WASHINGTON: The White House late Tuesday hailed the successful renegotiation of the US-Korea Free Trade Agreement, which they said expanded US access to the South Korean auto market while limiting US imports of Korean steel and aluminum.
The White House also said talks were underway to finalize a side agreement prohibiting both countries from competitively devaluing their currencies to gain advantages in trade.
Washington and Seoul this week reached an agreement “in principle” to update the 2012 agreement — which President Donald Trump had denounced as a “horrible deal” — following talks that began last summer.
In 2017, the United States ran a US$10.3 billion trade deficit in goods and services with South Korea. Counting services only, however, the US had a US$12.3 billion surplus.
Officials in Seoul on Monday had already disclosed much of what the White House described Tuesday as the “historic” first-ever renegotiation of any trade agreement with the United States.
“Clearly, the president was correct to undertake this renegotiation,” a senior administration official said Tuesday on condition of anonymity.
“He was able to make it a better deal and win concessions that should have been won before and to create and take advantage of leverage in the situation in a way that helps US workers and businesses.”
Korean officials admitted Monday that they had made concessions to preserve the deal and avoid the 25% steel tariff Trump announced this month against friends and foes alike, raising the specter of a global trade war.
These included agreeing to a hard quota on steel exports to the US — reducing them to 30% below current levels to 2.7 million tons — and a 20-year extension of the current 25% US tariff on Korean-made pickup trucks.
Preventing currency devaluation
The 10% tariff on aluminum imports Trump announced this month will remain in place, however.
The deal also includes streamlining Korean customs inspections while harmonizing Korean and US standards for auto safety and auto parts to allow more sales of US cars.
South Korea will also double to 50,000 vehicles its per-manufacturer limit on imports of US autos made to US and not South Korean safety standards.
General Motors, Fiat Chrysler and Ford each shipped fewer than 10,000 vehicles in 2017, however.
The deal also includes a provision that will allow US pharmaceutical companies to benefit from premium pricing for certain drugs sold in South Korea.
According to Trump administration officials, Washington made only minor concessions to South Korea, updating procedures for trade remedy cases and changing language on the resolution of investor-state disputes to deter frivolous or duplicate claims.
“These were items that were procedural in nature, that were consistent with what we already do in US law,” the senior administration official said.
Washington’s Treasury Department was currently in talks to produce a side agreement to prohibit “competitive currency devaluation” which had yet to be finalized, the official said.
South Korea currently figures on a US Treasury Department list of countries whose currency practices are closely scrutinized but Washington has not designated any country a currency manipulator.