SEOUL, April 2: The United States and South Korea agreed the biggest US trade pact for 15 years on Monday with only minutes to go before a deadline. In one major surprise, South Korea said the United States agreed to give, at least in principle, preferential treatment to South Korean products made in North Korea.

The deal to cut tariffs and remove trade barriers follows nine months of talks, and sometimes violent protests in South Korea, mostly over fears that 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.

“In the agricultural sector, you’re going to see substantial new market access for America’s agricultural producers in a fast growing, wealthy market ... it’s a great deal for America’s farmers and ranchers as well,” Deputy US Trade Representative Karan Bhatia told a small group of reporters including Reuters’.

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, something Bhatia said he wished had been included.

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

But early reaction suggested the deal could face difficulties in the US Congress. Senator Max Baucus, a Democrat from the cattle state of Montana who chairs the Senate Finance Committee, threatened to block the deal, which he called an “entirely unacceptable outcome.” He wants Korea to accept US beef imports that have been blocked in a dispute that, while not formally part of the trade deal, has cast a long shadow.

Bhatia said the struggling US auto industry would be helped by the deal.

“We have in this agreement an unprecedented set of provisions to help ensure that American automobile manufacturers ... will gain a level playing field that will allow them to do so,” he said.

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 United States agreed in principle to give certain products from North Korea preferential treatment, South Korean officials said.

That was a concession to South Korea, which wanted the goods it makes in an industrial park just inside North Korea to be treated the same as those made at home.

The agreement does come with conditions, including progress in talks to end North Korea’s nuclear weapons programme.

“Not only Kaesong but all parts of North Korea will benefit from this,” Roh later said in nationally televised remarks.

Bhatia rejected the notion that North Korean goods would now be able to enter the United States.

“I can tell you there’s no contemplation on the United States’ part right now to allow goods from North Korea into the US somehow through the FTA. That won’t happen,” he said.

US President George W. Bush, in a letter to Congress released by the White House, said the 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 tariffs and other barriers to auto imports.—Reuters