The US government this week released a 17-page summary of its proposal to renegotiate the North American Free Trade Agreement that included a ban on currency manipulation, which is also expected to impact looming talks on amending the Korea-US Free Trade Agreement.
The Office of the United States Trade Representative on Monday issued the NAFTA amendment summary looking to reduce the US trade deficit by improving accessibility of its exports to Mexico and Canada. In particular, the USTR office announced that the Donald Trump administration is looking to enact provisions to deter currency manipulation with its trading partners to diminish unfair profits.
With neither Canada nor Mexico appearing on the US Treasury Department‘s currency watch list as the countries are not considered to be currency manipulators, the move is suspected to be aimed at putting the squeeze on counterparts such as South Korea in the US’ push to modify trade deals, industry watchers said.
Although Korea has not been designated as a currency manipulator, the country continues to be on the US Treasury’s watch list. The Treasury Department’s semiannual report released in April said the country hits two of the three criteria to be considered an official currency manipulator. The Treasury said it was urging Korea to increase its exchange rate flexibility and that it will be closely monitoring its currency intervention practices.
According to industry experts, Korea being viewed as a currency manipulator may give the US the ammunition it needs to force trade concessions in its favor. If the Trump administration is able to prove Korea’s currency practices meet the legal definition of currency manipulation, a complaint can also be lodged to the World Trade Organization, further putting the screws to Korea to agree to the US’ FTA modification demands.
Shortly before the release of the NAFTA amendment guideline, President Trump reportedly lashed out against unfair trade practices, saying he intends to take more legal actions to deter imbalance trade deals.
“No longer are we going to allow other countries to break the rules, to steal our jobs and drain our wealth,” Trump was quoted as saying by the New York Times.
On Tuesday, the US Congress requested a consultation meeting with the USTR office regarding its proposed amendments to the KORUS FTA.
Lawmakers from the Senate and House of Representatives sent a letter to US Trade Representative Robert Lighthizer earlier this week requesting the office to consult closely with lawmakers prior to meeting with South Korean officials, according to a statement by the Korea International Trade Association.
“The US trade agreement with South Korea remains a key cornerstone of US economic and strategic engagement in the Asia-Pacific region,” the letter said. “Preserving and strengthening the strong economic relationship between the United States and South Korea is particularly important today with rising tensions on the Korean Peninsula.”
The letter came shortly after the US government sent Korea’s Ministry of Trade, Industry and Energy a formal request last week to hold a joint meeting to begin revision of KORUS within a month.
By Julie Jackson (email@example.com