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Six year old free trade agreement overhauled by USA and South Korea

29 March 2018

The Trump administration says some of the key changes affect the auto industry, which accounts for a big chunk of the trade deficit the United States runs with South Korea.

"We have come to an agreement in principle, and we expect to roll out specific details on that very soon", White House spokeswoman Sarah Sanders told a briefing.

The auto sector is among the most contentious issues in South Korea's trade dealings with the U.S. Yet, the revised agreement will likely have little immediate impact on South Korea's exports to the United States.

The revised deal also postpones the phasing out of a U.S. tariff of 25% on pickup trucks from South Korea.

U.S. President Donald Trump on Wednesday hailed the revised free trade agreement with South Korea as a "great deal" for workers in both countries.

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They told reporters that the deal includes provisions outlined by South Korean officials on Monday, including a 20-year extension of the 25-percent USA tariff on pickup trucks and a doubling of the Korean import cap on autos that meet US -specifications to 50,000 per manufacturer per year.

One official declared that "the President was correct to undertake this renegotiation". It will remain subject to the 10 percent aluminum tariff imposed by Trump that took effect March 23.

However, it has been suspending the duties on allies like the EU, Canada and Mexico.

In addition to the increased access for American vehicles that meet United States but not necessarily South Korean safety standards, the USA officials also said they won reductions in non-tariff barriers to U.S. vehicle sales, including elimination of duplicate environmental testing requirements and recognition of U.S. replacement parts standards.

In addition to the agreement on autos, the South Korean trade ministry announced Monday that it would accept a new quota on steel shipped to the United States that equalled about 70 per cent of its annual average over the last three years. While the plan had limited additional funds for innovative drugs to Korean companies, it will include higher payments for innovative American-made drugs as well starting this year.

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Relations between the US and South Korea have been strained at several points in the past year as Trump has railed against an US$18 billion trade deficit and denounced the US-Korea Free Trade Agreement, known as Korus.

The United States and South Korea also agreed to try to make sure neither country devalues its currency intentionally to gain an unfair advantage on trade.

Under this approach, Congress does not have to approve the final agreement between the United States and South Korea.

At the House Ways and Means hearing on March 21, Republicans and Democrats said they wanted more details about the South Korea negotiations. "And we obviously would want to be kept abreast and in the loop as to the changes that are going to be made and as to our consideration as to how it will affect our districts". Free Trade Agreement, known as KORUS, a day after Korean Trade Minister Kim Hyun-chong announced the move.

The United States has never included a provision on currencies in a trade negotiation before, according to Trump administration officials. Envoys from Seoul and Washington have been holding talks to renew the deal for months.

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Six year old free trade agreement overhauled by USA and South Korea