Korea, US face rough trade renegotiation

By Lee Min-hyung

The planned renegotiation of the Korea-U.S. free trade agreement (KORUS FTA) is expected to face a rough road ahead, with both sides showing no signs of narrowing their differences in major trade areas such as manufacturing and agriculture.

The Ministry of Trade, Industry and Energy on Friday held its second round of public hearings on the nation’s strategies for trade renegotiations with the world’s largest economy.

The FTA renegotiation comes amid growing diplomatic pressure from the U.S. President Donald Trump administration. He has stepped up provocative and aggressive rhetoric over the trade pact since taking office earlier this year.

Experts voiced their consensus that the government should remain more than careful to establish specific countermeasures to minimize potential aftershock from the trade renegotiation.

“If we end up importing more agricultural products from the U.S., this will pose a threat to President Moon Jae-in’s key economic policy of creating more jobs here,” Korea University professor Han Doo-bong said in the hearing. “The agriculture industry accounts for only 2.2 percent of the nation’s GDP. But 5 percent of the employed here work for the agricultural industry.”

If the nation opens up the trade volume of U.S. agricultural products, this will invite strong public backlash, he said. The expert also said this will put the brakes on President Moon’s plans to push ahead with other policies during his five-year tenure.

Han Seok-ho, a researcher from the Korea Rural Economic Institute, also concurred over the negative impact from the potentially botched trade renegotiation in the agriculture sector.

“The FTA worsened the local agricultural deficits,” he said. “This has driven down local agricultural product prices, causing income reduction from the local farmhouses.”

The agriculture expert pointed out Korea failed to enjoy benefits from the FTA, which was clinched in March 2012.

For five years between 2007 and 2011, Korea exported agricultural products worth $190 million to the U.S. But the nation imported farm products, such as pork, cherries and oranges, worth $940 million from the U.S., during the five years after the FTA took effect, according to the local agriculture research body.

“After the FTA deal came into effect, the government opened trade for most of the agricultural and livestock markets to the U.S.,” he said.

This has driven up the import volume of U.S. farm products, reducing local production and food self-sufficiency here, the expert pointed out.

In October, Agriculture, Food and Rural Affairs Minister Kim Young-rok also said the government will take a hard-line stance not to make concessions in any terms of the agreement, citing the piling trade deficits. At that time he said the ministry will do its utmost to come up with countermeasures for each product.

Non-agricultural products under minimum impact

Ulsan College Professor Baek Il said the FTA renegotiation will pose little threat to the nation’s major export items.

“Most of the key export items, including those from the electronics and steel industries, will be hit little by the FTA renegotiation, as little or no tax is being levied on their items (regardless of the agreement),” he said.

“For this reason, the Korean government can deal with potential revocation of the FTA as well.”

“The U.S. president is bluffing that the country can revoke the deal. But realistically, chances are slim that the bluff will turn into reality, as this is just a part of his strategy to win the renegotiation. Against this backdrop, the upcoming FTA renegotiation will end up with a partial adjustment to the existing one, rather than a complete revision.”

He said the government should not continue to extend the pact, as it comes with little economic benefit for the nation.

“The gist of the FTA is to rev up the local manufacturing industry at the cost of agriculture,” he said.

“But the pact has done much more good to the U.S. economy for the past five years. Revocation can be a better option for us at the moment.”

He also urged the government to make public the five-year trade data since the FTA took effect, assuring the public the pact does not come with any economic advantages to the nation.