U.S. Says It Is Close to a Revised Trade Deal With South Korea -- Update
March 23 2018 - 03:21PM
Dow Jones News
By William Mauldin in Washington and Kwanwoo Jun in Seoul
U.S. officials said they are close to a deal with South Korean
counterparts on amending an existing trade agreement between the
two countries and resolving a dispute about steel and aluminum
imports.
"We believe we are relatively close to a resolution" with the
South Korean government," Commerce Secretary Wilbur Ross said at
the White House in a news briefing with President Donald Trump.
Mr. Trump has threatened to pull out of the U.S. free-trade
agreement with South Korea, known as Korus, unless Seoul agrees to
amend the deal in ways that better balances trade between the two
countries.
Besides the broader trade talks, the officials in Washington are
discussing concerns about metals trade with South Korea, which is
the top importer of Chinese steel and a major exporter to the
U.S.
Late Thursday the White House temporarily exempted South Korea,
along with some other countries, from global steel and aluminum
tariffs Mr. Trump is imposing on national-security grounds starting
Friday. Initially, U.S. officials named only Canada and Mexico as
countries that would get exemptions.
Mr. Ross and U.S. trade representative Robert Lighthizer are
working with those countries on arrangements that would allow
permanent exemptions from the tariffs. A spokeswoman Mr.
Lighthizer's office, which is leading the negotiations with South
Korea, didn't immediately elaborate on the prospective deal.
South Korea's trade minister, Kim Hyun-chong, has been in
Washington all week trying to work out terms of a revised deal. Mr.
Lighthizer expressed confidence Wednesday at a congressional
hearing, saying: "I think we're down to the last few issues."
Officials in Seoul echoed that optimism, but disputes remain in
the broader talks, particularly about cars. More than 70% of South
Korea's surplus in goods trade with the U.S. comes from car
exports, according to South Korea's trade ministry.
South Korea no longer imposes tariffs on U.S. passenger cars and
is phasing them out on pickup trucks, but U.S. auto makers say
nontariff barriers remain, such as the requirement that cars must
have a yellow taillight.
The current free-trade deal allows U.S. auto makers to bring in
up to 25,000 vehicles each year if they meet U.S. safety standards,
even if they don't meet the Korean ones. U.S. negotiators are
asking South Korea to lift the remaining tariffs and remove the
quota, according to people familiar with the issue.
South Korea's car market is still dominated by local brands
Hyundai Motor Co. and its affiliate, Kia Motors Corp. Imports make
up 15% of the market, and U.S. auto makers, while growing, have
just 1% of that market share.
While South Korean steel exporters got a temporary reprieve from
U.S. tariffs, some of them are nonetheless preparing for the worst
by curtailing production or shipments. The steel industry in South
Korea -- the third-largest supplier to the U.S. after Canada and
Brazil -- is a case study in how companies outside the U.S. have
been buffeted by uncertainty over the prospects for avoiding Mr.
Trump's tariffs of 25% on steel and 10% on aluminum.
Husteel Co., a South Korean mill specializing in steel pipes for
oil wells, said it has switched off one of its seven production
lines at its Dangjin plant on the country's west coast since early
March, anticipating that the products might face U.S. tariffs by
the time they were delivered. The company said 70% of its exports
go to the U.S., and the 25% tariff would come on top of already
existing 16% anti-dumping duties imposed previously on Husteel
products.
"Few would be able to survive the combined 40% tariffs. The more
you export there, the more you lose," a Husteel official said.
Dongguk Steel Mill Co., a South Korean producer of bars, plates,
beams and other steel products, said American customers stopped
placing new orders after the tariff announcement. Some 20% of the
company's total exports go to the U.S. The company said it decided
to cease shipments to the U.S. beginning in April.
"The monthlong temporary relief does not make any big
difference," a Dongguk official said Friday. Another company
official said it was searching for alternative markets in the
Middle East, Japan or elsewhere.
The U.S. has expressed concern that South Korea serves as a
conduit for inexpensive Chinese metal to enter the U.S., but Seoul
says steel exports using Chinese raw materials account for only
2.4% of U.S.-bound shipments.
One reason it is hard to make forecasts is that the steel issue
is now part of the bigger U.S.-South Korea renegotiations over
their free-trade agreement, which Mr. Trump has denounced as
"horrible deal."
Japan's experience in negotiating with the U.S. shows how trade
talks can stumble. It lobbied hard for a tariff exemption as a
close U.S. ally, but got shut out in Thursday's decision.
Write to William Mauldin at william.mauldin@wsj.com and Kwanwoo
Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
March 23, 2018 15:06 ET (19:06 GMT)
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