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South Korea Feeling Pressure to Appease Trump on Trade

FILE - South Korea's Hanjin Shipping Co. container ship Hanjin Montevideo, top, is anchored outside the Port of Long Beach in Long Beach, Calif.
FILE - South Korea's Hanjin Shipping Co. container ship Hanjin Montevideo, top, is anchored outside the Port of Long Beach in Long Beach, Calif.

American business leaders in South Korea are urging leaders in Seoul to increase market access to U.S. companies to dissuade U.S. President Donald Trump from enacting protectionist policies.

During the U.S. presidential election campaign Trump threatened to pull out of the U.S.-South Korea bilateral free trade agreement (KORUS FTA) that he called a “job killing deal” that “doubled our trade deficit with South Korea and destroyed nearly 100,000 American jobs."

Non-tariff regulations

The American Chamber of Commerce in Korea (AMCHAM Korea) wants to preserve the KORUS FTA that took effect in 2012 and eliminated 95 percent of tariffs on consumer and industrial products over a five-year period. But to convince Trump it is worth saving, James Kim, the president of GM Korea and Chairman of AMCHAM Korea said Seoul needs to end practices that circumvent the FTA by imposing non-tariff related regulations on imports.

“We need to make the Korean economy more transparent and predictable, by making the regulatory process more deliberative,” said Kim at a recent press conference in Seoul.

The American auto industry in particular has complained that they spend an inordinate amount of time and money to deal with unwarranted environmental standards and certification procedures that are often introduced without notice or clear explanations.

In South Korea, foreign cars make up only 15 percent of the market, compared to 40 percent import penetration in developed countries like the U.S. and European nations.

Nearly 80 percent of the current $28 billion U.S. trade deficit with Korea is in the automotive sector, according to the American Automotive Policy Council.

South Korean authorities have downplayed charges of unfair trade practices, saying most complaints have been resolved through negotiations, and arguing the FTA has also benefited the U.S. economy.

U.S. auto imports into South Korea, for example, have increased over 20 percent in the last two years, according to the Korea Automobile Manufacturers Association (KAMA.)

However, international investment attorney Jeffrey Jones said President Trump’s tough talk on trade adds new urgency to clearing up any misunderstandings over alleged unfair trade practices and ending discriminatory policies that unfairly favors domestic industry over American imports.

“I think the message that we would like to achieve is that we are out of time,” said Jones, who is a former AMCHAM Korea chairman and advisor to the Seoul International Business Advisory Council.

FILE - The grill of a car made by Hyundai, South Korea's largest automaker.
FILE - The grill of a car made by Hyundai, South Korea's largest automaker.

American jobs

AMCHAM Korea is sending a delegation to Washington to defend the KORUS FTA, and discuss with lawmakers the mutual benefits of trade with South Korea.

The AMCHAM Korea chairman views President Trump not as a hardcore proponent of protectionist trade policies, but more as a pro-business advocate trying to negotiate more equitable trade terms.

“Given that Trump is a respected business person with many senior leaders in his administration coming from a business background, we believe a pragmatic and practical approach by business will be received very, very well,” said Kim.

The way to persuade Trump to support the U.S.-Korean trade agreement, Kim said, is to first and foremost point out the increase of American exports to South Korea from steel and semiconductors that rose by close to 8 percent over the last decade. Also since the FTA was put in place, some U.S. agricultural exports to Korea improved dramatically. Cheese exports grew by 500 percent and pork bellies increased by over 90 percent.

Kim said South Korean companies like Hyundai and Kia, which have opened manufacturing plants in the U.S, have created more than 45,000 American jobs.

After Reuters reported last week that Samsung was considering opening a new manufacturing facility in the U.S, Trump tweeted “Thank you” to the company, “We would love to have you.”

The Korean electronics giant did not confirm it will build a new U.S. plant, but said in a statement that it is making significant investments that include the existing $17 billion semiconductor manufacturing facility in Austin, Texas.

The Korea Herald newspaper reported last week that Samsung, LG and Hyundai all have plants in Mexico that export to the U.S. under the North American Free Trade Agreement (NAFTA). The Korean companies are concerned they may face increased tariffs if Trump renegotiates NAFTA and are reportedly feeling pressure to expand their operations into the U.S.

Youmi Kim contributed to this report.