US, South Korea Presidents Examine Options for Boosting Trade
South Korean President Moon Jae-in and US President Donald Trump discussed how to move forward in their countries’ bilateral trading relationship, including with the Korea-US Free Trade Agreement (KORUS), during a summit in Washington late last week.
The Trump administration’s interest in upgrading KORUS was earlier announced by US Vice President Mike Pence on a visit to Seoul in April and seeks to rectify a perceived imbalance in trade between the two nations, particularly with regard to the automobile and steel industries. The US goods trade deficit with Korea amounted to US$27.7 billion in 2016. (See Bridges Weekly, 27 April 2017)
“We are renegotiating a trade deal right now as we speak with South Korea. Hopefully it will be an equitable deal, a fair deal to both parties,” Trump said in a press conference on Friday 30 June. “We want something that is going to be good for the American worker and I think we will be able to do that today.”
While Trump and Pence have both floated their interest in a KORUS upgrade, Korean officials have not confirmed whether they wish to do the same.
In a joint statement issued that day, the leaders mutually “committed to foster expanded and balanced trade while creating reciprocal benefits and fair treatment between the two countries.”
The KORUS agreement, first negotiated and signed under the George W. Bush administration, eventually entered into force in 2012 following several years of difficult negotiations and a tough ratification process on both sides. (See Bridges Weekly, 29 February 2012)
Korea is the US’ sixth-largest trading partner, with US$112.2 billion in total two-way trade in goods in 2016.
Trade deficits, steel
The trade relationship with Korea has been one of several under review since the issuance of an executive order earlier this year to assess any instances of “unfair treatment” by countries with which the US has a trade deficit. (See Bridges Weekly, 4 May 2017)
Trump has claimed that the agreement has had adverse effects on the domestic automobile industry, citing a US$11 billion dollar rise in the trade deficit with Korea since 2011 pre-KORUS. Cars also represented a key point of contention in the original negotiations and formed part of efforts to revamp the agreement in 2010 in order to give it a better chance of passing through the US domestic legislature. (See Bridges Weekly, 9 December 2010)
“I am encouraged by President Moon’s assurances that he will work to create a level playing field so that American workers and businesses and especially automakers can have a fair shake at dealing with South Korea,” Trump stated, adding that the two sides will work together to address these issues.
In addition, the administration raised concerns over steel trade, claiming that Korean-made steel is being sold in the US at prices lower than its normal value, in what is known in trade jargon as “dumping.” The US Department of Commerce imposed new anti-dumping duties on oil country tubular goods (OCTG) from Korea in April.
The US-Korea joint statement referred to this discussion, committing “to fostering a truly fair and level playing field, including working together to reduce the global overcapacity of such basic materials as steel.”
Some analysts have pointed to the US services surplus with the Asian economy, and the high volume of Korean foreign direct investment (FDI) into the United States. The US had a services surplus of US$10.7 billion with Korea in 2016, while Korean FDI amounted to US$40.1 billion in 2015 to the US’s US$34.6 billion into Korea, according to statistics published by the Office of the US Trade Representative.
Moon’s visit was accompanied by a large business delegation, and came shortly after Samsung pledged to invest US$380 million in the creation of a home appliances plant in South Carolina, which proponents say would create almost 1000 jobs, as well as an additional US$1.5 billion in its semiconductor factory in Texas before 2020.
“Samsung’s investment is great news for South Carolina and the United States, and it is a direct reflection of the fact that America is becoming an even stronger destination for global businesses looking to grow,” US Commerce Secretary Wilbur Ross noted following the announcement.
"I hope that Korea-US economic cooperation can expand on the existing level of mutual trade and investment so that it can help both countries become strategic economic partners who work together to pioneer the world market," Moon told business leaders during a recent speech, according to comments reported by the Korea Times.
The leaders are slated to meet again later this year in South Korea, officials confirmed. In the meantime, they will host “high-level consultations” on economic and trading issues.
ICTSD reporting; “Samsung Invests $1.9 Billion in U.S. Ahead of Trump-Moon Summit,” BLOOMBERG, 28 June 2017; “Trump: ‘We may terminate’ U.S.-South Korea trade agreement,” WASHINGTON POST, 28 April 2017; “US to renegotiate South Korea trade pact,” FINANCIAL TIMES, 18 April 2017; “Moon Enlists Chaebol Execs to Disarm Trump's Trade Threat,” BLOOMBERG, 27 June 2017; “Moon, Trump to face showdown on FTA renegotiation,” THE KOREA HERALD, 25 June 2017; “President Trump and South Korea President Moon Meet in Oval Office,” CNBC, 30 June 2017; “Moon's US visit brings economic achievements,” THE KOREA TIMES, 4 July 2017.