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The chief South Korean negotiator in free trade agreement talks with the United States said Friday both sides have made progress in contentious areas such as cars and drugs, reinforcing the belief that the 10-month-long negotiations can be successfully wrapped up by the end-of-March deadline.

"Progress has been made in key issues," Kim told reporters at a reception on the sidelines of the talks, referring to headway in three sensitive areas -- antidumping remedies, automobiles and pharmaceuticals.

Kim didn't give any specifics on what sort of progress was being made, only saying "It will take some time for us to see the shape of progress."

His counterpart, Assistant U.S. Trade Representative Wendy Cutler, appearing at the same event, said both sides have made "good progress," declining to give details.

In less sensitive areas, both sides have made rapid progress and are nearing to wrap up a number of issues such as electronic commerce, government procurement, investment, labor environment and financial services. They have already completed talks on two issues -- competition policy and customs affairs.

Progress was also notable in textiles, an area of particular concern to South Korea, according to South Korean Assistant Commerce Minister Kim Young-hak who met with Scott Quesenberry, Washington's top textiles negotiator from the U.S. Trade Representatives.

"Substantial progress has been made with both sides showing cooperative stances," Kim said.

Quesenberry said, "We have made a lot for progress and we hope that progress will continue," adding that the two sides shared common ground for compromise on the textiles issue.

South Korea is demanding that the United States abolish its average 13 percent tariffs on Korean-made textile goods and allow the use of cheap Chinese yarns for its goods to be sold in the U.S. market.

South Korea sold US$1.8 billion worth of textiles in the U.S. in 2006, down 5 percent from the previous year. An unofficial study shows that if U.S. import tariffs are eliminated, South Korea can expect to increase its textile shipments by $600 million a year.

South Korean officials said that "a few issues" would likely remain unresolved after this round of talks but stressed that they can be successfully tackled in the coming weeks at top-level informal contacts.

Inside sources said that those unresolved issues would include automobiles and some sensitive farm products, including oranges and rice, the Korean staple food. Oranges compete in the Korean market with tangerines, a product of Korea's southern resort island of Jeju.

South Korea is unhappy with Washington's refusal to change or ease its anti-dumping rules. Korean negotiators indicated that they would link it with two key issues of U.S. concern related to South Korean auto tariffs and drug pricing.

Cutler identified a car trade in favor of South Korea as a major point of contention. U.S. officials are asking South Korea to lower its 8 percent tariff on car imports to the U.S. level of 2.5 percent.

She also warned that a trade row over U.S. beef imports may work as a deal breaker. Under a 2006 agreement, South Korea would allow in only boneless U.S. beef. It later turned back some shipments after bone chips were discovered.

South Korean officials defended their action as a health-related measure against a mad cow disease scare but U.S. officials accused Seoul of using its quarantine rules to block U.S. imports.

Before the beef row, South Korea was the United States' third largest beef market, with annual purchases totaling $840 million.

Beef is not technically part of the FTA negotiations, but U.S. officials warn that Congress would not support any deal with South Korea unless the South Korean beef market is fully opened.

The end-of-March deadline was set by U.S. negotiators because they must submit any FTA to Congress by April 2 for a mandatory 90-day review before a yes-or-no vote without amendments under U.S. President George W. Bush's "fast-track" trade promotion authority, which expires on July 1.

The deal, if made, also requires approval by South Korea's National Assembly where supporters outnumber opponents.

Earlier in the day, South Korean President Roh Moo-hyun named former Finance and Economy Minister Han Duck-soo as new prime minister, a widely expected move to support the envisioned agreement with Washington. Han, who was the finance and economy minister in 2005-2006, has been serving as a special presidential adviser on the FTA talks with the U.S.

The stakes are high for the two countries which did $74 billion in two-way trade in 2006. Some studies show that an FTA would increase trade volume by 20 percent. For the U.S., an FTA with South Korea would be its biggest commercial pact since the North American Free Trade Agreement in 1994.

Seoul, March 9 (Yonhap News)