For over 20 years, U.S. trade negotiations have followed two tracks: multilateral talks such as the Doha Development Round of the World Trade Organization (WTO) and bilateral and regional arrangements with other countries, known as free trade agreements (FTAs). To date, the United States has entered into a dozen FTAs with various trading partners including Israel, Canada, Singapore, Chile, and Australia. FTA agreements with Colombia, Panama, and South Korea are pending before Congress now. This report evaluates the implications of the potential U.S. agreement with South Korea for American manufacturers and compares it with a similar pending free trade agreement between South Korea and the European Union (EU). South Korea has already enacted FTAs with countries such as Chile, Singapore, and India, and also is currently negotiating FTAs with other trading partners, including Australia, Canada, Japan, and Mexico. The implications of these arrangements for the United States are not discussed in this report. A major outstanding issue in the commercial relationship between the United States and South Korea is the three-year old pending FTA, commonly referred to as the KORUS FTA. It was signed by the Bush Administration in 2007, but has yet to be submitted to Congress for approval. If accepted, it would be the second-largest free trade arrangement approved by the United States next to the North American Free Trade Agreement (NAFTA), which entered into force in 1994. On December 3, 2010, President Obama announced that cabinet-level negotiations and his discussions with South Korean President Lee Myung-bak produced modifications in the KORUS FTA that he believes addresses his concerns and those of Congress. In a nutshell, the pending KORUS FTA would eliminate tariff and non-tariff barriers for U.S. and South Korean manufacturers in a range of industrial sectors, including automobiles, consumer and industrial products, textiles and apparel, and pharmaceuticals and medical devices. The main section of this report compares the manufacturing components of the two agreements. In particular, it reviews automotive trade, the most politically and economically sensitive manufacturing sector in both agreements. Also included is a brief overview of the possible implications of the two pending FTAs on other selected industrial sectors affected by the FTAs: home appliances, consumer electronics, textiles and apparel, and pharmaceuticals and medical devices. The report begins by providing a legislative outlook and reviews the positions of key stakeholders. Agricultural and services trade are not covered. The KORUS FTA is a candidate for fast-track legislative consideration (automatic discharge from committee, no amendments, and limited debate) under the Bipartisan Trade Promotion Authority Act of 2002, because the agreement was entered into before July 1, 2007, the date on which the President's authority to enter into qualifying agreements expired. The implementing bill, which would be submitted to Congress by the Administration but, given past practice, would be drafted in consultation with Congress, would include a provision to approve the FTA, as well as provisions "necessary or appropriate" to implement the agreement. Under fast-track procedures, Congress votes on the implementing legislation as submitted and can either approve it or reject it as whole. In areas of concern to some members of Congress such as automobiles, however, members might suggest that provisions addressing their concerns be included in the implementing legislation or seek assurances from the executive branch regarding the implementation of the agreement in these areas. As Congress considers what action it might take on the KORUS FTA, the European Union and South Korea have completed their own negotiations of a comprehensive free trade agreement (KOREU FTA). They initialed the agreement on October 15, 2009. Signing and ratifying the KOREU FTA is a complicated process. The FTA must be formally adopted by the EU Council of Ministers, which represents the national governments and is the European Union's main decision-making body. Thereafter, it can be submitted to the European Parliament, which represents the citizens of the EU, for a vote. The KOREU FTA is the first bilateral trade agreement subject to an up or down vote in the European Parliament under the provisions of the Lisbon Treaty, which became effective in 2009. If approved, it means the FTA is provisionally ratified in the European Union and can enter into force. Provisional application is a common practice in the European Union (EU trade agreements with Mexico (2000) and Chile (2003) were also subject to provisional application). Full ratification of the KOREU FTA requires approval by all 27 member states. In South Korea, the process is easier since only the approval of the National Assembly is required for ratification. In many ways, the KOREU FTA is a similar agreement