Photographer: SeongJoon Cho/Bloomberg
politics

U.S. Sees ‘Much Work’ to Revising South Korea Free-Trade Pact

  • Trump administration seeks to narrow widening trade deficit
  • Negotiations complicate ties with key ally against North Korea

Officials from the U.S. and South Korea said further talks were needed to revise their free-trade pact, a negotiation straining ties between the allies as they grapple with Kim Jong Un’s growing nuclear-weapons threat.

The U.S. presented proposals to improve auto exports and lift trade barriers during a meeting with South Korea counterparts Friday in Washington, Trade Representative Robert Lighthizer said in a statement. While both sides agreed to hold more talks soon, South Korea’s top negotiator, Yoo Myung-hee, said afterward that “the negotiation is not easy,” according to Yonhap News.

“We have much work to do to reach an agreement that serves the economic interests of the American people,” Lighthizer said. “We must achieve fair and reciprocal trade between our two nations.”

U.S. President Donald Trump, who has abandoned or reopened trade talks with numerous nations since taking office last year, has blamed the five-year-old pact known as Korus for doubling America’s trade deficit with South Korea. He has pressed ahead with efforts to revise the deal, even while seeking solidarity from President Moon Jae-in against North Korea’s nuclear provocations.

Five Years of Korus

U.S. exports to South Korea have barely grown and the deficit has surged under the pact

Note: The free-trade agreement, known as Korus, took effect in 2012. Data include goods and services.

Source: U.S. Commerce Department

The talks Friday represented the first round of Korus negotiations since the U.S. in July invoked a clause in the accord that enables either side to seek amendments. South Korea “responded actively” to the U.S. while proposing its own changes to investor-state dispute settlement rules and trade remedies, the country’s trade ministry said in a statement, without giving details.

So far, Trump hasn’t notified lawmakers that he plans to seek their approval under a law that gives the president authority to “fast track” trade deals through Congress.

Since Trump wasn’t seeking congressional approval, the U.S. would probably propose narrow changes to the agreement, such as amendments to tariffs or the rules of origin that set content requirements for products, said Troy Stangarone, senior director of congressional affairs and trade at the Korea Economic Institute of America in Washington. Stangarone said trade in autos was likely to be a major focus of talks, given the U.S.’s $18.8 billion vehicle trade gap with South Korea.

Narrower Deficit

The U.S. overall deficit in goods with South Korea narrowed to $21.6 billion in the 11 months through November, down 18 percent from the same period a year earlier, according to U.S. data released Friday.

The U.S. is South Korea’s second-largest trading partner and the push to alter the deal comes at a difficult time for Seoul. Thwarting the risk from North Korea has risen in prominence on Trump’s agenda since he took office, and overshadowed trade during his November trip to Asia. In South Korea, he discussed both topics in a meeting with Moon.

“South Korea will probably take a defensive stance during the negotiations to minimize changes to the deal, whereas the U.S. may ask for changes in areas spanning manufacturing goods to agriculture and services,” said Heo Yoon, a professor at Sogang University and president of the Korean Association of Trade and Industry Studies.

The Korus talks don’t appear to be a priority for the Trump administration, which is also seeking an ambitious overhaul of the North American Free-Trade Agreement and changes to its economic relationship with China, said Matthew Goodman, a senior adviser for Asian economics at the Center for Strategic and International Studies.

“Korus could be the sacrificial lamb to show toughness on trade generally, because the Trump administration is going to face a lot more backlash from the U.S. business community, the U.S. agriculture community if for example they walk away from Nafta or do something really radical on China,” Goodman said.

— With assistance by Andrew Mayeda, Randy Woods, and Jiyeun Lee

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