Trump should exempt Korea from 'Section 232'

By Kim Jae-kyoung

Troy Stangarone

U.S. President Donald Trump should exclude South Korea from the list of 12 nations subject to heavier tariffs on steel, according to Troy Stangarone, senior director at the Korea Economic Institute (KEI).

He believes that as a treaty ally of the U.S., disputes over steel should be resolved through regular safeguard measures.

“As a major treaty ally of the U.S. and one of only two FTA partners on the list, President Trump should use his authority to exempt South Korea from Section 232,” Stangarone said in an interview.

His comment came after the U.S. Department of Commerce released a report Friday outlining an array of recommendations Trump could take to protect American steel producers, which includes a 53 percent tariff on all steel products from 12 countries, including South Korea.

The report, which was sent to the White House in January, came as a result of an investigation based on a trade provision known as Section 232 of the 1962 Trade Expansion Act, which allows the U.S. president to impose higher tariffs and restrict imports without congressional approval.

Trump must make his move on steel by April 11.

Korea was the only U.S. traditional ally to be included on the list of 12 countries. Canada, which is the biggest steel exporter to the U.S., as well as Japan, Germany and Taiwan were excluded.

Stangarone stressed that in the current environment, the Trump administration should realize that maintaining the solid alliance with Korea is critical.

“If the U.S. exempts other treaty allies, but not South Korea it sends the wrong signal,” he said.

“If South Korean firms are dumping steel on the U.S. market or violating other trade rules, there are already tools in place to deal with that.”

Stangarone, who is in charge of congressional affairs and trade at the KEI, said that while one option before Trump is to only impose tariffs on 12 countries, there is no clear rationale for how this list was developed.

“Imports from South Korea declined last year and other major exporters to the U.S. such as Canada were not included on the list meaning the list is not composed of major exporters of steel to the U.S.,” he said.

“Some countries which saw surges in exports to the U.S., such as Costa Rica, were included while others such as Portugal were not.”

He also said that the use of the Trade Expansion Act is also problematic since the goal is to address Chinese overcapacity.

“China only accounts for 1 percent of U.S. steel imports. Instead of potentially placing restrictions on imports from U.S. allies, the U.S. should be working with them to address the root cause of the issue,” he said.

Heavier tariffs on semiconductors?

The Washington-based expert suggested that South Korea raise these issues with the WTO while continuing to reach out to other U.S. government officials in a manner similar to Canada and Mexico.

“A WTO case will take time to adjudicate, so even if successful it would not provide immediate relief,” he said.

“However, the case will be important in setting the rules of the road going forward since the Trump administration is expanding the definition of national security.”

He said the Trump administration’s objective “would most likely be to keep the restrictions in place until any ruling forced them to reverse course.”

Stangarone said that these trade actions are separate from renegotiations over the KORUS FTA.

“There is a long history of U.S. disputes with South Korea over steel imports and this should be viewed in the broader context,” he said.

“If South Korea is not ultimately exempted from the steel action, it could make the talks more complicated for the U.S.”

Regarding the Trump administration’s next move, he said that chances are slim that it will put similar tariffs on semiconductors.

“Punitive tariffs on semiconductors would be a self-defeating measure. In the case of steel, the objective is to raise the use of U.S. capacity,” he said.

From his perspective, a similar step in semiconductors would only result in higher costs for U.S. consumers as the cost of semiconductors in iPhones and other popular consumer products will go up.

“Since semiconductor production requires significant investment, it is unlikely companies would invest the billions needed to develop new production in the U.S. and run the risk of that investment being lost if the U.S. lost a dispute settlement case at the WTO,” he said.