Trade Deals, Multilateralism in the Spotlight as UN General Assembly Gets Underway
Trade has been a high-profile topic both at this week’s UN General Assembly (UNGA), featuring during leaders’ speeches and at meetings in the margins, as officials lay out their visions on trade and multilateralism while also working to advance different negotiating processes at the political level.
On Monday 24 September, US President Trump and South Korean President Moon Jae-in signed an update to the US-South Korea free trade agreement (KORUS), meeting on the UNGA margins. Aside from the KORUS signing, the UNGA to date has featured ministerial-level meetings between the US, EU, and Japan on WTO reform and other trade topics, as well as a speech from Trump that referred repeatedly to the need to negotiate improved trade deals and tackle allegedly unfair trade practices.
Bilateral talks have also been held at ministers’ or leaders’ level on the EU-Mercosur trade negotiations, deeper ties among the Pacific Alliance countries, and the launch of US-Japan trade talks. (For more on US-Japan, see related story, this issue)
Underpinning all these efforts is a heightened international awareness and debate over what role trade policy should take in shoring up the global economy, along with domestic countries’ economic strategies. New statistics from the Organisation for Economic Co-operation and Development (OECD) have warned that trade growth could begin to take a dive in the coming months, amid continued trade tensions among some countries, while ministers from the G20 recently noted the “urgent” need for intensified discussions on boosting trade confidence, lowering risk, and updating WTO rules.
KORUS amendments moving ahead
The UNGA week kicked off with the news of the KORUS signing, just over one year after Washington and Seoul launched talks to modernise the accord. The US-Korea deal first entered into force in 2012 after years of negotiations and a challenging legislative process on both sides to approve the deal.
The talks were launched under KORUS’ “special session” of its Joint Committee. That committee meets annually and can meet more frequently in “special session” at the request of either Washington or Seoul. Among other functions, the committee can consider “amendments” or “modifications” to KORUS’ commitments, according to the KORUS chapter on institutional provisions and dispute settlement. (See Bridges Weekly, 20 July 2017)
According to a factsheet from the Office of the US Trade Representative (USTR), the newly signed agreement includes amendments affecting trade in automobiles, pharmaceuticals, and farm goods. Notably, it extends a 25 percent US tariff on imports of South Korean trucks through 2041, along with doubling the amount of US auto exports to South Korea that are absolved of meeting additional safety standards to suit local requirements. (See Bridges Weekly, 29 March 2018)
In addition, it reduces regulatory burdens for US automotive exports through streamlined customs procedures, updated provisions on emissions and safety standards, harmonised testing requirements, and reduced labelling burdens for car parts.
Leaders from both sides lauded the revised KORUS for its potential economic benefits and as a positive next step in bilateral relations, particularly in promoting more balanced trade.
“Today we have made amendments and modifications to improve the existing agreement,” said Moon during the signing ceremony at UN Headquarters in New York. “With the swift conclusion of the negotiations to the revision, uncertainties surrounding our free trade agreement have been eliminated and as a result companies from both countries will now be able to do business under more stable conditions.”
“In addition I am hopeful that this will provide us with a platform upon which our bilateral economic ties will be elevated to a higher level in a freer, fairer, and more mutual beneficial direction,” he said.
The trade deal will contribute to minimising the trade deficit between the partners, Trump said, calling it a “historic milestone in trade.” In 2017, the US ran an overall trade deficit of US$9.8 billion with South Korea, reaching US$23.1 billion for trade in goods. The US has a trade surplus in services with the Asian economy, which in 2016 was at US$10.6 billion, according to statistics from the Office of the US Trade Representative.
The deal represents the first trade agreement update signed by Trump during his time in office, who has sought to rework trade relationships as a central tenet of his economic agenda. The US is also negotiating an update to the North American Free Trade Agreement (NAFTA), with a preliminary deal reached with Mexico and talks ongoing with Canada.
Trump and Moon called for the swift enactment of the agreement revisions. “With today’s signing of our newly concluded agreement, we pledge to direct our officials to move forward with additional steps, as required in our respective countries, to bring the updated agreement into force as soon as practicable,” said the leaders in their joint statement issued on Monday.
