The United States formally notified South Korea that it wants to start the process of revising the free trade agreement between the two countries, the office of the US Trade Representative said Wednesday.
USTR Robert Lighthizer made the notification in a letter to South Korean Trade Minister Joo Hyung-hwan, calling for the convening of "a special Joint Committee meeting under the US-Korea Free Trade Agreement to start the process of negotiating to remove barriers to US trade and consider needed amendments to the agreement," the office said in a statement.
In the letter, Lighthizer said the US wants to hold the meeting to "consider matters affecting the operation" of the trade pact, "including possible amendments and modifications."
He proposed that the meeting take place in Washington next month.
"I believe that this session and follow-on negotiations will provide an opportunity to review progress on the implementation of the agreement, resolve several problems regarding market access in Korea for US exports, and, most importantly, address our significant trade imbalance," Lighthizer said in the letter.
"Korea is an important ally and key trading partner, and in order to strengthen our relationship, we need free, fair and balanced trade," he said.
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A panoramic view of a Busan port (Herald Business) |
Lighthizer also noted that US President Donald Trump and South Korean President Moon Jae-in committed to "foster expanded and balanced trade while creating reciprocal benefits and fair treatment" when they held their first summit in Washington late last month.
"It's imperative that we work together to ensure that the economic partnership between our two countries is not only strong and vibrant, but also fair, and that the KORUS Agreement benefits the US economy as much as it does that of Korea," he said.
Lighthizer said that reducing trade deficits with its trading partners around the world is a key focus of the Trump administration, and the US has "real concerns about our significant trade imbalance with South Korea."
He also said that the US has had a persistent goods deficit with Korea for nearly two decades.
"When the KORUS Agreement was negotiated, expectations were high that both of our economies would realize significant gains,"
he said. "However, our overall deficit with Korea has increased, and our goods deficit has doubled since the Agreement entered into force," he said. "It is critical that we achieve real progress that fosters a truly fair and level playing field, and a more balanced trade relationship."
Meanwhile, South Korea said Thursday (Korean time) that it accepted the USTR letter asking to open a special joint committee to amend the KORUS FTA.
"The South Korea government will voice our opinion that it is necessary for working-level officials from the two countries first to study, analyze and assess the effect of the KORUS FTA and check the reasons of the bilateral trade imbalance as we have made such suggestions at the Seoul-Washington summit last month," Seoul's trade ministry said in a statement.
"We will send a senior official to the US and discuss detailed schedules and agenda items with the USTR," it added.
According to the trade pact, a special joint committee can be held within 30 days upon request by one party, with the two sides needing to reach an agreement on decisions made at the committee.
But the ministry clarified a task force team for altering the free trade pact requires Seoul's consent since the US is calling for "amendments and modifications," not "renegotiations."
"At the joint committee, the two countries will talk about issues that they are concerned with. But a joint committee doesn't mean that the two parties have started renegotiations," said Yeo Han-koo, a director general at the ministry. "The renegotiation table opens when the two countries agree to do so."
He said South Korea will discuss ways to reduce the US trade deficit and improve fairness of the KORUS FTA.
The official also said it may take more than 30 days to hold the proposed special joint committee as the South Korean trade ministry is subject to the government reorganization. The 30-day period is not mandatory, he added.
Under the government restructuring plan outlined by the new Moon Jae-in government, a semi-independent trade bureau will be set up, with the trade chief to be called a minister. But the bill on the government reorganization has been unattended at the National Assembly due to a prolonged political standoff.
Moreover, he said there is low possibility that Washington will repeal the trade pact due to strong backlash from US businesses, who have also benefited from expanded bilateral trade between the two economies.
"The pact has an article about the repeal of the agreement. One side notifies the other side of its decision to end the FTA, which will be terminated within 180 days," said Yeo. "But, the KORUS FTA is also important for American companies. They will not stand by if the US government repeals it."
The US demand came as no surprise as Trump has long vowed to improve the deal.
During the June 30 summit with Moon, Trump even said that the two countries "are renegotiating" the pact, saying the agreement has been "rough" for the US and calling it "not exactly a great deal."
During last year's campaign, Trump blamed free trade deals for being a key cause of job losses and other American economic problems in an attempt to woo voters struggling with economic difficulties. He denounced the FTA with South Korea a "job killing" deal and a "disaster."
The painstakingly negotiated Korea-US FTA has been in effect since 2012 and has widely been considered a symbol of the economic alliance between the two countries.
South Korean officials say the deal has been mutually beneficial. Experts also say that even though the US has a deficit in goods trade, the country has enjoyed surpluses in services trade under the deal, and US deficits in goods trade would have been larger had it not been for the pact.
The US International Trade Commission (ITC) also said in a report last year that the Korea deal has been good for American interests, saying the agreement is estimated to have improved bilateral merchandise trade balances by $15.8 billion in 2015.
That means that had it not been for the deal, the US trade deficits would have been larger. (Yonhap)
