Woes on trade deal revision weigh heavily on economy
By Yoon Ja-young
Korea’s trade minister is scheduled to meet his U.S. counterpart to stress how the Korea-U.S. Free Trade Agreement (KORUS-FTA) has benefited the two countries following a report by the United States Trade Representative (USTR) that added concerns the U.S. may demand a renegotiation of the pact.
According to the Ministry of Trade, Industry and Energy, Minister Joo Hyung-hwan will visit Washington D.C. next week, where he will meet U.S. Secretary of Commerce Wilbur Ross, U.S. Senate Committee on Finance member Ron Wyden, Heritage Foundation former President Edwin Feulner and other key figures.
The ministry explained that they will share views on how the KORUS-FTA mutually benefited the two parties, as well as seeking further cooperation.
The minister’s visit to the U.S. comes amid growing controversy over a USTR report, which is leading to speculation that the U.S. may demand a renegotiation of the pact. In the President’s 2017 Trade Policy Agenda, the USTR noted that the trade deficit in goods with Korea more than doubled following the FTA.
It cited statistics, according to which the total value of U.S. goods exported to Korea fell by $1.2 billion, while U.S. imports of goods from Korea grew by more than $13 billion from 2011 to 2016.
“Needless to say, this is not the outcome the American people expected from that agreement,” it noted.
It added, “The time has come for a major review of how we approach trade agreements. For decades now, the United States has signed one major trade deal after another - and, as shown above, the results have often not lived up to expectations.”
“We will not hesitate to use all possible legal measures in response to trading partners that continue to engage in unfair activities,” the report stressed.
After U.S. President Donald Trump denounced the bilateral trade agreement with Korea as a “job killer” during the presidential election campaign, there has been anticipation that Washington may demand a renegotiation of the deal that went into effect five years ago.
Korea’s trade ministry, however, said that the report didn’t show a big change from the previous stance of the country’s second-largest trade partner.
“The report did not directly mention a renegotiation of the KORUS-FTA,” an official at the ministry said, noting that the U.S. report only indicated a “major review on all bilateral and multilateral trade agreements.”
In a report submitted to the Korea Economic Research Institute, Prof. Choi Nam-seok from Chonbuk National University estimated that a renegotiation of the deal will incur a $26.9 billion loss in exports between 2017 and 2021, costing 240,000 jobs. The most directly hit will be the automobiles industry, which will sustain a $13.3 billion loss in exports.
Prof. Choi said that Korea should seek an aggressive, defensive mode against the U.S. pressure at the same time, based on a concrete analysis of how the respective industries in the U.S. are benefiting from the pact.
“For instance, Korean automakers are creating well-paying jobs in the U.S,” he said. The U.S. Department of Commerce has noted that Korea created 55,000 jobs in the United States between 2009 and 2015.
Experts in Korea also point out that the country’s growing exports to the U.S. of late were led by items that are not benefiting from the tariff cut, such as metals and agricultural products. The U.S. is also reaping a huge surplus in the services account with the figure jumping to $9.4 billion in 2015 from $6.9 billion in 2011.
The International Trade Commission (ITC) of the U.S. estimated that the U.S. trade deficit to Korea would have reached $44 billion instead of $28.3 deficit marked in 2015 if it were not for the bilateral free trade pact.