Trump FTA threat is a mere tactic to induce concession
By Kim Jae-kyoung
U.S. President Donald Trump’s rhetoric on withdrawing from the free trade agreement (FTA) with South Korea is a strategy calibrated to gain concessions in renegotiations, according to global analysts, Tuesday.
They said that Trump wants to show his commitment to delivering on his campaign promise to fix “unfair trade” and South Korea has become a target.
These views came after Trump ordered his economic advisers to prepare for the U.S. to withdraw from the FTA because the allies had only reaffirmed their differences on the trade deal at a recent meeting in Seoul.
“His ultimate objective is to narrow the trade deficit with Korea. I do not think he really wants to cancel the KORUS (Korea-U.S.) FTA),” Sohn Sung-won, a professor of economics at California State University, told The Korea Times.
“I assume the Trump administration wants some concessions from Korea, but does not want a total collapse of the agreement,” he added.
Sohn, a former member of the President’s Council of Economic Advisors in the U.S., pointed out that aside from economic issues, national security measures are now a part of the deliberations.
“Korea needs the U.S. both economically and from a security point of view. Some flexibility is needed from the Korean side so that Trump can feel that he has accomplished one of his campaign objectives,” he said.
Andy Xie, an independent economist formerly with Morgan Stanley, echoed the view, saying, “Trump wants to demonstrate to his voters that he is delivering on his promise to limit unfair trade.”
“Doing something to China has too many consequences. Japan is on the U.S.'s good side in so many ways. Korea is kind of an easy target,” he added.
Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis, also considers Trump’s remarks as a negotiating tactic.
“I think Trump is bluffing. If he did with Mexico, why not with Korea,” she said.
“He might be trying to get more support from Korea as regards North Korea’s next steps,” she added. “This is no longer only an economic question.”
In this regard, the Moon administration needs to come up with plans to show some movement to address complaints from the U.S. to keep the KORUS FTA afloat.
“The best way is for Korea to import more from the U.S. Rightly or wrongly, there are many Americans who believe KORUS has been unfair to the U.S.,” said Sohn.
“For example, the U.S. has been wanting to sell more buses to Korea, but a Korean rule related to the width of the bus has prevented sales.”
Mauro Guillen, the director of the Lauder Institute at the University of Pennsylvania’s Wharton School, agreed. “The FTA does indeed help cement the relationship with a key ally, especially at a time of tension on the Korean peninsula,” he said.
“I think South Korea should do everything it can to make the U.S. comfortable with its current agreement.”
The analysts said that it is important for Moon and his administration to understand that many Americans don’t like the KORUS FTA.
“Unfortunately, like with the ill-fated Trans-Pacific Partnership (TPP), the media is obsessed with giving the opinions of the lobbyists and lawyers here in Washington who negotiated trade deals, and oddly, from politicians who once hated such deals but now feign love for them,” said William Brown, adjunct professor at Georgetown School of Foreign Service.
“So Korea may be getting a false impression of what is in store,” he added. “I expect you have some of the same media issues in Seoul.”
Brown suggests that the Moon administration offer some improvements along the lines of the better parts of the TPP, especially on intra-industry trade.
“Instead of being left out of the old TPP, and waiting forever for Japan to let it in that club, Seoul now has a chance to build with the U.S. a revised and updated KORUS FTA that could become the template for all new trade negotiations,” he said.