ten minus one." Thailand said it expects to join the pact by next year after negotiations.

Despite Thailand's exclusion, leaders of all 11 nations were set to go forward with the comprehensive free trade pact when South Korean President Roh Moo-hyun meets on Tuesday with counterparts from the 10 ASEAN countries.

Thailand, the world's top rice exporter, objected to South Korea's insistence on excluding rice from the goods accord. Seoul, which faces an often-militant farm lobby at home, keeps its doors shut to foreign rice through high tariffs and subsidies for small-plot farmers.

Thai Commerce Minister Somkid Jatusripitak said "rice is a very important issue for Thailand because more than 70 percent of Thai people are farmers."

"Once you take rice out of the list I think both Thailand and Korea have to spend time to discuss further to find a rice solution," he said. "I think it will not take too long. Maybe three or six months. We need some more time to discuss. We decided to defer -- not today. The time has been too short."

Malaysia's International Trade and Industry Minister Rafidah Aziz said the agreement on trade in goods will come into force on July 1, 2006 with a gradual cut in tariffs on a list of agreed products.

Both sides will eliminate tariffs on all agreed products by Jan. 1, 2010, although the six developed members of ASEAN will have flexibility to remove tariffs on 5 percent of products by 2012, she said in a statement.

The remaining three, poorer ASEAN members were given a later but unspecified deadline.

ASEAN-Korea trade last year amounted to US$40.2 billion (US$33.9 billion), up nearly 25 percent from 2003, she said.

Despite strong pressure from rice farmers, the South Korean government has taken steps to lower import barriers. It concluded an accord with nine rice exporting countries including the United States and China to increase mandatory rice imports from 4 percent of domestic consumption to 8 percent by 2014. The accord calls for fully opening the market thereafter.

Farmers in South Korea claim that they are already heavily indebted and that their plight would worsen if cheaper foreign rice floods into the country.