Obama fails to seal trade deal with South Korea

The US and South Korea have today failed to conclude a long-sought free-trade deal, a setback for President Barack Obama as he confronts tensions over economic measures abroad and at home.

The trade pact was a prize American officials would have liked to take home from the president's 10-day trip to Asia. But Obama could only pledge negotiations would conclude in weeks rather than months.

Denied the deal US business wanted, Obama was also forced to defend his policies for climbing out of a deep economic slump against foreign suspicions that the US is engineering a weak dollar.

He also had to confront critics at home, including leaders in his own Democratic Party, who denounced proposals by the chairmen of a bipartisan commission he assembled to recommend solutions to the nation's deficits and debt.

"Before anybody starts shooting down proposals, we need to listen, we need to gather up all the facts, we have to be straight with the American people," the president said in Seoul.

Today's developments summed up the problems facing a president weakened by election results, reeling from a domestic unemployment rate that is stuck at 9.6% and facing an international community suspicious about the US response to its economic crisis.

"The most important thing that the US can do for the world economy is to grow because we continue to be the world's largest market and a huge engine for all other countries to grow," he said.

He declined to comment on the proposals released yesterday in Washington by the chairmen of his deficit commission, saying he wanted to wait for the final report.

The bipartisan co-chairmen proposed painful cuts in Social Security benefits, deep reductions in federal spending and higher taxes for millions to stem a deficit that they said threatens the nation's future.

The proposals drew swift condemnation. House Speaker Nancy Pelosi said the ideas were "simply unacceptable".

"If people are in fact concerned about spending, debt, deficits and the future of our country then they're going to need to be armed with information about the kinds of choices that will be involved and we can't just engage in political rhetoric," Obama said.

The president is on the third stop of a four-country visit to Asia seeking greater access to the region's markets for American goods, something he hopes will help spur job creation at home.

The visit to Seoul included the trade talks today with South Korean President Lee Myung-bak and a meeting tomorrow of the G20.

Obama first held private meetings with Chinese President Hu Jintao and German Chancellor Angela Merkel, whose governments have been among the critics of a decision by the US Federal Reserve to buy $600bn (€437.8bn) in bonds in the hope of invigorating the economy by freeing up more credit.

China and Germany fear the US is engineering a weaker dollar to boost trade, a charge the US has been making against China.

Treasury Secretary Timothy Geithner today told a US cable channel: "We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy."

The White House said the currency exchange issue dominated Obama and Hu's 80-minute meeting today.

Lael Brainard, Treasury undersecretary for international affairs, said Obama raised the topic and noted the importance of China adhering to economic fundamentals in setting its currency rate. Hu expressed a strong commitment to moving forwards on a flexible rate, Brainard said.

The White House said Obama and Hu also discussed the need for a United Nations Security Council agreement on Iran. Obama brought up human rights and called on China to release people imprisoned for political advocacy.

Obama also emphasised the need for countries like China that have relationships with North Korea to impress upon the isolated communist nation the need to refrain from provocative actions against South Korea, the White House said.

Brainard said there was a "glancing reference" to the Fed decision in Obama's meeting with Merkel. Scathing comments about the Fed move from Germany's finance minister have spurred criticism from around the world in recent days.

Brainard said Obama and Merkel agreed on the need for leaders to discuss a framework for addressing large imbalances between the world's economies.

The dominant issue of the day, however, was what was not completed - the trade pact with South Korea.

At issue is an effort to slash tariffs and other barriers to trade that was signed in 2007 when previous administrations were in power. It remains unratified by both countries. Sticking points include access to South Korea's market for American beef and cars.

Ron Kirk, the US trade representative, rejected suggestions that the failure to agree on trade was a setback or defeat for Obama.

"The president's leadership on this has put us much closer to a successful closure," Kirk said.