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THE INVESTOR
May 21, 2018
Big Reunion

Economy

KORUS FTA talks resume amid growing trade tensions

  • PUBLISHED :January 31, 2018 - 16:51
  • UPDATED :January 31, 2018 - 16:51
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[THE INVESTOR] Korea and the US resumed the second round of talks to review the bilateral free trade agreement in Seoul on Jan. 31 in the wake of growing tension following the US safeguard measures on Korean washers and solar panels.

The two-day talks, led by Yoo Myung-hee, director general for FTA negotiations at Korea’s trade ministry and Michael Beeman, assistant US trade representative, follow the first round of talks on Jan. 5 in Washington. 


Yoo Myung-hee (second from left), director general for FTA negotiations at Korea’s trade ministry, sits for the second round of review talks on the Korea-US free trade agreement in Seoul on Jan. 31.



In the first round, the US had primarily raised the issue of the automobile sector where the US currently sees the greatest trade deficit between the two nations. The US trade deficit with Korea in the auto sector stood at US$12.9 billion last year, accounting for 72 percent of the total trade deficit of US$17.8 billion, according to the Korea International Trade Association.

In order to narrow the deficit, The US is likely to call for deregulations on environment standards regarded as non-tariff barriers by the US car industry, according to industry watchers. They are also likely to call for increasing the quota of imported cars that do not satisfy safety standards of Korea.

However, local auto experts have pointed out that the low sales of the US cars in Korea is not due to the bilateral trade deal because trade rules are identically applied to all other imported carmakers from Europe and Japan.  “The low sales of the US cars here are not because of trade regulations but due to design preferences such as how their vehicles tend to be too big for small Korean land. The Korean government should rationally persuade the US side with respect to the deficit issue,” said Dealim University automotive professor Kim Pil-soo.

The Korean side, for its part, is expected to focus on trade remedies in the wake of the latest US safeguard measures on Korean washers and solar panels last week. Director General Yoo also told reporters before entering the negotiation room, “We will raise the trade remedy issue because it is important to us.”

The Korean government is likely to call for clarification into the ambiguous rules of the FTA.

The Article 10.5 currently says when an imported item is not a critical factor in damaging the local industry, it may be excluded from safeguard measures. The Korean side is likely to call for the revision of the phrase from “may exclude” to “shall exclude.”

This can be based on the facts including Whirlpool’s recent announcement of posting US$21.3 billion in net profit last year, a US$600 million rise from a year earlier, proving the US appliance maker has not been hurt by imported products.

The Korean government is also likely to discuss the mechanism of the investor-state dispute settlement that is regarded as a toxic provision among local trade experts. Under ISDS, the US investors, who are damaged by the Korean government laws and regulations, can seek compensation from the government through international arbitration organizations.

In October, a woman surnamed Seo who had acquired US citizenship in 2013, sought compensation from the Korean government based on the ISDS article. Seo had said her house and land that she bought for 330 million won in Seoul was designated as redevelopment and the government offered her 850 million won in compensation. But, she refused to receive the compensation and claimed the Korean government cannot nationalize the investment made by foreigners under the bilateral trade deal. The Korean government is concerned that similar suits may follow when the ISDS article is not revised.

Meanwhile, outside the venue for the trade talks, a coalition of civic groups -- mainly led by agriculture and stockbreeding civic groups -- held a rally opposing the trade deal, chanting, “Terminate the KORUS FTA.”

They claimed Korea should make the US trade pressure an opportunity to end the FTA as it is unfair and anti-public welfare.

By Shin Ji-hye/The Korea Herald (shinjh@heraldcorp.com)

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