U.S. President Donald Trump visited South Korea on November 7 for the first time since his inauguration. Trump is the first American president to make a state visit to South Korea in 25 years. During the two-day visit, Trump discussed in-depth bilateral economic concerns as well as the North Korean nuclear issue with his South Korean counterpart Moon Jae-in. Here is Professor Kim Gwang-seok of the Graduate School of International Studies of Hanyang University to explain the economic message that the U.S. president stressed during his stay in South Korea.
Trump has emphasized the need for creating jobs in the U.S. even before he was elected president. Trump believes that the U.S. unilaterally imports various products from South Korea, resulting in a trade imbalance, less production, and fewer jobs in the U.S. To generate more jobs and reduce the U.S. trade deficit with South Korea, Trump thinks the U.S. should export more to South Korea. He focused on arms sales, in particular. Reflecting this view, the two sides agreed to have additional talks on South Korea’s arms purchases from the U.S. Accordingly, South Korea will be buying advanced strategic assets, including nuclear-powered submarines and reconnaissance assets. The agreement means more jobs in related areas in the U.S.
Upon arriving in South Korea on November 7, Trump brought up the job issue. The first stop in his South Korean tour was Camp Humphreys in Pyeongtaek, a military base for the U.S. Forces Korea. There, he said that creating jobs in the U.S. was to be one of the main points of discussion during his trip to South Korea. The remarks show that the bilateral trade issue comprises his primary concern. During the following South Korea-U.S. summit, the trade issue was put on the table as a major topic, along with the North Korean nuclear weapons development. The two countries agreed to immediately start negotiations over South Korea’s introduction of advanced strategic assets. Apparently, Trump visited South Korea with two purposes in mind—resolving the North Korean nuclear crisis and easing the U.S.’ trade deficit with South Korea. It turned out that Trump earned practical benefits, while South Korea upheld the cause for strengthening security cooperation with the U.S.
Basically, the U.S. claims that it has suffered from a chronic trade deficit with South Korea and the trade imbalance has worsened even further under the bilateral FTA. The claim is considered groundless for the most part, but the U.S. believes that a revision of the FTA will work favorably for the U.S. to repair the trade imbalance, increase output, and create more jobs in the nation. South Korea and the U.S. agreed to push for their FTA negotiations promptly in a way to correct the imbalance.
Previously, Trump even raised the possibility of scrapping the FTA with South Korea. But during the recent bilateral summit, he toned down his rhetoric and didn’t mention
renegotiating or terminating the deal. Rather, he underlined the principle of focusing on reducing the U.S.’ trade deficit with South Korea. Also, he did not directly mention the bilateral FTA in his speech at the National Assembly in Seoul. During the summit talks, however, he did stress the importance of fairness and balance as well as the need for swift negotiations. Given that, the U.S. is expected to intensify its pressure on a revision of the FTA.
Washington’s request for the revision will likely target the automobile sector. It has claimed that regulations concerning safety and the environment in South Korea are too strict for the U.S. to export its cars to South Korea, working as a non-tariff barrier. During the prospective negotiations, the U.S. side is expected to demand that South Korea ease those standards or recognize a relevant U.S. certification. In another sensitive area of agricultural and fisheries products, South Korea has remained firm in its previous position that it will never open the market. But the U.S. will also likely request that South Korea import some agricultural and fisheries products little by little. Also, the U.S. has slapped excessive anti-dumping and countervailing duties on South Korean steel products. But it is expected to seek an amendment to trade terms regarding steel in an even stricter way.
The U.S. is also considering placing import restrictions on and banning sales of Korean memory chips and solar panels as well as Korean washing machines, which are awaiting a safeguard ruling set for November 21. In response, the South Korean government is devising a strategy to minimize Washington’s growing trade pressure. Regarding the agricultural and fisheries sectors, in particular, it will make sure that the areas are a “red line” that should never be crossed.
Before the South Korea-U.S. summit, Washington included South Korea on the currency watchlist and designated it as a country with which it has suffered a chronic trade deficit. It has also taken intense trade protectionism measures against South Korea. But through the recent bilateral summit, South Korea expressed its will to reflect Washington’s demands in some way. If the requests are met, the U.S. may ease the harsh measures. When it comes to trade, there are both gains and losses. South Korea may demand something in return for responding to Washington’s requests, and the U.S. is likely to accept South Korea’s demands. So, the U.S. may change its previously unfriendly attitude toward South Korea, at least in trade.
South Korea held a public hearing on a possible amendment to the Korea-U.S. FTA on November 10. It is going through domestic procedures for the FTA revision more quickly than the U.S. As President Moon said that he will press ahead with revision negotiations promptly, the government plans to complete relevant domestic procedures within this month, leaving little room for the U.S. to mention the trade imbalance. After the summit, the leaders of the two countries announced a plan for South Korea’s investment worth 74.8 billion US dollars in the U.S. Under the plan, South Korean companies will spend the funds over the next five years by investing in the U.S. or purchasing American goods. The plan is expected to ease the U.S.’ trade pressure against South Korea. After his South Korea visit, Trump flew to China, where he also announced 253.5 billion US dollars’ worth of business deals with China, the largest-scale ever in bilateral economic cooperation. The U.S. and China also promised to make mutual efforts to resolve the trade imbalance issue, over which the two sides had been expected to clash. While a change is anticipated in the U.S.’ trade protectionism, President Moon has held a summit with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation Summit to provide momentum for reducing economic risks in the region.
The South Korea-China summit, the South Korea-U.S. summit, and the U.S-China summit will hopefully help alleviate extreme trade protectionism measures. The three countries should work together to counter protectionism and address security issues as well, including sanctions on North Korea and its denuclearization. By cooperating in various areas, they need to maintain their economic partnership.
The Korean economy has experienced difficulties this year, due to growing uncertainties. But it is now facing a turning point, following a series of summit talks with the U.S. and China. If South Korea effectively deals with unfavorable external factors, such as Washington’s trade pressure and conflict with China over the deployment of the THAAD missile system, the Korean economy will gain momentum for growth. To this end, the government needs to display balanced diplomacy. Another major diplomatic event, the ASEAN Plus Three summit, will take place on November 14. Attention turns to whether mutually beneficial results will be produced this week.