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S. Korean trade minister expects hardball trade tactics from U.S.

All News 17:43 January 08, 2018

By Kim Eun-jung

SEJONG, Jan. 8 (Yonhap) -- South Korea's trade minister on Monday said he expected growing pressure from the United States in the upcoming free trade agreement (FTA) talks, as President Donald Trump could ratchet up his rhetoric ahead of the first anniversary of his inauguration to appeal to his core base.

Kim Hyun-chong made the remark after South Korea and the U.S. concluded their first round of talks to amend the five-year-old trade deal in Washington on Friday.

"The Trump administration has adopted protectionist trade policies to create more jobs and cut trade deficits, so the U.S. is expected to add pressure in the FTA talks (with South Korea) ahead of the first anniversary of his inauguration on Jan. 20," Kim Hyun-chong said in a meeting with reporters. "It is premature to talk about the negotiations that have just begun, but I think there will be lots of work to do in a short period of time."

Kim, a former trade lawyer and ambassador to the U.N., vowed to stand up to U.S. demands that could "hamper technology development and negatively impact the next generation." He said that "no deal is better than a bad deal" when it comes to KORUS FTA negotiations.

The policymaker said the government will seek to revise the investor-state dispute settlement (ISDS) clause and explore ways to protect the agriculture industry, which has suffered from the implementation of the FTA.

With the ISDS provision, investors can sue countries for alleged discriminatory practices through international arbitration bodies. Local experts have expressed concerns that large multinational companies could exploit the clause, leading to the infringement of South Korea's judicial sovereignty.

"We will focus on our capacity to maximize national interests, while protecting the agriculture sector and reflecting the interests of local industry," Kim said.

The inaugural talk came at a time when the U.S. is pushing for a series of protective trade measures, including safeguard actions on Korean washers and anti-dumping duties on steel and chemical products.

Later this month, the U.S. Commerce Department is expected to release "Section 232" investigations on steel and aluminum on national security grounds, which could lead to broad tariffs or quotas on imports from China and South Korea.

In November, the U.S. International Trade Commission recommended a 50 percent tariff on large residential washers built by Samsung and LG exceeding the 1.2 million unit quota.

If Trump approves the safeguard measures triggered by U.S. company Whirlpool, it will be the first such action since 2002, when the administration of George W Bush imposed 8-30 percent duties on imported steel.

"We will actively reach out to related industries to resolve the issues in a timely manner," Kim said. "In regard to measures that violate international regulations, we will file a suit at the World Trade Organization."

Yoo Myung-hee, director-general of the ministry's trade policy bureau who led the first dialogue, said the U.S. will try to make narrow changes to the auto sector, such as fixing tariffs or the rules of origin, because Trump is not seeking congressional approval to revise the trade deal.

"The devil's in the details," Yoo said. "Some regulations are considered non-tariff barriers, but we have to look into whether (auto exports) are affected by the non-tariff barriers or consumer preference."

Seoul officials have anticipated increased pressure on the auto industry, which takes up a large part of the trade surplus with the U.S. About 80 percent of South Korea's trade surplus came from the auto sector in 2016.

Industry officials said the percentage of U.S. auto parts used by South Korean carmakers could become an important issue. This is also a thorny subject for the U.S. in the ongoing North American Free Agreement negotiations with Canada and Mexico.

With no tariffs levied on South Korean auto parts shipped to the U.S., local carmakers with assembly lines in the U.S. can pick whatever components they want to put into cars assembled in the world's No. 1 economy. The existing FTA has no specific clause on this issue.

While the FTA has boosted auto trade between the two nations, South Korean companies have enjoyed greater benefits thanks to the bigger size of the U.S. auto market, which is about 10 times that of the domestic market.

South Korea's auto exports to the U.S. jumped 80 percent from 2011 to $18.49 billion in 2015, while its imports of American-made cars soared 380 percent from 2011 to $1.68 billion in 2015, according to government data.

The U.S. market in 2016 accounted for 30 percent of the auto exports of Hyundai Motor Co., South Korea's top automaker, and its sister company, Kia Motors Corp. Together, the two companies, which belong to Hyundai Motor Group, constitute the fifth-largest automaker in the world in terms of sales.


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