Daily Management Review

There May Be Breakdown In Trump's Aggressive Drive Against One 'Horrible' Trade Deal


09/04/2017




There May Be Breakdown In Trump's Aggressive Drive Against One 'Horrible' Trade Deal
South Korea is one country may manage to stymie major changes in the aggressive drive by the Trump administration to renegotiate U.S. trade deals.
 
Threatening to terminate it, the U.S.-Korea Free Trade Agreement, known as Korus, was described as a "horrible deal" that has "destroyed" his country by President Donald Trump during an April interview with the Washington Post.
 
In a bid to address the administration's concerns about the U.S. goods trade deficit with the North Asian country, the U.S. Trade Representative Robert Lighthizer had sought a special meeting with South Korea on the deal.
 
Concerns that the U.S. goods deficit with South Korea had more than doubled from the 2012 implementation of the deal through 2016 was reiterated in a statement which was issued by the USTR at the end of that meeting which ended last week.
 
The were no comments available from the USTR.
 
The two sides had "different views," on both the cause of the goods deficit and whether there was a need to amend the deal, said Trade Minister Kim Hyun-chong, who was the country's chief negotiator for Korus, last week on the South Korean side.
 
Since the deal took effect, the U.S. goods trade deficit with South Korea has certainly risen. According to USTR figures, $27.6 billion was the deficit in 2016 from $13.2 billion in 2011, the last full year before implementation. But neither does that figure include the services component of trade, in which the U.S. has a surplus with South Korea nor is it clear that Korus is to blame for that change.
 
When it came to trying to force through changes to the deal, several reasons the USTR might be on shaky ground were pointed out by analysts.
 
The sectors that were responsible for it, which were electronics and autos – was one big problem with the USTR's claim that Korus was causing a goods trade deficit was pointed out by Deborah Elms, executive director at the Asian Trade Centre.
 
"Korus didn't touch electronics. It didn't touch electronics because electronics were already tariff free," she said in an interview last week, noting that was due to an existing agreement with the World Trade Organization
.
Additionally, "if we have a trade deficit in autos, it's really hard to blame Korus for that because the timeline for Korus hasn't done anything to autos yet," she said.
 
It would be difficult for the USTR to pin specific issues on the deal, others also noted.
 
"The trade agreement came into effect five years ago and under normal kind of conditions you would not be making a decision at this early stage of the success of the FTA," Joshua Meltzer, senior fellow in global economy and development at think tank Brookings Institution, said last week. "A lot of the provisions are phased in over a number of years and are only coming into effect now."
 
And with South Korea entering a recession shortly after the deal was completed in 2011, the rise in the goods trade deficit might be simply macroeconomic, Meltzer also noted.
 
"Korea naturally was going to be importing less than the U.S. and the U.S. was growing quite strongly and so it was sucking in more imports from Korea," he said. "It's not clear, fundamentally, what is the problem with the trade agreement and certainly what could be done to address the bilateral deficit."
 
"Our companies tell us that it is a good deal as written," Tami Overby, the senior vice president for Asia at the U.S. Chamber of Commerce, said last week.
 
(Sourcec:www.cnbc.com) 






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