Sandler, Travis & Rosenberg Trade Report | Friday, October 6, 2017
The U.S. and South Korea have agreed to negotiate amendments to their bilateral free trade agreement after weeks of uncertainty, including a Trump administration threat to withdraw the U.S. from the agreement.
Following the second special session of the joint committee under KORUS, held Oct. 4 in Washington, D.C., U.S. Trade Representative Robert Lighthizer said he looks forward to “intensified engagement with Korea in an expeditious manner” to resolve outstanding issues with respect to implementation of the agreement. The two sides also plan to “engage soon on amendments that will lead fair, reciprocal trade.”
Korean officials had previously said they saw no need for substantial revisions to KORUS, arguing that it has generated mutually beneficial outcomes in terms of trade, investment, and employment. At the first special session in August, Seoul rejected a U.S. proposal to renegotiate the agreement and instead called for a joint study on its effects before any further decisions are made.
While it does not appear that such a study has been completed, an Oct. 4 statement from the Korean trade ministry said both sides now share an understanding of the need to amend the agreement to further strengthen its mutual benefits. The ministry said it would begin the domestic procedures necessary to make such amendments, including consultations with lawmakers and stakeholders.
No details have yet been made available on the specific changes the two sides might seek, though there are some indications. The U.S. has placed a priority on reducing its trade deficit with Korea, which it says has more than doubled since KORUS took effect in 2012, and particularly in the automotive sector, which in 2016 accounted for nearly 90 percent of the total deficit of $27.6 billion. A USTR press release notes that U.S. services exports to Korea stalled between 2013 and 2016, another issue the U.S. may seek to resolve in the forthcoming negotiations. A Bloomberg article adds that accelerating Korea’s elimination of tariffs on U.S. agricultural products could also be an objective.