to the pending KORUS FTA. It is expected to facilitate manufacturing trade between the European Union and South Korea by eventually removing most customs duties and addressing regulatory obstacles across various sectors, including autos, consumer electronics, and pharmaceuticals. The possible competitive impact on U.S. manufacturers of a KOREU FTA will likely be debated by Congress when it considers whether or not to ratify the KORUS FTA, which could be in 2011. Likewise, the competitive implications of a KORUS FTA for European manufacturers, particularly for European automakers, will be considered as the European Parliament debates whether to approve the KOREU FTA. It remains to be seen if the KORUS FTA or KOREU FTA will be ratified first, or if either agreement will be approved. Some observers speculate that the auto sections of the FTAs may require some form of side agreement or other arrangement, which have yet to be worked out, before either agreement can be passed by the U.S. Congress or the European Parliament. A large number of U.S. and EU industry observers expect gains for their respective industrial sectors upon the implementation of the KORUS FTA and the KOREU FTA. Various economic impact studies are used to support their positive assessments. One U.S. business advocacy group, the U.S.-Korea FTA Business Coalition, which represents a broad-based group of U.S. companies, concludes the KORUS FTA "will give U.S. exporters and investors a competitive edge." Similarly, U.S. business groups such as the Business Roundtable and the National Association of Manufacturers (NAM) are also supportive of the KORUS FTA. A cross-section of U.S. manufacturing sectors, including information technology, aircraft equipment, medical devices, and pharmaceuticals, stand to gain from the KORUS FTA based on assessments by the U.S. International Trade Commission (ITC) and the U.S. Department of Commerce. The ITC, which generates official estimates of the likely impacts of proposed trade agreements, estimates that the reduction of tariff and non-tariff barriers to U.S. manufactured and agricultural goods under the KORUS FTA would increase U.S. goods exports to Korea by $10 billion to $11 billion and boost U.S. gross domestic product (GDP) by nearly $12 billion. The Administration estimates that full implementation of the KORUS FTA could add up to 70,000 jobs in the United States. Europe's business federation, Business Europe, has a positive assessment of the pending KOREU FTA stating "the EU-Korea FTA will bring significant benefits to European firms." One study estimates the KOREU FTA would create up to $24.2 billion (€19 billion) in new trade in goods and services for EU exporters. Almost all EU and member states business confederations and sectoral groups support the agreement. Nevertheless, the business communities in the United States and the European Union are not uniformly in favor of their respective pending bilateral agreements with South Korea. Most prominently, until the December 2010 supplemental agreement between the U.S. and South Korea, trade in automobiles remained a lingering issue. A key stumbling block to approval of the KORUS FTA had been complaints by Ford, Chrysler, and the United Auto Workers (UAW) that it did not do nearly enough to open the South Korean market to U.S. auto sales. Ford changed its position on the KORUS FTA in December 2010 and issued a statement in support of the revised agreement based on the strengthened automotive provisions. GM issued a positive statement on the KORUS FTA in December 2010. The UAW is also supportive of the revised agreement. Views also diverge among European carmakers. Some European car producers are relatively neutral on the KOREU FTA, particularly those that export larger European luxury cars and have created a strong market niche for their automobiles in South Korea (see Appendix A ). European automakers of smaller and middle-sized cars, such as Fiat, are most often in direct competition with South Korean manufacturers like Hyundai and Kia. Thus, they continue to push for what they deem a balanced and symmetric liberalization of the two auto markets. Beyond a possible competitive threat, some European automakers claim their access to the South Korean market might remain hampered by non-tariff barriers. Ivan Hodac, secretary general of the European Automobile Manufacturers' Association (ACEA), claims 30,000 manufacturing jobs could be lost and 10 plants closed across Europe if the KOREU FTA is implemented. The steel sectors in the United States and the European Union are also notable dissenters. U.S.-based steel manufacturers argue the KORUS FTA would weaken U.S. trade remedy laws (i.e., antidumping and countervailing duty). EUROFER, the European Union's steel industry representative, has raised concerns about the KOREU FTA stating, "the result is sectoral winners and losers with potential negative effects for steelmaking in Europe."