Can the U.S. Scrap Its Trade Deal With South Korea? -- Update
August 22 2017 - 7:39AM
Dow Jones News
By Kwanwoo Jun
SEOUL--The U.S. and South Korea wrapped up fruitless talks over
a trade agreement that protectionist Washington blames for an
imbalance requiring the pact's amendment or termination.
"Both sides have reached no agreement," Trade Minister Kim
Hyun-chong said after the daylong talks ended in Seoul Tuesday. Mr.
Kim said both sides reaffirmed their opposing views: The U.S.
insists on modifying the deal, but South Korea opposes any change
without recommendation from an objective joint study.
U.S. President Donald Trump has said the agreement, called the
Korus FTA, is a "horrible" deal. The U.S. had a trade deficit of
$28 billion with South Korea last year. Five years earlier, the
deficit stood at about $13 billion.
South Korea has said the five-year-old agreement has benefited
both sides and the U.S.'s protectionist rhetoric doesn't tell the
whole story.
"While we have a profit in goods trade with the U.S., we have a
deficit in services trade with the U.S. We invest a lot more in the
U.S.," South Korean President Moon Jae-in said last week.
Mr. Moon and others on the Korean side say the deal--which has
removed 95% of tariffs on goods over the past five years, with
remaining duties to be phased out over the next 10 years--has
offset the global slowdown in trade and increased commerce between
the U.S. and South Korea.
American industrial reaction to the Korus FTA talks has been
mixed. The U.S. beef industry has seen its market share in South
Korea increase and it doesn't support a change in terms.
"Simply put, the Korus created the ideal environment for the
U.S. beef industry to thrive in South Korea," said the heads of
three leading beef-exporter lobby groups--the National Cattlemen's
Beef Association, the North American Meat Institute and the U.S.
Meat Export Federation--in a July 27 letter to the government.
And Tami Overby, senior vice president for Asia at the U.S.
Chamber of Commerce, said the U.S. trade deficit would have widened
even more had it not been for the pact. "U.S. businesses believe
the Korea-USA FTA is working well," she told the Yonhap news agency
on Aug. 16.
The Trump administration wants to renegotiate trade terms
regarding cars and steel because the two sectors are where the U.S.
has significant deficits, said Rajiv Biswas, IHS Markit's Asia
Pacific chief economist.
The American auto and steel industries have expressed support
for Mr. Trump and his protectionist policies. The U.S. exported
$1.6 billion worth of passenger cars last year to South Korea, up
from $417 million five years earlier. South Korean car exports to
the U.S. last year, however, were 10 times higher at $16
billion.
On steel, American officials say South Korea is partly to blame
for the global glut that has caused prices to fall. The Trump
administration is conducting a probe that could result in broad
barriers against global steel imports.
Korean researchers who monitor trade with the U.S. say
Washington may want to make tweaks to Korus FTA, rather than
conducting a deep negotiation, given the conflicting interests of
individual industries. In addition, the Trump administration is
focused more on renegotiating the North American Free Trade
Agreement with Canada and Mexico.
Ahn Dukgeun, a professor at Seoul National University's Graduate
School of International Studies, said South Korea can take cues
from the Nafta talks, though he said Mr. Trump's threat to pull out
of Korus FTA might not work.
"The U.S. needs South Korea's cooperation more than ever to
address North Korea," he said.
Write to Kwanwoo Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
August 22, 2017 07:24 ET (11:24 GMT)
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