KORUS Renegotiation Update

By Patrick Togni

North Carolina maintains deep economic ties with the Republic of Korea. In fact, the State of North Carolina maintains a trade-facilitation office in Seoul that is designed “to support export activity” and “to facilitate foreign direct investment into North Carolina.” This article provides you with a primer on recent developments regarding the renegotiation of the U.S.-Korea Free Trade Agreement (KORUS). United States Trade Representative (USTR) Robert Lighthizer formally notified Korea in July that the U.S. requested a special Joint Committee meeting under KORUS to start the process of negotiating to remove barriers to U.S. trade and consider amendments to the agreement. USTR’s action was consistent with the Trump Administration’s stated objective of reducing the trade deficit. KORUS entered into force in March 2002 and, from 2011 to 2016, the U.S. trade deficit in goods with Korea more than doubled from $13.2 billion to $27.6 billion.

KORUS Joint Committee special sessions took place in Seoul, South Korea, on August 22, 2017, and in Washington, D.C., on October 4, 2017.  At the conclusion of last month’s session, USTR Lighthizer stated that he “initiated Joint Committee discussions at the direction of the President to improve outcomes under this agreement for all Americans.  I now look forward to intensified engagement with Korea in an expeditious manner to resolve outstanding implementation issues as well as to engage soon on amendments that will lead to fair, reciprocal trade.”

The KORUS Joint Committee second special session concluded on the eve of President Trump’s first visit to Asia.  The President’s itinerary included a stop in the Republic of Korea on November 7.  During his visit, President Trump participated in a bilateral meeting with President Moon Jae-in and visited American and South Korean service members. President Trump also spoke at the National Assembly, where he expressed his appreciation for “productive discussions on increasing military cooperation and improving the trade relationship between our nations on the principle of fairness and reciprocity.”

Press reports in South Korea indicate that formal negotiations may commence “as early as January” 2018.  Events that must take place in South Korea prior to the commencement of formal negotiations include an economic feasibility study, public hearings, and reports to the National Assembly.

Although the United States predicated its decision to call for KORUS renegotiations in large part due to the significant U.S. trade deficit in goods with Korea, the South Korean Minister of Agriculture, Food and Rural Affairs, Kim Yung-rok, recently indicated that South Korea also will emphasize its own trade imbalance with the United States in key sectors, including agriculture.  Minister Kim Yung-rok stated that “the imbalance in trade is already huge in agriculture. While Korea exported $700 million worth of goods to the United States, imports stood at $6.8 billion.”  The negotiations are expected to address other areas, however, including market access.  For example, press reports indicate that the United States has communicated its intention to push South Korea to relax certain data localization requirements that impact cloud server management options in the financial services sector.

More generally, KORUS renegotiations are increasingly a focus of domestic political discourse in South Korea, especially by leadership in the opposition parties.  Other stakeholders have urged the South Korean government to take KORUS renegotiations very seriously because the Trump Administration could attempt to use the potential for withdrawal from KORUS as leverage in other international trade negotiations, including ongoing talks with China and the North American Free Trade Agreement Parties.