Outcry from US business community forces Trump to rethink plans to scrap treatyReports to the US Congress indicating the White House does not plan to discuss backing out of the South Korea-US Free Trade Agreement (KORUS FTA) any time soon are raising questions about why it changed its position in the space of just four days and how this may affect future negotiations.
Fischer wrote: "During this challenging time, we must demonstrate solidarity with our allies as they face significant threats".
According to the United States International Trade Commission, the tariffs the USA imposed on South Korean petrochemical products a year ago had an average rate of 0.6%. "We welcome bilateral discussions to strengthen the economic ties between South Korea and the United States, and we reiterate the importance of transparency and close consultation by the administration with Congress and American businesses and workers". South Korea, they noted, is America's seventh largest export market.
Understandably, newly elected President Moon Jae-in and his trade negotiators have been reluctant to accede to a full-scale renegotiation of KORUS, particularly given Trump's economically ignorant (and impossible) demand that a new agreement result in lowering the US-Korean trade deficit.
Fischer concluded: "We are witnessing one of the toughest farm economies since the 1980s. Withdrawing from KORUS would significantly disadvantage many successful US exporters, seriously harm many USA manufacturers and consumers, and badly undermine broader US economic and strategic interests". And Scott estimates that this trade deficit has cost the US some 90,000 jobs. USA media reported that procedures on terminating the trade pact could begin as early as this week.
U.S. President Donald Trump has long blamed the KORUS trade deal for U.S. trade deficit with South Korea. Likewise, the USA gained a net profit of US$14.1 billion in 2015 in its trade with the service sector of South Korea. "As various USA economists and industrialists have pointed out, the US trade deficit with South Korea may not be due to the unfair trade accord but to macroeconomic factors, such as the difference in industrial structures of the two countries, disparate business cycles and the Fourth Industrial Revolution", the Korea Times editorial noted. The United States runs a trade deficit with South Korea.
ROB SCOTT: We were supposed to benefit from the deal. Pork exports were $365 million in 2016 and making South Korea the fifth largest export market.
Whether Trump will go that far remains to be seen. In fact, some of our competitors, such as Australia, Canada and the European Union, have signed their own trade agreements with South Korea. In contrast, South Korea's economy has been lackluster, so Koreans are buying less.
China is South Korea's number one export market, averaging 25 percent of Korea's exports over the past decade. The administration should curb talks of withdrawing from KORUS, and it should tread lightly with respect to trade enforcement actions. All this implies that a Trump rejection of the free trade agreement would be bad economic policy as well as a geopolitical disaster.
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