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Talks for a proposed free trade agreement (FTA) between South Korea and the United States wrapped up hours earlier than scheduled on Friday, as both sides canceled their final day of discussions because of Washington's boycott of a session on pharmaceuticals in protest of Seoul's new drug pricing policy.

"The second round of talks came to an end, as no sessions were held today," Yoo Ho-gwon, an official with the Ministry of Foreign Affairs and Trade who was in the venue of the negotiations, said in a telephone interview.

In a separate statement, the Korean ministry said discussions on four categories planned for Friday weren't opened. "As the U.S. side didn't take part in talks on medicine and medical equipment on July 13, we notified the U.S. of the cancellation of today's final discussions," the ministry said in the statement.

Officials at the Korean Trade Ministry declined to elaborate, saying South Korea's chief negotiator Kim Jong-hoon will hold a press briefing at 7 p.m., two hours ahead of the previously announced schedule.

It wasn't immediately clear how the early finish of the talks would affect the next rounds of negotiations, but a South Korean delegate said on condition of anonymity that the abrupt end won't mean the failure of the talks.

The top U.S. negotiator in free trade talks with South Korea, Wendy Cutler, expressed her concerns over the South Korean government's new drug pricing move, admitting the cancellation of the final day of talks was mainly due to discord on the category of pharmaceuticals.

Differences surrounding medicines were challenging, but aren't a matter that couldn't be overcome, Cutler told reporters in a press briefing on Friday afternoon, saying she hoped both sides will approach the issue in a "productive way." South Korea and the U.S. had been scheduled to end the second round of talks as of 5 p.m.

During the five-day Seoul meeting, South Korea and the U.S. discussed 18 categories, but failed to exchange initial offers on concessions or agreements, except for the sector of government procurement, which was discussed in Geneva.

The chief sources of disagreement have been rice, pharmaceuticals and goods made at the inter-Korean business complex in the North Korean border city of Kaesong, officials say.

Pharmaceuticals emerged as a fresh sticking point in the Seoul meeting, as the U.S. officials boycotted discussions since the start of second round of talks, protesting Seoul's new drug pricing policy.

At issue is the South Korean government's new policy to reimburse patients when they buy medicine approved by the nation's Health Ministry as "positive drugs," aimed at offering quality medicine to low-income people at an affordable price. Products by many U.S. pharmaceutical companies are not on the so-called positive list.

If the new policy goes into effect in September, many U.S. pharmaceutical companies will face a steep drop in sales, experts said.

"We believe that in an advanced country like Korea, people should have the right of access to advanced medications," said Rob Smith, an executive with the global pharmaceutical company Eli Lilly's Korean unit, in a statement posted on a Web site of the Korea Research-based Pharmaceutical Industry Association, a lobbying group for Western medicine companies.

"We are concerned that targeting these advanced medications for reduced access does not best serve the interests of Korean patients," the executive said.

South Korean Health Minister Rhyu Si-min accused the U.S. delegates of boycotting the pharmaceutical discussions during the free trade talks, calling it an "inappropriate act." "We are trying to do good for our people by cutting medicine prices, but the U.S. overturned the negotiating table," Rhyu was quoted as saying by the daily JoongAng Ilbo in its Friday edition.

On Thursday, South Korea's chief negotiator Kim Jong-hoon said both nations were still very divided over sensitive issues such as rice, medicine and the inter-Korean industrial complex in North Korea, indicating there would be tougher negotiations in the third round of talks in September.

"So far, we haven't made progress in FTA talks with the U.S.," Kim told reporters.

"Let me compare the second round of talks to a stage of reconnaissance," He said in a briefing on Wednesday. "The real war will begin in the third round of discussions." One of the most difficult items is rice.

Washington is pressing for Seoul to open its heavily protected rice market, but Kim reiterated on Thursday his government's pledge to exclude rice from the free trade deal.

"I don't think rice is a subject for the bargaining table with the U.S.," Kim said, seen as his first public comment about rice.

However, Cutler said on Monday, "Nevertheless it's no secret that we will seek rice market access in these negotiations." Another sticking point is the Kaesong industrial park. South Korea wants to include products made in the North Korean city in the FTA with the U.S., hoping to promote inter-Korean trade and spread capitalism to its communist neighbor.

But there appears little room for negotiation on the Kaesong matter after North Korea test-fired seven missiles earlier this month, defying a chorus of warnings from the U.S. and Japan.

Despite the growing tensions after the missile tests, Kim said his delegates will continue to try to persuade their U.S. counterparts to recognize Kaesong-made products as originating from South Korea.

Cutler has repeated that the FTA would cover only goods between South Korea and the U.S. Time is also running out for both sides.

The two countries launched the FTA talks in Washington in early June, hoping to sign a formal deal by early next year, as the U.S. president's Trade Promotion Authority, which allows a deal to be approved by Congress without amendments, expires at the end of June next year.

The Seoul talks have spawned massive demonstrations by tens of thousands of South Korean farmers, factory workers, filmmakers, journalists and even dentists, arguing that if the trade pact is signed, it would threaten their livelihoods.

Opponents also claimed a trade agreement with the U.S. would make South Korea the "51st state of America." South Korea is the world's 11th-largest economy and the U.S.'s seventh-biggest trading partner. Two-way trade amounted to US$72 billion last year, with South Korea posting a surplus of $16 billion, according to South Korean government data.

After this week's second round in Seoul, negotiators will resume discussions in Seattle in September, with plans to exchange concessions on agriculture, without rice, and textiles in mid-August, Kim said previously.

Earlier on Friday, South Korea's Trade Minister Kim Hyun-chong said at a breakfast seminar in Seoul that the South Korea-U.S. free trade talks will proceed based on a national consensus.

According to a telephone survey of 800 adults conducted by private polling company Research & Research, 46.5 percent of the respondents said a free trade accord with the U.S. would not be beneficial to their country's interests, while 43.4 percent said the pact would benefit South Korea.

Seoul, July 14 (Yonhap News)