Trick is to bring hidden Korean contributions into account
U.S. Vice President Mike Pence left a parting message ― "review and reform" of the Korea-U.S. free trade agreement (KORUS FTA) when he talked to U.S. businesspeople Monday. South Korea is left parsing Pence's comments and trying to comfort itself with its own wishful thinking that the U.S. may not want to go over Korea on trade with great vigor. The basis for such an interpretation is that he didn't use the dreadful word ― renegotiation.
The rhetorical examination pales in importance, compared with what strategy Korea will use to deal with one of the big campaign grievances expressed by President Donald Trump ― that FTAs are to enrich foreign countries at the expense of American jobs.
So far, Korea has been cautious ― pushing the merits of current bilateral trade which has created 45,000 American jobs since it went into effect in 2011, for instance.
This is a standard approach but in the Trump era, it is the wrong button to push, considering his tendency for anything but Obama. Rather, a better approach would be to directly tackle Trump's grievance ― Korea's trade surplus ― and in a pre-emptive way.
Last year, Korea recorded a $23 billion trade surplus with the U.S. This year, it could get bigger.
The U.S. considers it excessive when its trading partner has more than a $20 billion trade surplus. So it is desirable for Korea to bring down its surplus to that level. Korea has been changing its import route for natural gas to the U.S., among other things. The chance is that it will end up as a flash in the pan, making little difference in the end.
Instead, it is worth thinking of sending a big purchasing party to the United States in an effort to impact the trade account as suggested by the American Chamber of Commerce (AMCHAM) Korea. Addressing the auto sector where most of the surpluses are generated can be another way. It can be done by granting American cars greater market access. Now, German cars occupy the lion's share of the imported car market here.
Worthy of keen attention is to bring into the overall account Korea's U.S. weapons purchases. Seoul regularly updates its forces at a huge cost, including signing a deal in 2014 to import 40 Lockheed Martin-made F-35 fighter jets at the total cost of 7.4 trillion won ($6.5 billion) or an individual cost of close to $160 million.
"Noise marketing," ― U.S. cities and states, which have had big investments from Korea, pressuring their congressmen and senators ― can prove to be effective.
Trump's priority is to first dismantle the North American Free Trade Agreement (NAFTA) with Mexico and Canada and then go after bilateral trade agreements with Japan and Korea. So it is estimated that Korea has a window of opportunity of about 18 months. It is a strategic decision to wait or go on the fast track on this issue. Considering the two countries have a much bigger issue to deal with, that is, North Korea, Seoul should better pre-empt the trade issue and clear it up promptly.