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Cars waiting to be exported from the Hyundai Motor port in Ulsan

After the US administration under President Donald Trump officially requested negotiations to revise the South Korea-US Free Trade Agreement (KORUS FTA), Seoul has stated that the two countries have not made an agreement to negotiate a revision of the KORUS FTA. “We will communicate to the US our position that we should first jointly investigate, analyze and assess the effects of implementing the KORUS FTA and then determine whether the agreement is actually the cause of the bilateral trade imbalance,” Seoul said.

During a briefing on July 13, the Ministry addressed a document that the Office of the United States Trade Representative (USTR) sent to Minister of Trade, Industry and Energy Joo Hyung-hwan on July 12 officially requesting a meeting of a special session of the South Korea-US FTA Joint Committee. “We’re preparing for the contingency of opening talks for revising the agreement, but that may not be our best option. We will soon be sending director general-level trade officials to the US to arrange the specific agenda and timing of the special session with the USTR,” the Ministry said during the briefing. The Ministry explained that, according to the text of the KORUS FTA, South Korea is not required to accept a proposal by the US for talks aimed at amending the agreement and that for such talks to occur, there must be an agreement between the two sides. President Moon Jae-in did not agree to an amendment during his summit with Trump at the end of June, and even if a special session of the joint committee is held, that in itself does not mean the beginning of such talks, the government said.

“The government is carefully preparing for that scenario. But since the US’s greatest interest is reducing the trade deficit with South Korea, we believe that it may be possible for the US to resolve the trade deficit issue through another means, and not necessarily by amending the agreement,” the Ministry said. This appears to mean that Seoul will join the US in looking for ways to resolve the trade deficit issue without going so far as to revise the agreement.

“US Commerce Department figures show that the US’s trade deficit with South Korea amounted to US$27.7 billion last year, and we first need to investigate, analyze and assess what part of this deficit was due to the KORUS FTA and what part was due to bilateral economic conditions on the macro level and factors related to industrial structure on the micro level. We will be boldly making this request to the US during the special session,” a Ministry official said.

If one of the parties to the agreement requests a special session of the South Korea-US FTA Joint Committee (during which the two parties will hold talks to revise and amend the agreement), the other party is technically required to agree within 30 days. “Since the Government Organization Act is currently being revised in the National Assembly, the Trade Minister, which represents South Korea in the South Korea-US FTA Joint Committee, has not yet been decided. As such, we’re planning to adjust the timing of the special session [to a later date] through working-level deliberations with the US,” the Ministry said when asked about the date of the special session.

Some trade experts believe that if the US, as one of the parties to the KORUS FTA, requested talks to revise the agreement but the two sides failed to reach consensus about holding such talks, the agreement could be scrapped. “The commercial sectors in both countries don’t want the KORUS FTA to be cancelled. We’re planning to explain that canceling the agreement would actually hurt the US and that the agreement has been mutually beneficial since it took effect in 2012,” said an official from the Ministry. If the two sides agree to enter talks to revise the agreement, one big question is the extent to which the original agreement will be revised. “For now, it’s hard to predict the extent [of a revision]. For example, just two sections could be revised, but it’s also conceivable that there could be a complete overhaul in which more than a hundred sections are revised,” the Ministry said.

At the moment, Seoul is emphasizing the fact that it has not “agreed” to negotiate a revision of the KORUS FTA. But President Trump has promised on multiple occasions since his presidential campaign last year to renegotiate the KORUS FTA, and though Seoul has made a variety of attempts to appease the US to avoid renegotiating or revising the agreement, it has essentially failed to avoid such talks. In order to win over Trump, Seoul has taken steps to reduce the trade surplus with the US by increasing imports of American shale gas, and the group of businesspeople who accompanied Moon to the US for his summit last month brought “gifts” worth a total of 40 trillion won, including large-scale investment (US$12.8 billion over five years) and purchases such as American liquefied natural gas (LNG) and US-manufactured airplanes (US$22.4 billion over five years).

But none of this could prevent the “consummate business negotiator” Trump from asking for the KORUS FTA to be revised. Even though South Korea concentrated on defense and made generous concessions to the US, the Americans continue to pressure South Korea with the threat of revising the agreement even as they pocketed these concessions. Though the KORUS FTA is a “free trade” agreement that eliminates tariffs on products from both countries across a wide range of areas, Trump has denounced it as a “horrible agreement,” focusing solely on the numerical imbalance in bilateral trade. Over the past seven months, Seoul has been so focused on appeasing the US that it could already find itself at an disadvantage in the trade negotiation.

By Cho Kye-wan, staff reporter

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