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Seoul seeks clarity on Trump trade comment

April 02, 2018 13:33·
Moments before Donald Trump suggested he would delay the renegotiated agreement he hailed it as ‘a wonderful deal’ and criticized the existing trade agreement with South Korea as ‘a horror show

Moments before Donald Trump suggested he would delay the renegotiated agreement he hailed it as ‘a wonderful deal’ and criticized the existing trade agreement with South Korea as ‘a horror show

The Trump administration has reached an agreement in principle on a new trade deal with South Korea.

As it turned out, South Korea was celebrating too early. "A renegotiated KORUS will strengthen our trade relationship with Korea, ensuring that the country continues to receive nutritious USA dairy foods". USA dairy exporters have repeatedly encountered challenges with South Korea's overly narrow interpretation of which goods qualify as those originating from the United States.

In a letter to U.S. Trade Representative Robert Lighthizer, the two dairy groups expressed appreciation that trade officials were able to secure a result with South Korea that addressed certain dairy industry concerns while preserving the overall agreement. South Korea agreed to a quota on its steel exports to the United States of 70 percent of the amount exported from 2015 to 2017.

On balance, based on what we know now (the final legal text has not been released yet), the new KORUS deal does not offer a radical remake of USA trade policy.

The Trump Administrations negotiations will eliminate burdensome South Korean regulations that have impeded USA exports and ensure that trade partners follow through on implementation.

South Korea will extend the phase-out of the 25 percent US tariff on trucks until 2041, well beyond the current phase-out date of 2021. That 25 percent levy, which was set to expire in 2021, effectively has locked South Korean trucks out of the USA market.

"We want to make a deal that's fair for the United States and fair for South Korea".

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South Korea also agreed to eliminate non-tariff barriers such as certain environmental testing requirements and recognize USA standards on auto parts, according to the Office of the U.S. Trade Representative. That's double the current cap of 25,000 cars, although actual sales are well below that.

"But it's going to be very interesting over the next period of time", Trump said, before returning to the Korean trade pact.

The new and extended trade barriers imposed by the administration mark a departure from past trade agreements.

Trump's team went the other way: Rather than trying to pry open the Korean market to American rice, for example, they chose to erect a higher, more long-lasting wall of protection around the domestic truck industry. The impact of these quotas/tariffs will be some degree of price increase for USA consumers. "And it did - for them", he said amid laughter from the audience.

On a separate track, the Treasury Department is finalizing an understanding with South Korea to avoid practices that provide an unfair competitive advantage.

When setting fuel economy standards in the future, South Korea will take USA corporate average fuel economy regulations into account and will continue to include more lenient standards for smaller volume exporters.

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