Tag: US-ROK FTA

I would not be surprised that the price for South Korea to get President Trump on board with a possible 2nd Kim-Trump Summit was to agree to change the US-ROK FTA.  Usually when it comes to changes in the FTA there is a lot of pushback from the ROK where this went pretty smooth:

South Korean President Moon Jae-in and U.S. President Donald Trump welcomed the conclusion of negotiations to amend the countries’ bilateral free trade agreement (FTA) on Monday, vowing efforts to implement it swiftly.

“We, the Presidents of the Republic of Korea and the United States of America, hereby reaffirm our close alliance and the importance of maintaining strong, mutually beneficial trade and economic ties between our peoples,” the leaders said in a joint statement issued at the end of their bilateral summit in New York.

“We welcome the successful conclusion of negotiations between our governments that have resulted in amendments and modifications to improve the Korea-United States Free Trade Agreement,” they added.

Under the revised FTA, the U.S. will extend a 25 percent tariff on imports of South Korean pickup trucks by 20 years to 2041, while Seoul will double the number of U.S. cars not subject to its local industry regulations to 50,000.

“South Korea will double the number of American cars sold …(to) 50,000 per manufacturer of cars,” Trump said in a joint press conference.

The changes, which come at a U.S. request, were approved by the South Korean Cabinet last week. The revised FTA was signed Monday by the countries’ trade ministers. It still needs to be ratified by the countries’ legislatures.  [Korea Times]

You can read more at the link.

Here is a media leak if true that provides some insight into the US negotiating strategy in regards to the modifications the US wants in the US-ROK Free Trade Agreement:

In an Oval Office meeting earlier this month, President Trump gave his top trade negotiator, Robert Lighthizer, an Art of the Deal-style coaching session on how to negotiate with the South Koreans.

Trump’s impromptu coaching came in the middle of a pivotal conversation with top officials about whether or not to withdraw from the U.S.-Korean trade deal. Sources familiar with the conversation recounted the exchange for Axios, and the White House did not dispute this account.

A number of senior officials and cabinet secretaries were present for the conversation, including Defense Secretary Mattis, Agriculture Secretary Perdue, and Secretary of State Tillerson. At issue was whether the U.S. would withdraw from the Korean trade deal — an action Trump threatened but still hasn’t done.

“You’ve got 30 days, and if you don’t get concessions then I’m pulling out,” Trump told Lighthizer.

“Ok, well I’ll tell the Koreans they’ve got 30 days,” Lighthizer replied.

“No, no, no,” Trump interjected. “That’s not how you negotiate. You don’t tell them they’ve got 30 days. You tell them, ‘This guy’s so crazy he could pull out any minute.'”

“That’s what you tell them: Any minute,” Trump continued. “And by the way, I might. You guys all need to know I might. You don’t tell them 30 days. If they take 30 days they’ll stretch this out.”  [Axios]

First of all conversations like this should not be leaked out of the White House.  These leaks have to stop. Secondly as the article states the crazy approach only works if people think you will actually follow through with the threat.  That is why Kim Jong-un’s rhetoric is taken so seriously.

It looks like the Trump administration will at some point demand a renegotiation of the US-ROK FTA:

The U.S. Trade Representative said Wednesday the free trade agreement with South Korea resulted in a “dramatic increase in our trade deficit,” stressing it’s time for a major review of how the U.S. approaches trade deals.

“The largest trade deal implemented during the Obama administration — our free trade agreement with South Korea — has coincided with a dramatic increase in our trade deficit with that country,” USTR said in President Donald Trump’s 2017 Trade Policy Agenda.

Compared with before the deal went into effect in 2012, the total value of U.S. goods exported to South Korea fell by $1.2 billion, while U.S. imports of goods from South Korea grew by more than $13 billion, USTR said.

“As a result, our trade deficit in goods with South Korea more than doubled,” it said. “Needless to say, this is not the outcome the American people expected from that agreement. Plainly, the time has come for a major review of how we approach trade agreements.”  [Korea Times]

I think what would be interesting to see is a report on any artificial barriers making it difficult for US companies to compete in South Korea which may contribute to the trade deficit.