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| Thousands of Korean cars stand by to be loaded at a port for export. Korea prepares for possible free trade renegotiations with the United States, which will likely affect future outbound shipments of Korea's leading goods such as cars, semiconductors and consumer electronics. / Yonhap |
By Park Hyong-ki
Korea is preparing for all possibilities regarding its trade deal with the U.S. amid moves by President Donald Trump to abandon and readjust terms of its two key multinational trade pacts, the Ministry of Trade, Industry and Energy said.
Yeo Han-koo, the Trade Ministry's point man on free trade agreements (FTA), said that although it will refrain from prejudging what might happen to the Korea-U.S. bilateral deal, the government will be preparing for all possibilities.
"We should not overly predict that changes to the FTA are inevitable, but this does not mean that we are just going to sit back and do nothing. We are preparing at the same time carefully observing the U.S. policy moves on its multinational deals," said Yeo, the ministry's FTA deputy director general.
This comes as President Trump signed an executive order to scrap plans to join a dozen economies, including Japan, Australia, Singapore and Vietnam for the Trans-Pacific Partnership (TPP). Former President Barack Obama strongly supported the TPP, which represented 40 percent of the global trade, in an effort to curb the rise of China.
Also part of Trump's campaign pledge, he said he will exercise his executive power to renegotiate with Canada and Mexico on the North American Free Trade Agreement (NAFTA). The U.S. is expected to undo and redesign some of the NAFTA terms to be more favorable toward the country under Trump's America-first policy.
His hard-line stance on global free trade is likely to affect the Korea-U.S. FTA, which many analysts said will also inevitably push the two allies to renegotiate. Trump has criticized those trade deals, saying that they made American manufacturers move out of the U.S., ultimately killing many American jobs.
Observers say that Korea can no longer afford to just sit by, get nervous and second guess whether renegotiations will happen.
Yoo Jang-hee, an economist and former chairman of the Presidential Commission on Shared Growth for Large and Small Companies, said Korea needs to gather and show data to the U.S. to get the facts straight about the bilateral free trade.
"Korea definitely benefited from the deal, enabling more of its manufactured goods to be exported to the U.S. The U.S. has also seen benefits if we look at our service account. For instance in education, intellectual property licensing and movies, the U.S. was able to boost its service account surplus whereas Korea's deficit increased," Yoo said.
"These are some of the facts Korea should deliver to the U.S. instead of worrying about renegotiations."
Not only has the U.S. service surplus increased, Korea's investment in U.S. high tech has grown since the FTA.
Korea's investment in the U.S. more than doubled averaging $5.7 billion over the last four years after the KORUS FTA went into effect.
It was an increase from $2.2 billion on average before the bilateral trade deal, according to the Trade Ministry. The bilateral FTA created more than 10,000 jobs in the U.S. as well.
Even though the U.S. had an overall trade deficit of some $500 billion in 2015, it had a surplus of more than $262 billion in services, according to Korea Investment & Securities.
"This would likely push the U.S. to pressure its partners to further open up their services sector as it tries to reduce the overall deficit," said Park Jung-woo, analyst at Korea Investment & Securities.
Given his executive power on trade, enabling the U.S. president to bypass the Congress and implement trade policies, the Trump administration is expected to raise tariffs and further warn other economies such as China to make up for tax cuts and infrastructure spending at home.
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