South Korean trade

Trump gets South Korean concessions in first trade deal

By DOUG PALMER

President Donald Trump has reached the first trade deal of his administration, getting South Korea to make a few changes to a six-year-old pact he said was a horrible deal.

Trump had largely criticized the previous agreement largely because of the U.S.’s auto trade deficit with South Korea, which has grown significantly since the deal went into force in 2012. At his insistence, the two countries launched talks last year to renegotiate the pact.

Senior administration officials Tuesday night outlined the details of the revised U.S.-Korea Free Trade Agreement, known as KORUS, most of which were announced over the weekend by the South Korean government.

Separately, Seoul won a permanent exemption from a new 25 percent steel tariff imposed by Trump as of last week, although not from a new 10 percent duty on aluminum imports.

The changes to the KORUS agreement include a provision that will double to 50,000 the number of cars each U.S. manufacturer can export to South Korea without having to meet the country’s more stringent safety standards. Others address additional auto regulatory barriers.

“While some of these may seem small individually, altogether these create a suite of outcomes that make it a lot easier for our auto companies to compete on a level playing field there in South Korea,” a senior administration official said.

Those include aligning South Korean environmental testing standards with the United States‘ and recognizing U.S. standards for auto parts, which should make it easier for companies to make auto sales in the market, he said.

Seoul has also agreed to let the United States maintain its 25 percent tariff on light trucks for 20 extra years, instead of phasing it out by 2021 as originally negotiated.

In another area, South Korea is taking steps to make it easier for American-made cars to meet the country’s fuel efficiency standards, U.S. officials said.

Last year, the United States exported about $2.5 billion worth of autos and auto parts to South Korea and imported about $23.9 billion worth of those products from the Asian ally.

South Korea also agreed to reform its custom inspection procedures for determining whether an import meets the necessary “rules-of-origin” to qualify for duty reductions under the pact.

“Oftentimes in the past, Korea has had burdensome and arbitrary inspections for country of origin at the border. It’s been a big problem, not just for cars, but for all kinds of industrial products, even agricultural products and processed foods,” the administration official said.

In exchange for the steel tariff exemption, South Korea agreed to cap its steel exports at 70 percent of the average volume from the past three years on a product-by-product basis. Administration officials said that other countries seeking tariff exemptions would have to agree to similar quota restrictions, but not necessarily at the same levels.

The one additional detail that had not been announced was that the United States and South Korea are finalizing an agreement that will prohibit either country from devaluing their currency for an unfair trade advantage, senior administration officials said.

U.S. officials hailed the new currency side agreement — which is being finalized by the U.S. Treasury Department and South Korea’s finance ministry — as the first of its kind.

But the currency measure is not actually part of the revamped KORUS pact and is not enforceable through that agreement's binding dispute settlement provisions. (The Trans-Pacific Partnership, which Trump abandoned, also contained a non-binding currency agreement.)

It also could be a precedent for future U.S. trade agreements, an administration official said, without commenting on whether the revised NAFTA agreement now being negotiated with Canada and Mexico would include a similar provision.

The United States also won a commitment that South Korea would open up its national drug reimbursement program to American companies, which previously have not been able to receive payments under the program.

“To date, that system has only applied to Korean companies, and our pharmaceutical companies, which are the leading ones in the world, have not been able to take advantage of that program,” the administration official said.

“Korea has agreed that within 2018 that it will amend its premium pricing policy to make sure it’s consistent with previous commitments under the agreement and to make sure U.S. companies have non-discriminatory and fair treatment for their pharmaceutical exports,” he said.

South Korea won certain “procedural guarantees” regarding the administration of U.S. anti-dumping laws and import duties meant to counteract subsidies.

Treasury Secretary Steven Mnuchin had said on “Fox News Sunday” that the U.S. and South Korea had reached "a very productive understanding" on amendments to KORUS and the tariff exemptions. "We expect to sign that agreement soon," Mnuchin said over the weekend, calling Seoul's willingness to cap its steel exports to the U.S. an "absolute win-win."