South Korea's beef with US business

It was a single bone fragment in nine tons of US beef. Yet the 0.4 centimeter sliver caused South Korea to reject the first US beef shipment in three years, following a "mad cow" disease ban – a ban that mainly maddened US diplomats and agriculture officials who felt the restrictions were a partisan "excuse" to toy with trade.

Symbolically, however, the bone sliver represents an ever-larger bone of contention between the US and South Korea on many fronts – highly emotional beefs ranging from investor confidence, a continuing drift of the military alliance, clashes over how to handle North Korea's nuclear accession, and free trade. Mutual trust is not high, with diplomats on both sides even using the phrase "deteriorating," depending on the issue.

The US and South Korea have all the ingredients for good relations – in the mid and long term. But in the crucial short term, relations are slipping worryingly, experts say.

US investors in the Korean market, for example, were badly shaken last month watching the case of a US private equity firm, Lone Star, the target of a wave of collective suspicion – created partly by Korean media.

The Houston-based Lone Star has been trying to sell, quite legally, but for a huge $4.5 billion profit, its share in the Korean Exchange Bank (KEB) to another local Korean bank, Kookmin. But the deal got scotched after a year of attempts by a Korean prosecutor to find a case against Lone Star. A record three separate indictments were rejected by Korean courts. The atmosphere became so emotionally negative – with Lone Star depicted every day as stereotypical foreigners bent on tricking Korea – that Lone Star Chairman John Grayken threw in the towel.

"A recent survey shows that Korea has the most negative perception, the greatest anticorporate sentiment in Asia, stronger than Japan or China," says Jeffrey Jones, a lawyer for the Kim & Chang firm here, which also handles the KEB account. Mr. Jones, a white American who is a naturalized Korean, rarely criticizes Seoul officials, which make his remarks "significant," his friends say.

Add the future of the US-South Korea military alliance to the list of emotional issues. South Korea's President Roh Moo-hyun has been playing to popular sentiments by stating bluntly that he wants Korean security dependence on the US to rapidly lessen.

Most serious, Seoul wants to take "operational control" of military forces for the first time, meaning a response to North Korean aggression would no longer be handled by the US. With little fanfare, the long period of the US as guarantor of South Korea's security appears to be waning. In fact, the main issue in a US-South Korean meeting in Washington in October was how quickly Seoul would take control – as early as 2009 or by 2012?

A US official points out that when Secretary of State Condoleezza Rice visited Seoul after the Oct. 9 nuclear test, gaps between the allies were so appreciable that "we even stopped bothering to try and raise our disagreements with Seoul."

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