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(News Focus) Temporary U.S. tariff exemption puts burden on KORUS talks

All Headlines 10:01 March 23, 2018

By Kim Eun-jung

SEOUL, March 23 (Yonhap) -- South Korea breathed a sigh of relief as it received a temporary exemption from steep steel tariffs proposed by the United States, but tough work lies ahead in the upcoming trade negotiations amid rising pressure from Washington for a deal focused on a balance in the exchange of goods.

Speaking at a Senate hearing, U.S. Trade Representative Robert Lighthizer said Thursday that President Donald Trump had authorized a "pause" in the 25 percent tariff on steel imports from South Korea, the European Union, Argentina, Brazil, Canada and Mexico.

The announcement, which came just hours before its implementation, gave some breathing space for South Korean trade officials, who have been desperately lobbying American policymakers and officials in Washington D.C. over the past weeks, seeking to avoid the hefty duties. South Korea is the third largest steel exporter to the U.S.

But the temporary exemption created more pressure on Seoul to reach a trade deal with Washington that can satisfy Trump's demands to improve the balance of trade between the two nations. Talks have been underway since January to amend the six-year-old free trade agreement.

Lighthizer said he expected talks about permanent exemptions to the tariffs would be resolved by the end of April. Trump signaled that the suspensions are only temporary and he is willing to enact the tariffs if Washington fails to get better arrangements with its trading partners.

"The countries that received the temporary relief should negotiate terms (of permanent exemption), and we also have to continue talks with the U.S.," South Korean trade minister Kim Hyun-chong told Yonhap News by phone, without disclosing details of plans for the trade talks.

Hot-rolled coil products are lined up at a steel factory in Pohang, 374 kilomters southeast of Seoul, on March 22, 2018. (Yonhap)

Kim has made three trips to Washington in nearly a month to meet with U.S. Commerce Secretary Wilbur Ross and Lighthizer, to push hard for the tariff relief. Yoo Myung-hee, who leads the FTA negotiations with U.S., extended her stay in the U.S. following the third round of talk last week to assist Kim's outreach efforts.

The tariff decision came at a politically sensitive time, against the backdrop of a flurry of diplomacy by Seoul and Washington in preparation to hold separate summits with North Korean leader Kim Jong-un in the coming months to resolve the nuclear standoff.

As Washington is seen as using the tariffs as leverage to draw a better trade deal, local experts say Seoul may face stronger pressure to make concessions in some contentious issues, including the auto sector.

The USTR earlier said the two sides discussed "steps to rebalance the agreement to improve the large trade deficit in industrial goods, including autos and auto parts."

Following the third round of FTA talks last week, Seoul's trade ministry said the two sides "made some headway in some of the key issues and agreed to promptly conduct follow-up negotiations."

While the bilateral trade deal 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 sector, which is about 10 times larger than their home 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, according to trade ministry.

The U.S. is South Korea's second-largest trading partner after China, with bilateral trade reaching $119.3 billion in 2017, according to government data.

South Korea's trade surplus with the U.S. fell from $25.8 billion in 2015 to $17.8 billion last year on sluggish sales of autos and steel, and as the country imported more American beef and natural gas.

As the prospect for steel exports remains unclear, local steelmakers said they will continue efforts with their American clients and government officials to get permanent exclusions from the tariff list. The U.S. Commerce Department will decide on exclusions for certain products where domestic production in the U.S. is not sufficient to meet demand, a process that could last up to 90 days.

"The temporary relief only delays the imposition of tariffs. It doesn't give a clear indication of whether South Korean steel products will be exempted (from duties)," a senior official of a local steel company said, asking not to be named.


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