After months of starting talks between the two countries, aimed at renegotiating Korus, which is the United States-Korea Free Trade Agreement, the South Korean government on Monday announced that they had struck a new version of the trade deal.
Last year, President Donald Trump criticized the existing trade deal between the two countries, calling it “horrible” and a “job killer” and, since taking office, had announced his intention to renegotiate or terminate the treaty altogether, which had raised fears that it could cause discord between the two countries. South Korea is one of the United States’ closest allies in Asia and its sixth biggest trading partner, and the trade in goods and services between the two countries has soared, with last year totaling near $150 billion.
Now, after talks of renegotiation which began in January, officials from both countries said that the two sides reached an agreement on the key points. Krystal Tan, an Asia economist at research firm Capital Economics, reported to her clients saying that the concessions South Korea has agreed to “will have a very small impact on its economy.”
Under the new version of Korus, U.S. automakers will have more access to the South Korean market, shipping more cars to the United States from South Korea to make up the $23 billion annual trade deficit between the two countries. According to U.S. government figures, the United States imported $16 billion worth of South Korean passenger car vehicles but sent just $1.5 billion worth in the other direction. U.S. automakers have previously complained they are put at disadvantage because of having to yield to South Korean rules. Troy Stangarone, a Washington-based think tank and a senior director at the Korea Economic Institute of America, said the results of this renegotiation is good for U.S. automakers, and for South Korea, as South Korea does not have to open up its agricultural industry to U.S. imports. Moreover, Stangarone said that the two countries agreeing to the changes of the deal has put “a potentially divisive issue off of the table” as they now shift their focus on talks with North Korea and its nuclear programs.
South Korea’s Trade Ministry said that the new version of the deal will allow U.S. automakers to import 50,000 vehicles annually, doubling the previous quota. The new agreement has also got South Korea to secure a partial exemption from Trump’s new tariffs on steel and aluminum, permanently exempting South Korea from the new 25% tariff of the 70% of steel that South Korea exports to the United States annually.
[via CNN Money]