The renegotiation of the Korea-US free trade deal is becoming a matter of “when” rather than “if.”
US President Donald Trump pledged Sunday to begin to renegotiate the North American Free Trade Agreement with Mexico and Canada. Trump signed an executive order Monday to withdraw the US from the Trans-Pacific Partnership, a 12-nation trade pact. He blasted the five-year-old trade deal with Korea as a destroyer of American jobs during his campaign.
The Trump government is expected to demand the opening of additional markets, mostly in the service sector. Trade experts here predict US negotiators will make an issue of nontariff barriers rather than tariff ones.
Korean government officials need to heed experts’ advice that Seoul should convince Washington that the trade pact has been and will be beneficial to the US as well as to Korea. They should highlight that the deal has expanded bilateral trade and increased jobs in the US. The agreement improved bilateral merchandise trade balances by $15.8 billion last year, according to a report by the US International Trade Commission.
US-Korea trade volume expanded 15 percent from $100.7 billion in 2011 to $113.8 billion in 2015, according to a report by the US Trade Representative. The top 12 Korean companies which invested in the US created about 35,000 jobs last year, according to the Heritage Foundation. The number of job gains is more than three times larger than when the trade deal took effect. Exports of US cars to Korea nearly doubled from the pre-deal days. Exports of US agricultural products to Korea increased 31 percent from 2011 to 2015.
Trade experts also note Korea may well utilize the renegotiation as a chance to increase the bilateral economic cooperation toward the fourth industrial revolution.
When it comes to persuading Trump effectively that the deal has little to do with American job losses, summit or ministerial diplomacy would count for much.
The advices deserve attention from presidential runners, who have not taken a clear stand yet on the issue. For now, they are distracted by pressing domestic politics ahead of the election, but they should be aware that the renegotiation of the trade deal will almost certainly come to the desk of the next president.
Korea and the US should remember trade is a two-way street. Protectionism will lead to destruction and cost jobs.
Most mainstream economists agree that free trade is good for an economy in the long-run, while trade-restrictive measures hurt consumers. Essentially, free trade enables lower prices for consumers, increased exports and a greater choice of goods.
Protectionist trade policies might spark a global trade war, which could trigger a global recession. Higher import tariffs could be passed through by companies in the form of higher prices. Companies could avoid tariffs by producing more in the US, but the problem is that labor is more expensive in America.
What concerns Korea more than the renegotiation of its trade pact with the US is the possibility of a trade war between the US and China. China accounts for about half of the US trade deficits, and the country is pointed out as the main culprit for massive job losses in the US. China also pursues a global economic hegemony. The Trump administration considers imposing a 45 percent tariff on Chinese goods to be sold in the US and also designating China a currency manipulator.
China, for its part, could counter such US moves by restricting US business investment in China, limiting imports of US goods, imposing retaliatory tariffs and undercutting the US.
If the Sino-US trade war escalates, the Korean economy will be caught in the crossfire between the two giants on which it is heavily dependent. And in the meantime, China has been retaliating against Korea economically for its planned deployment of a US antimissile system.
Korea faces a growing prospect of renegotiating its trade deal with the US. It should gird itself for the uphill task and rising protectionist tide.
