Real meaning behind Trump’s comment on renegotiating FTA

Real meaning behind Trump’s comment on renegotiating FTA. July. 03, 2017 07:26. by Gun-Huk Lee, Ho-Sung Cheon gun@donga.com,thousand@donga.com.

After leaders of South Korea and the U.S. announced the joint statement following the summit, the two countries have different views on the renegotiation of FTA. The presidential office Cheong Wa Dae refuted that the leaders of the two countries have never agreed on the renegotiation. However, the White House showed its intention to prepare for the renegotiation.

According to the joint statement issued on last Friday (local time), the two nations committed to foster balanced trade while creating reciprocal benefits and fair treatment. However, Trump insisted that U.S. automobiles should be sold in Korea and asked South Korea not to allow Chinese steel dumping. He mentioned that the automobile and steel industries are main examples of unfair trade.

Many observe that the reason why Trump specifically mentioned the two industries is to soothe the Rust Belt (deindustrialized regions) that is his main political ground. In the past, the U.S. targeted service areas such as agriculture and livestock production (beef) and intellectual property rights (IPRs). They argued that President Trump mentioned industrial products for the negotiation in an effort to strengthen political supports within the U.S., even though the market opening of the relating industries has completed already.

Considering that there is no direct reference on the renegotiation in the joint statement, the Korean government’s explanation is right. However, the government did not deny that the FTA was one of agendas during the summit. Hence, it is certain that the U.S. will begin to pressure South Korea for renegotiation as soon as it is ready. The Article 16.7 (consultations) of the FTA stipulates, “To foster understanding between the Parties, each Party shall, on request of the other Party, enter into consultations regarding representations made by the other Party. The Party to which a request for consultations has been addressed shall accord full and sympathetic consideration to the concerns raised by the other Party.”

Experts stressed that South Korea should also demand the U.S. for its benefits, if the renegotiation of FTA is inescapable. Examples are clauses that products made in Kaesong Industrial Complex are not recognized as South Korean products and the one relating to investor state disputes, which is also known as the poison pill provision. “South Korea can also point out its worsening trade deficits in areas of agriculture and farming industries, and pharmaceuticals," said Professor Lee Hae-young of International relations at Hanshin University. "There is a need to fix deteriorating service balance with the U.S.”