Korea expects US pressure on auto industry in FTA talks

South Korea's trade ministry said Monday it will push to start talks to amend the free trade agreement with the United States within a month or so and expected Washington to engage in hardball tactics, especially in autos.

The Ministry of Trade, Industry and Energy reported its FTA plan to the National Assembly, wrapping up the domestic procedures required for beginning the renegotiation of the five-year-old trade deal.

The latest move comes as Seoul accepted US President Donald Trump's demand to rewrite terms of the pact he called "horrible," citing trade deficits in the manufacturing sector.

"There is a possibility that the US could demand abolishing remaining tariffs on goods and adjusting duties on major items to resolve the trade imbalance between the two nations," the ministry said in the report. "(The US) is especially interested in improving the market access in auto parts, such as lowering non-tariff barriers."

The ministry said the two sides are expected to negotiate a wide range of issues, including merchandise, service, investment, source of origin and non-tariff regulations, at the negotiating table.

"Starting with talks within this year or early next year, we will push for follow-up negotiations with a three- to four-week interval," the ministry said.

In the goods trade, the government expected the US could demand stricter rules of origins on the auto and steel industries.

American automotive officials have complained non-tariff trade barriers in the South Korean market, including requirements for local standards and environmental regulations.

In the North American Free Trade Agreement talks, Trump's team is calling for stricter rules of origin in auto parts to track them more closely to have a higher share of them coming from the US, drawing opposition from Canadian and Mexican negotiators

Seoul officials also expect US negotiators will want to add steel to the tracing list, arguing some cheap Chinese steel finds its way through the South Korean market into the US

During a parliamentary committee meeting, Trade Minister Kim Hyun-chong said the government would consider revising the controversial investor-state dispute settlement clause in the upcoming talks.

With the ISDS provision, investors can sue countries for alleged discriminatory practices through international arbitration bodies. Local experts have expressed concerns that large multinational companies could exploit the clause, leading to the infringement of South Korea's judicial sovereignty.

Kim stressed that there won't be additional opening of the agricultural sector as local farmers and livestock breeders have suffered damages from cheap imports of beef and fruits.

"We expect that the US could demand (more opening in the agricultural sector) as part of its negotiation strategy," Kim said. "Touching on the agriculture sector would lead to big losses for small gains, so I think (the US) would have to handle the issue appropriately."

In regard to calls for strengthening safeguard standards for US beef imports, Kim said his team will consider the option as a way to protect the domestic industry.

US beef has gained a bigger presence in South Korea thanks to the free trade deal, achieving a market share of over 50 percent of the import market in January-September, according to the latest data from the Korea International Trade Association.

The government said it will seek ways to reach a "reciprocal" deal on the areas but vowed to guard against the additional market opening in the agricultural sector. 

"We will push for negotiations with the US under a goal of improving the mutual benefits and balance of interests," the ministry said. "We will propose our demands equivalent to the US calls and push for decreasing the scope of the renegotiations."

To start talks, the US administration has to send a letter notifying Congress that it intends to launch FTA negotiations in 90 days. It must also hold public hearings and disclose its goal 30 days prior to official talks. (Yonhap)