[Editorial] Renegotiation a reality

The administration of US President Donald Trump is increasing trade pressure on South Korea.

Seoul and Washington agreed Wednesday to begin a process to amend their free trade agreement. It seems South Korea could not help but accept the US demand for renegotiation after Trump threatened to terminate the deal amid mounting tension over North Korea’s provocations.

On the following day, the US International Trade Commission found that surging imports of washing machines from Samsung Electronics and LG Electronics harmed domestic producers. It is the second ITC ruling on harm to domestic industry after Korean solar panels were found to have hurt US manufacturers. If Trump decides to impose barriers or restrictions, the two Korean home appliance makers may be slapped with high tariffs as Whirlpool petitioned.

Earlier, the US imposed antidumping duties on steel imports from South Korea.

Though Washington has taken such measures to shake economic ties with Seoul, the government response, in retrospect, seemed complacent and out of touch with the reality.

Despite Trump vowing to fix trade deals unfavorable to American businesses and workers, including the “horrible” one with South Korea, President Moon Jae-in has asserted that there would be no renegotiation.

In the first meeting with US trade officials in August, Seoul offered a joint review of the impact of the agreement on the two economies, then abruptly accepted Washington’s request for amendment negotiation after Trump threatened to scrap the deal. South Korean Trade Minister Kim Hyun-chong said the threats of withdrawal were real, not a “bluff.” The government took things easy despite Washington’s forewarning of its push for renegotiation. There are even suspicions that the government obeyed humbly for fear of conflicts with the US over North Korea.

Now that revision negotiation has become an irreversible reality, South Korea must develop its own strategies.

Considering the Rust Belt is the bedrock of support for Trump, Washington is likely to seek to revise tariffs on steel and automobiles. Tariff abolition for US beef and a wider opening of the Korean market for US agricultural products are expected to be on the table.

South Korea’s fresh demands are not worked out yet, because either the government or the business community has placed top priority on the maintenance of status quo rather than on the amendment of the trade deal.

If the government agonizes over how far it could accept US demands, the odds are against South Korea. It must have bargaining chips to make proactive or counter offers. Negotiation, though arduous, does not unilaterally put South Korea at a disadvantage. Without doubt, there must be clauses that are unfavorable to Korea. The service sector is one of them. Korea has suffered from a chronic deficit in service sector trade with the US.

Trump is far from the type of leader who goes easy on trading partners if they are US allies. He vows to put America first, no matter what.

The Ministry of Trade, Industry and Energy will reportedly hold a meeting with officials from the electronics industry including Samsung Electronics and LG Electronics to plan countermeasures to the US trade ruling. In an upcoming ITC hearing on remedies or import restrictions, they must convince US officials that Samsung and LG did nothing to harm Whirlpool, that its falling market share was a consequence of its management decisions and that barriers, if imposed, will harm American consumers eventually.

The biggest concern for the US would be to cut down on its trade deficit with South Korea, which reached $23.2 billion last year. In the 1980s when Japan had a large trade surplus with the US, it tried to seek a trade balance through capital investment. It was wise of Samsung Electronics and LG Electronics to make clear shortly after the trade ruling that they would keep pushing to construct their plants in the US. To make trade sanctions burdensome is a business strategy to consider.

The US has ramped up trade pressure on South Korea. The government, businesses and politicians all should join forces to minimize harm to domestic industries as well as further national interests.