The US does not require congressional approval for the deal to move ahead, given that the changes were made via the KORUS Joint Committee process and do not require domestic legislative changes. This is different from the situation with the NAFTA update, which will require lawmakers’ approval via the procedures laid out through the US’ Trade Promotion Authority (TPA) legislation. However, South Korea will need to submit the updated KORUS to its legislature for ratification.
“When it comes to ratifying the Korea-US free-trade agreement, I have an optimistic view,” Korean Finance Minister Kim Dong-yeon said prior to the signing, according to comments reported by the Wall Street Journal.
For Seoul, analysts say that lawmakers’ approval of the deal may hinge on whether Washington decides to impose global tariffs on automobiles and auto parts on national security grounds, having already made concessions on autos under the revised pact. Automobiles have long been a key component of the US-Korean trading relationship, with one-third of total South Korean auto exports destined for the US in 2017.
UNGA speeches show differing takes on multilateralism
In his speech to the UN General Assembly, Trump addressed pressing global issues including migration, trade and economic growth, and peace and security, speaking in defence of domestic interests and retaining American sovereignty.
“As my administration has demonstrated, America will always act in our national interest,” he said. “America is governed by Americans. We reject the ideology of globalism, and we embrace the doctrine of patriotism.”
On trade, Trump underlined the importance of creating a level playing field based on reciprocal market opening, pointing to the use of market-distorting tools, including dumping, subsidies, and currency manipulation, and citing a US$800 billion annual trade deficit.
“We believe that trade must be fair and reciprocal. The United States will not be taken advantage of any longer,” Trump said. “For this reason, we are systematically renegotiating broken and bad trade deals.”
Separately, UN Secretary-General António Guterres aimed his remarks on Tuesday in support of multilateralism, which he considered "under fire precisely when we need it most.” Faced with global existential threats, he said, "there is no way forward but collective, common-sense action for the common good."
This year’s new UN General Assembly President, María Fernanda Espinosa Garcés, also backed a cooperative approach to global issues and renewed commitment to multilateralism to ensure the UN is “more relevant to all people.” Espinosa, who is currently Ecuador’s Foreign Minister, identified gender equality, decent work opportunities, climate change, and migration as key priorities for the General Assembly to take on.
US-EU-Japan trilateral talks press on
Also on the sidelines of the UN General Assembly, the top trade officials from the US, EU, and Japan met for the fourth trilateral meeting on Tuesday for discussions around cooperation on WTO reform, industrial subsidies and state support, forced technology transfers, and digital trade. The trilateral talks were launched at the 2017 WTO Ministerial Conference in Buenos Aires, Argentina, and have met twice more since. (See Bridges Weekly, 7 June 2018)
The initiative seeks to build a coordinated response to “non market-oriented policies” that officials say lead to skewed competitive conditions and undermine global trade. This week, the partners pledged to continue discussions and improve information sharing on these subjects, as well as explore avenues for related enforcement and rule-making.
Ministers agreed this week to take the requisite internal steps before years’ end with a view to kicking off potential talks for the creation of new subsidy rules with the participation of key trading partners. They also devoted a section of their statement to learning more about forced technology transfers and working with other “like-minded partners” on how to address these.
The EU, US, and Japan ministers also reiterated the need for WTO reform, including with regard to development, suggesting in the joint statement that “overly broad classifications of development, combined with self-designation of development status, inhibits the WTO’s ability to negotiate new, trade-expanding agreements and undermines their effectiveness.” Other topics they raised were transparency and notifications, improved synergies across WTO bodies, and support for further exploratory talks among a coalition of WTO members looking at potentially negotiating new rules on digital trade.
ICTSD reporting; “South Korean Finance Minister Optimistic About Revised U.S. Trade Deal,” THE WALL STREET JOURNAL, 20 September 2018; “Trump Signs Revised Korean Trade Deal,” THE NEW YORK TIMES, 24 September 2018; “White House Says Revised South Korea Trade Pact Within Reach,” ROLL CALL, 28 March 2018.