The Korean government has announced that it will invest nearly $4 billion of its 2020 annual budget on innovation and technology to bolster South Korean
Korean-U.S. Relations in 2018: Tension, Revision, and Progress
The public story that unfolded from January to September of 2018 to December 7th in regards to the KORUS FTA seems a bit more drastic than it actually was. As every multi-trillion federal international trade deal goes, the recent KORUS FTA revisions had to navigate the many political, cultural, and economic agendas which compete for the top spots of newspapers and twitter feeds. One can find themselves easily distracted by the financially-apocalyptic topics that media sources might spin up surrounding the context in which the revisions took place, when in reality, the actual negotiations inside the meeting rooms were far less ominous.
As Fellows of the Peterson Institute for International Economics, Jeffrey J Schott and Euijin Jung explain in their “18-22 KORUS Amendments” policy brief:
“No surprise then that when U.S. and Korean trade officials got together in late August 2017, the rhetoric was heated; preparatory talks, designed to set the negotiating agenda for KORUS revisions, got off on the wrong foot. But with high tensions on the Korean peninsula, enflamed by frequent North Korean missile tests, neither side wanted trade friction to undercut the U.S.-South Korea strategic alliance. Within a few months, the two sides opted instead to negotiate limited amendments to the KORUS FTA rather than overhauling the entire agreement as was being done concurrently by the United States, Canada, and Mexico in their North American trade talks.”
Thinking back to this tension, including the agreement dubbed as a “horrible deal” months after the 2017 presidential inauguration, how can one explain the relatively straightforward outcome this past September despite the explicit diplomatic ultimatums passed around? It is important to understand the chronological events of the 2018 KORUS FTA negotiations:
- January 5 – KORUS negotiations begin
- March 26 – Agreement was reached, but U.S. officials pushed Korea to reduce steel imports by 30% or paying an additional 25% tariff on imported steel as proposed
- September 24 – After separate FTA talks to address this unexpected component of the trade deal, U.S. and Korea Presidents sign the deal
- December 7 – Korea’s National Assembly ratifies revised KORUS FTA
It was a combination of two factors. First, Korean-US trade deficit was in decline during negotiations, coincidentally sweetening the deal. Second, while it may sound altruistic in nature, the tenacity of both diplomatic parties to fight for a bi-partisan agreement echoes this idea: the FTA agreement is, in fact, for both parties’ best interests. Negotiations devoted themselves to the mission at hand: improving the trade conditions between both nations’ economically entwined trajectories. Successfully achieving this holistic goal means that Korea and the U.S. can continue to boom forward with a mutually expansive investment frontier and balanced trade potential in front of them.
To make this deal happen, the main revision addressed the obligatory KORUS requirements which the U.S. deemed Korea was not upholding, specifically regarding modifications to auto regulations and emissions standards, transparency in unfair trade cases, and restrictions of investor-state dispute settlement procedures, regulations of pharmaceutical pricing and textiles.
A few items were left for another day, including rules of origin for autos and parts, new agricultural liberalization, and currency issues. Nevertheless, the deal was signed and Korean National Assembly officially ratified the agreement on Dec 7th, 2018. The agreement’s revisions are successfully in effect and one can reflect on how the KORUS FTA has indeed mitigated, not exacerbated, trade friction between both countries. From March of 2012 to December of 2018, revisions to the KORUS FTA has reduced the trade imbalance between Seoul and Washington.