South Korea-US free trade talks hit snag

SEOUL, July 14 (Reuters) The second round of free trade talks between South Korea and the United States hit a snag, leading some working groups to halt discussions a day early, the chief US negotiator said today.

Wendy Cutler said talks in the pharmaceuticals working group were suspended as well as those in services and trade remedies, but she thought the gaps could be bridged.

''No negotiating groups met today,'' Cutler told reporters at a briefing in Seoul.

The talks started on Monday and had been scheduled to end on Friday. Summing up the week, Cutler said: ''We made reasonable progress''.

''The difference in views in the pharmaceutical sector are challenging and difficult. They are not insurmountable,'' she said.

The United States was not satisfied with a system proposed by Seoul for insurance reimbursements for drugs proposed by South Korea, saying it would discriminate against innovative drugs, which are a specialty of US manufacturers.

Cutler's counterpart, Kim Jong-hoon, also said the disagreement would not break the talks.

''There have been ups and downs and I expect there will be more,'' Kim told reporters. But Seoul was determined to push forward with its insurance plan for drugs, he said.

''It is our strong position that the practice of irresponsibly prescribing expensive medications with little effectiveness, putting a burden on the insurance plan, must be fixed.'' The latest talks were marred by protests in Seoul, where tens of thousands of demonstrators took to the streets to fight with riot police.

South Korean farm and labour activists say opening their country's market to more goods and services through a reduction of tariffs and other barriers would endanger the livelihood of millions of South Korean workers and farmers.

Dubbed KORUS, the pact under discussion would be the biggest US free-trade deal since NAFTA, the North American Free Trade Agreement, which took effect in 1994.

''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,'' Cutler said.

Cutler and Kim said the next round of talks is scheduled for early September in Washington.

Negotiators are pushing for a deal by January so the US Congress can vote on it before the expiry of White House authority to negotiate trade agreements that cannot be amended. That authority runs out in mid-2007.

South Korea was the world's 11th-largest economy in 2005, according to the World Bank, and seventh-largest US trading partner.

Two-way trade in goods totalled some 72.5 billion dollars in 2004, when Seoul had a surplus of 19.8 billion dollars.

REUTERS PKS ND1722