By Nam Hyun-woo
Korea should prepare for a possible renegotiation of its trade deal with the United States after the summit between President Moon Jae-in and his counterpart Donald Trump last week.
The two were apparently far apart in their views of the Korea-U.S. free trade agreement (KORUS FTA).
While Moon neutrally said both Korea and the U.S. “agreed to make economic relations mutually beneficial for the people,” Trump was more blatant, describing the FTA as “a rough deal” that should be more “equitable and fair for both parties.”
“We are renegotiating a trade deal right now with South Korea,” Trump said at the beginning of the summit.
“It will be much different and good for both parties,” he said.
The Seoul administration is playing down the after-summit comments.
“The renegotiation remark is not included in the joint statement and we have yet to receive any requests from the U.S. regarding the FTA,” said an official at the Ministry of Trade Industry and Energy.
“Our stance remains the same. We are preparing for all possible scenarios, but we cannot take any pre-emptive steps as there has been no official action from the U.S.”
Moon also told reporters that Trump’s remark was made outside of their agreement, adding that he assumed he was talking about what he wanted from Korea.
Since the start of his presidential campaign, Trump has been calling for the KORUS FTA to be renegotiated, while Moon has pledged to prevent this from happening because of potential losses to Korea’s export-driven economy.
According to a Korea Economic Research Institute report, a renegotiation of the KORUS FTA could cause up to $17 billion losses in Korea’s exports to the U.S. over the next five years.
Experts say Korea should raise its preparedness and convince the U.S. that the deal has benefited both parties so far, because Trump is highly likely to keep his word.
“As Trump puts American interests first, his administration was expected to seek a renegotiation of the KORUS FTA,” Prof. Lee Phil-sang of Seoul National University.
“After Trump’s inauguration many expected that and the summit reaffirmed it.
“I am afraid that the U.S. will make very bold demands, which could cause big damage. That would pose a threat to the Korean economy, which depends highly on trade.”
Korea Center for International Finance economist Kim Sung-taek said the U.S. would especially take issue with the automobile and steel sectors.
“During the summit, Trump mentioned the non-tariff barriers in the Korean automobile market and Korea’s exports of dumped steel,” he said. “These would be the key sectors on which the U.S. will focus to demand a renegotiation.
“Thus, Korean companies and the government should pay extra attention to a scheduled omnibus report on the trade deficit by the U.S. Trade Representative, and the guidelines of the NAFTA renegotiation, which will show how the U.S. will act in a potential renegotiation of the KORUS FTA.”
Shin Seung-kwan, president of the Institute for International Trade at the Korea International Trade Association, said Korea needed a fact-based approach to show that the KORUS FTA was mutually beneficial.
“Because Trump won the election on the back of support from workers whose jobs could be affected by FTAs, he is expected to stay tough about the issue,” Shin said.
“Korea should convince him that it has tried to be fair about bilateral trade.”
He said if a renegotiation took place, Korea should participate as an equal negotiation party without being afraid.
Korea Institute for Industrial Economics and Trade President Yu Byung-gyu concurred.
“After intensive studies on the benefits of Korea-U.S. economic cooperation, we need to persuade the U.S.,” Yu said. “In addition, we need a holistic approach involving not only the economic sector but also diplomatic and defense areas.”