Despite easing of uncertainty, fact sheets still have points of contention

A copy of the joint fact sheets on the Korea-United States trade negotiations is displayed at the National Assembly's Foreign Affairs and Unification Committee meeting in Seoul, Friday. Yonhap

The joint fact sheets on the Korea-United States trade negotiations released Friday have eased much of the uncertainty facing domestic manufacturing industries by confirming the application of a 15 percent tariff.

However, several contentious issues remain unresolved in areas such as digital trade, semiconductors and genetically modified organism (GMO) agricultural products, likely signaling further debates ahead.

According to the fact sheets, the two countries “commit to ensure that U.S. companies are not discriminated against and do not face unnecessary barriers in terms of laws and policies concerning digital services, including network usage fees and online platform regulations.”

The U.S. has previously taken issue with Korea’s “nontariff barriers” in digital services, with the U.S. Trade Representative (USTR) publishing reports for years that cite the National Assembly’s efforts to impose network usage fees and pass laws regulating large online platforms to prevent unfair practices against small merchants.

In Korea and many other countries, U.S. content providers such as Google and Netflix have faced growing criticism for contributing relatively little to network maintenance costs despite generating massive data traffic. The United States, however, has pushed back against these claims, arguing that imposing additional fees would place an excessive financial burden on its internet giants.

After the U.S.-European Union trade deal on Oct. 30 confirmed that the latter would not adopt or maintain network usage fees, there had been speculation that Korea might face pressure to reach a similar agreement, potentially affecting the competitive balance with domestic content platforms and internet service providers.

Since Friday’s fact sheets state that the two countries will work to “ensure U.S. firms are not discriminated against,” Korea seemingly did not face the same level of pressure as the EU, though fees for Google and Netflix here are expected to be lowered.

“The network usage fee has long been listed as a nontariff barrier in the USTR’s annual reports, so it would be hard to say Korea made a new concession here,” said Lee Tae-kyu, a senior research fellow at the Korea Economic Research Institute (KERI).

“However, as the issue is now included in the fact sheets, related discussions and consultations will inevitably continue.”

Google Korea Head of Government Affairs and Public Policy Hwang Sung-hye speaks during a National Assembly audit on the Ministry of National Defense in Yongsan District, Seoul, Oct. 13. Joint Press Corps

Along with network usage fees, the fact sheets confirm that the two countries will “facilitate cross-border transfer of data, including location, reinsurance and personal data.”

This pertains to U.S. tech firms’ requests for high-precision map data in Korea. Google made requests for such data in 2007, 2016 and this year, with the Korean government either rejecting or deferring its decision, citing national security.

Regarding Google’s latest request earlier this year, the Korean government deferred its decision twice and earlier this week asked the U.S. firm to submit additional documents, thus delaying the decision again. Apple has also requested approval to export high-precision map data, and the government is set to make its decision by Dec. 8.

Since the fact sheets allow both countries to interpret the clause in their favor, further discussions appear inevitable.

“The language used reflects that the two sides agreed on the principle of equal treatment, and any specific cases will be subject to future negotiations,” Presidential Chief of Staff for Policy Kim Yong-beom said during a press conference.

The fact sheets also cover potential U.S. tariffs on Korean semiconductor chips, guaranteeing Korea will receive no less favorable treatment if the United States later reaches a deal with another country that has a larger volume of chip trade. Kim noted that this effectively ensures Korea will not be placed at a disadvantage compared with Taiwan, Korea’s key competitor in chip manufacturing.

“The semiconductor clause suggests that Korean firms will not face heavy pressure in competition with other countries,” Lee said. “Since the cost increase would be the same whether U.S. companies use Korean or Taiwanese chips, there are chances that the U.S. industry could push for lowering semiconductor tariffs altogether. During Trump’s first term, several Chinese exports to the U.S. were exempted for similar reasons.”

A worker holds GMO yellow corn imported from the U.S. at a cattle feed plant in Tepexpan, Mexico, March 15, 2023. Reuters-Yonhap

In the agricultural sector, the fact sheets confirm the two countries’ cooperation on “addressing nontariff barriers affecting trade in food and agricultural product,” and “streamlining the regulatory approval process for agricultural biotechnology products.”

This means Korea will not directly expand imports of U.S. agricultural products through measures such as increasing quotas or lowering tariffs, but will expedite quarantine procedures for fruit from the U.S. and streamlining the approval process for GMO crops.

KERI research fellow Lee said this may increase the likelihood of more U.S. imports in the Korean market, but he does not expect any significant negative impact in the broader context of the overall economy.

For pharmaceuticals, the fact sheets confirm a 15 percent tariff on Korean imports, the same as Japan and the EU. Since Trump had previously threatened to impose a 100 percent tariff on drugmakers that do not build factories in the U.S., risks are eased for domestic firms.

However, the document does not address biosimilar medicines, Korea’s key export item. It remains unclear whether biosimilars would be treated as generics and exempted from tariffs or be subject to a separate category.