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US to renegotiate South Korea trade pact

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US to renegotiate South Korea trade pact

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US to renegotiate South Korea trade pact

American businesses ‘face too many barriers’, Mike Pence says during visit to Seoul

Mike Pence © AP

The Trump administration is to review and reform the US trade deal with South Korea, Mike Pence said on Tuesday, citing a widening bilateral trade deficit and obstacles for American businesses in the east Asian nation.

“We have to be honest about where our trade relationship is falling short,” the US vice-president told US and Korean business leaders in Seoul. “Our businesses continue to face too many barriers to entry, which tilts the playing field against American workers.”

The US has to “level that playing field”, he added, saying “we will work with you” as we “reform Korus [the Korea-US trade deal] in the days ahead”. 

The comments on what was once touted by Washington as the “gold standard” in trade pacts came just before Mr Pence flew to Tokyo for the second leg of his four-nation Asian tour. 

While South Korea has known since the election of Donald Trump in November that the trade pact could face renegotiation, Mr Pence’s comments mark the first time the US administration has been so explicit about the need of reforming the contentious deal, which Mr Trump deems detrimental to US interests. The new administration had already pulled out of the Trans-Pacific Partnership, a 12-nation trade agreement, and stepped up attacks on the North American Free Trade Agreement.

The Korea-US agreement, negotiated during the Republican administration of George W Bush, has been a target of trade critics for years. It has now been caught up in the Trump administration’s push to address bilateral trade deficits blamed for the loss of US manufacturing jobs. The US trade deficit in goods with South Korea, which has existed for two decades, has soared in recent years from $16.6bn in 2012 to $27.7bn in 2016. 

The hard-fought deal has been divisive in both countries since it came into force in 2012. While supporters say it has helped spur much closer economic relations between the two allies, US critics have pounced on the sharp increase in the US trade deficit as evidence that the deal is not living up to its goals for the US economy. South Korean farmers and some labour unions initially opposed the deal on the grounds that opening up the domestic market could hurt Korean interests.

Joo Hyung-hwan, South Korea’s commerce minister, visited Washington in March to meet his US counterpart Wilbur Ross, and said the deal had helped expand bilateral trade and investment and that South Korea wanted to expand and develop the pact. But a recent report from the Office of the US Trade Representative said US companies continued to face numerous regulatory trade barriers in South Korea that were hampering US exports to the country.

Mr Pence met Prime Minister Shinzo Abe as well as his deputy Taro Aso in Tokyo later on Tuesday. The US and Japanese deputy leaders agreed to launch a programme of economic talks based around three policy themes: trade, macroeconomic policy and sectoral co-operation in industries such as autos, and said they would meet again before the end of the year.

Additional reporting by Shawn Donnan in Washington

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