» People from the United States and other foreign nationals living in Korea cheer upon hearing the news of Obama’s winning the U.S. presidential election at a restaurant in Seoul on November 5 (KST).

The South Korea-U.S. free trade agreement is likely to face renegotiation following the election of Democrat Barack Obama, who has called a free trade agreement between South Korea and the United States an “unfair deal,” as the next U.S. president.

Since the beginning of the Democratic presidential campaign, U.S. President-elect Obama has repeatedly said that he wanted to see the South Korea-U.S. FTA revised. Experts say it is highly likely the Obama administration, after its inauguration, will ask South Korea to renegotiate the auto provisions in the deal. Obama and the Democratic Party, which are supported by labor unions, and automotive labor unions in particular, need to return the political favor amid the worst downturn in the U.S. auto industry in 25 years. In the third presidential debate, Obama expressed his dissatisfaction about the automobile trade with South Korea, saying South Korea is “sending hundreds of thousands of South Korean cars into the United States... We can only get 4,000 to 5,000 into South Korea. That is not free trade.”

Some ruling party politicians in South Korea downplayed Obama’s remark as “political rhetoric used to become president.” However, many experts predict there is another reason Obama will accept calls by his supporters to renegotiate the trade pact: renegotiating the auto provisions in the deal is part of the trade agenda for the U.S. Democratic Party, which gained a majority in both the House of Representative and the Senate. In a report released immediately after Obama’s victory was announced, the government-run Korea Trade-Investment Promotion Agency said, “Opinion leaders in the United States view changing the auto provisions as an important factor for (congressional) approval of the South Korea-U.S. free trade agreement.”

It is unclear how or to what extent the United States would seek to renegotiate. But if the new U.S. administration again wants to delay eliminating tariffs until the market share in South Korea for cars made in the United States increases to what it would consider to be a meaningful level, it will probably kill the deal. If the United States wants to renegotiate, both sides will need to fully revise the existing agreement, but it is likely that the South Korean government will find it nearly impossible to accept because it would be seen as politically burdensome and as violating the basic principle of free trade. Under the current trade deal, if it comes into force, the United States must abolish its 2.5 percent import duty on South Korean cars with an engine displacement of less than 3,000 cc, and phase out the 2.5 percent import duty on cars with an engine displacement of 3,000 cc or more within three years and 25 percent tariff on pickup trucks within 10 years. In exchange, South Korea would abolish its eight percent import duty on all cars made in the United States.

It is likely that the United States will ask South Korea for additional negotiations on the auto trade, as the two sides did for the resumption of U.S. beef imports to South Korea, or may ask to amend some of the terms in the auto provision in the trade pact through the signing of an addendum to the agreement. Jeong Jae-hwa, the head of the trade research division at the Korea International Trade Association, said, “At stake is to what extent the U.S. government will accept a request from the (automobile) industry.”

While the South Korean government and the ruling Grand National Party had pressed the National Assembly to ratify the deal in order to put pressure on the U.S. Congresses to pass it, most experts were skeptical because ratification of free trade deals in the United States has been dependent upon the landscape of domestic politics in the past. In fact, Congress passed a free trade deal with Peru and then the labor and environment provisions of the deal were renegotiated following a request from the Democratic Party and the deal was passed again.

If the United States demands South Korea renegotiate the free trade deal, South Korea should use it as a chance to correct the provisions South Korea feels are unfair, experts say. Hanshin University Professor Lee Hae-young said the South Korean government “should respond strongly by requesting (the United States) renegotiate provisions that are disadvantageous to us such as the investor-state lawsuit system and the opening of our financial and capital markets.”

Please direct questions or comments to [englishhani@hani.co.kr]