The South Korean government's increased investment of more than $700 million on innovation would typically put a strain on the budgets of most similarly-situated economies.
Korean-U.S. Business Conditions Stabilized with Signing of FTA
In late September, 2018, President Moon and President Trump sat down to sign a revised Korean-U.S. Free Trade Agreement in New York.
“It’s a great day for the United States, and it’s a great day for South Korea,” Mr. Trump said after the two met, officially marking the first bilateral trade deal of the Trump administration.
While rumors circulated this year, surrounding the deal’s mysterious negotiations and impacts, the agreement, in general, has been transparent and straightforward as unveiled by the White House’s expectations last March. Regardless of what was speculated leading up to the signing, diplomatic motivations brought to the table have cemented these coupled economies in a clear path forward, with the necessary domestic procedures bringing the agreement into effect soon.
Revisions to the FTA aspire to widen economic potential for the Korean market to increased American exports. The revised FTA will also extend the 25% tariff on Korean pickup trucks until 2041. These aspirations are confirmed by the signed agreement, but tangible outcomes are still to be determined, with both administrations running the numbers for the economic chain of events that will unfold.
The Congressional Research Service’s U.S.-South Korea (KORUS) FTA In Focus’ notes that specific questions have been raised under Section 232, as investigations into U.S. auto imports may jeopardize ratification of KORUS FTA. Further, according to the CRS report, these lawmakers tasked with ratifying the agreement would not ratify the KORUS FTA if Korean motor vehicles are not exempt from U.S. auto tariffs.
Outside of this, analysts who tracked the negotiations closely remarked that there are no major changes to the preexisting agreement, which was put into effect during President Obama’s engagement with South Korea. Many of the provisions in the original KORUS agreement were not modified with September’s signing, as well as the new provisions surrounding U.S. motor vehicle exports to Korea, and services.
Most analysts, as noted by the CRS report, stand in agreement that while potentially positive for both countries, the modifications are relatively limited in scope and unlikely to fundamentally alter the balance of commitments. Nevertheless, this is exciting news for the diplomatic and economic relationship between the U.S. and South Korea.
“Manufacturers were glad to see the president recommit himself to the U.S. trading partnership with Korea today,” stated Linda Dempsey, the VP of international economic affairs at the National Association of Manufacturers. “A robust U.S.-Korea F.T.A. is essential to the jobs of hundreds of thousands of manufacturing workers across America.”
Looking ahead after the signing, KORUS FTA does not need approval from Congress to take effect, as the U.S. administration negotiated changes to the agreement independently to the requirements of U.S. Trade Promotion Authority (TPA). “U.S.-South Korea (KORUS) FTA InFocus” explains:
TPA provides for expedited congressional consideration of legislation to implement U.S. trade agreements based on meeting specific criteria. The proposed FTA modifications, however, consist primarily of South Korean regulatory changes and U.S. tariff modifications, and therefore may not require action by Congress for implementation. In South Korea, the National Assembly must approve the modifications. The KORUS implementing legislation and agreement provide little detail on amendment procedures but do provide presidential proclamation authority to modify the U.S. FTA tariff schedule.
Things are now in motion, and the agreement’s finality paves the way towards a more stable and mutually beneficial future for both countries, especially with the tense summer featuring nuclear threats between the US and North Korea.
President Moon expects the standards of the revised deal to start economic momentum in Korea soon, going on to say that “both countries will now be able to do business under more stable conditions,” Moon said.