South Korea says agrees on U.S. beef imports

South Korea agreed on Friday to open its market to U.S. beef, boosting prospects for a sweeping trade deal, ahead of a Camp David summit between leaders of the two allies later in the day.

The beef import agreement removes a big obstacle to U.S. congressional approval of the trade deal, the biggest since the North American Free Trade Agreement went into force in 1994, and should brighten the atmosphere as leaders prepare to discuss North Korea's nuclear ambitions, trade and military cooperation.

"We are working on fine-tuning details and an official announcement will be made at 6 p.m. (10 a.m. British time)," a farm ministry statement said.

But it was not clear whether South Korea had accepted U.S. demands that it completely open up its market or whether it would maintain some restrictions.

Local media have speculated that Seoul would likely bend to U.S. demands in return for Washington improving safety standards by toughening animal feed regulations.

The agreement comes just hours before South Korean President Lee Myung-bak, in the United States on his first overseas trip since taking office in February, meets U.S. President George W. Bush at the Camp David presidential retreat.

U.S. lawmakers have said a landmark trade pact the two countries struck about a year ago would be scuttled unless South Korea opened its market fully to U.S. beef.

Analysts have estimated the trade deal, which needs approval by legislatures in both countries, could boost their two-way, $78 billion annual trade by about $20 billion.

South Korea, once the third-largest importer of U.S. beef, imposed a blanket ban on American imports in 2003 following an outbreak of mad cow disease in the United States.

It later eased the ban by allowing imports of boneless beef from cattle younger than 30 months.

BONE OF CONTENTION

A key sticking point in the latest round of negotiations in Seoul has been South Korea's insistence that bone-in beef can only come from cattle under 30 months.

After the ban on U.S. beef, sales of Australian beef in South Korea more than doubled to 148,000 tonnes in 2007 from 64,000 tonnes in 2003. Australian beef now accounts for nearly three-quarters of imports in South Korea after overtaking U.S. beef as No. 1 in 2004.

A deal with Washington will particularly hurt Australian importers and local producers, who have benefited from the country's protective measures for domestic farmers.

"You'll see some very cheap U.S. frozen beef around the market for a month," Glen Feast, local manager for Australian meat industry marketing body Meat & Livestock Australia, told Reuters.

"There'll be an initial huge hiccup in the market ... and you'll see an unsettled market for three to even six months."

A U.S. beef industry and business lobby group welcomed the news.

"Resumption of trade is a long overdue but very welcome development," American Meat Institute President J. Patrick Boyle said in a statement.

Lee told U.S. lawmakers on Thursday he hoped negotiators could resolve the long-running tussle over beef while he was in Washington, a U.S. lawmaker said.

The Lee administration and his conservative Grand National Party hope parliament will ratify the trade deal in a session that runs for about a month from April 25, a GNP official said.

A deal with Seoul is important for Washington, which could use it as leverage to boost its trade with Japan and China and help rebuild its beef trade in Asia, the destination for about 55 percent of all U.S. beef exports in 2003.

Japan currently imports U.S. beef from cattle 20 months or younger, while Taiwan imports boneless beef from cattle under 30 months of age.

Expectations of a deal also pushed U.S. live cattle futures to a six-week high, with June live cattle closing up 1.000 cent at a six-week high of 92.650 cents per lb.