South Korea and the US signed a revised version of the Korea-US Free Trade Agreement earlier this week. The signing, hailed by leaders of the two countries, is welcome in many respects.
Most of all, the conclusion of the negotiations to amend the 6-year-old trade agreement that had been persistently challenged by US President Donald Trump put an end to uncertainty as to its fate. Another good point is that the two sides sealed a major bilateral dispute at a time when they need a seamless joint stance on the North Korean nuclear problem.
On Trump’s side, it is a political boon for his “America First” crusade, as he had targeted the Korea-US FTA as one that hurts US industries and workers and called it a “disaster” and “horrible deal.” There were reports that Trump even decided to scrap the agreement, but aides thwarted his action at the last minute.
In view of such a hard-line stance of the US president, the South Korean side can also claim a win in that Korea is the first country with which the Trump administration has settled trade issues with a new agreement. If Korea were unable to avoid what its chief negotiator labeled a “tsunami” of the Trump administration’s trade offensives, its economy would have been devastated.
The US is the second-largest market for Korea, drawing 12 percent of its total exports. Take the car industry as an example, Korean automakers export 850,000 cars -- 33 percent of their total exports -- to the US, adding up to about $14.53 billion.
The car industry was one of the focal points of the revised Korea-US FTA, reflecting the view of Trump who had said Korea sells more of its cars in the US than the US does in Korea.
The revised version extended a 25 percent US tariff on imported Korean pickup trucks by 20 years to 2041. It also doubled -- from 25,000 to 50,000 -- the number of vehicles each American automaker can export to Korea without regard to Korean safety standards.
One problem is Korea has yet to be excluded from the US plan to impose a 25 percent tariff on foreign cars under Section 232 of the Trade Expansion Act. The law authorizes the secretary of commerce to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the United States.
It was under the legal code the Trump administration imposed a 25 percent tariff on foreign steel. South Korea managed to avoid the tariff, but had to accept a quota to limit steel exports to the US to 70 percent of its regular volume.
It was timely in that sense that Moon asked Trump in their meeting in New York on Monday that Korea be exempted from the car tariffs. Trump needs to pay heed to Moon’s assertion that more than half of Korean cars sold in the US are manufactured on US soil.
Moreover, South Korea is reducing its trade surplus with the US, whereas other major exporting countries like China, Japan, Germany and Mexico are increasing their trade surplus with the US. In the first half of this year alone, Korea’s trade surplus with the US dropped by 25 percent.
Although there are still the car tariffs and other pending issues, Moon and Trump signed the revamped free trade agreement at an opportune time, since they need to stand together over the North Korean nuclear crisis. Any strain in trade and economic issues should never be allowed to tamper with the alliance between the two.
It is hoped that the revision of the Korea-US FTA could serve as a good reminder for Trump that security and strategic considerations should not be compromised by economic interests. If necessary, “America First” should give way to greater global interests that can be protected only by the world’s No. 1 power.
For its part, South Korea still should be ready to cope with an American leader who is often unpredictable and obsessed with a selfish, ruthless pursuit of narrow American interests. The Moon administration ought to bear this in mind in future dealings with the US, be they on car tariffs or ongoing negotiations on cost sharing of the US forces stationed in South Korea.