Renegotiation of the Korea-US Free Trade Agreement is inching toward reality.
US President Donald Trump recently signed an executive order directing a review of 20 trade agreements for possible abuses, including the one with South Korea. The order gives Commerce Secretary Wilbur Ross 180 days to conduct the review.
Trump earlier signed another executive order for a 90-day review of the causes of massive US trade deficits. The review focuses on 16 countries including South Korea.
Trump said of the trade deal with South Korea in an interview with the Washington Times, “It’s been a very bad deal for the US, negotiated by Hillary Clinton.”
He said in another interview with Reuters he will either renegotiate or terminate the “horrible” free trade deal with South Korea.
Considering he first threatened to scrap the North American Free Trade Agreement then shifted to renegotiation, chances of the US terminating the trade agreement with South Korea look slim.
Every country is fighting an economic war with every other country to defend its national interests, sometimes at the risk of straining relations. The US is not an exception. Trump was elected president on his “America First” pledge. He places top priority on America in all his external policies.
His comments appear to signal that the US will push South Korea hard to maximize its interests.
For the export-driven South Korean economy, nothing but national security is more important than trade.
According to a Korea Economic Research Institute report, if the US narrows its trade deficits with South Korea to levels before the deal through renegotiations on tariffs, South Korea would see its exports fall by up to $17 billion over five years and about 100,000 jobs would disappear.
Yet, both the government and presidential candidates appear to be little aware of the seriousness of the problem.
When US Vice President Mike Pence said during his visit to Korea last month that Washington would review and reform the Korea-US trade agreement, South Korean government officials took his remark lightly and excluded the possibility of renegotiation. They expected minor adjustment or fine tuning.
In response to Trump’s remarks on renegotiation or termination, the government only said it would review all possibilities. Its tangible measures are nowhere to be found yet.
Presidential candidates have not made meaningful remarks thus far on how to deal with likely renegotiations of the trade deal.
Front-runner Moon Jae-in of the Democratic Party of Korea has swung between support and opposition. The deal was agreed during the Roh Moo-hyun administration when Moon was chief presidential secretary, then ratified during the Lee Myung-bak government, which took power from the Roh regime.
Moon opposed the ratification vehemently and pledged to renegotiate the deal in the 2012 presidential election.
But as the public has become favorable to the pact and wants it to stay on, he changed his position. In a TV debate between presidential candidates late last month, he argued the Roh government should be credited for its benefits.
Now it is time to stop talking about who deserves credits for the deal and talk about renegotiation strategies instead. Moon should explain the changes in his position.
South Korea needs to consider the responses of China and Japan carefully when it draws up measures. They took strategic moves early to prevent trade conflicts with the US.
Chinese President Xi Jinping offered Trump a 100-day plan to reduce its trade surplus with the US. He agreed to resume American beef imports and allowed more US holdings in Chinese financial institutions.
Japan promised to help create 700,000 US jobs and a $450 billion market through investment. It launched a high-level cooperative body, Japan-US Economic Dialogue.
On the other hand, South Korea has either looked on idly or acted too cautiously due to its presidential vacuum.
Renegotiation of the free trade agreement looks inevitable. The next president should promptly draw up strategic responses to prevent trade friction.