Seoul has agreed to a quota for steel exports to the US 30 per cent below current sales and accepted extended tariffs on pick-up trucks to secure a revised trade deal with Washington and escape its steel duties, the government admitted today.
South Korea and the United States are security allies both threatened by the nuclear-armed North but since taking office US President Donald Trump repeatedly threatened to tear up their free-trade agreement, raising concerns about undermining the economic leg of their alliance.
The Trump administration instigated talks in July to renegotiate the free-trade treaty, known as KORUS, and the US last week imposed duties on steel imports from multiple countries including China, raising fears of a trade war.
South Korea and the United States have agreed "in principle" on the revisions of their free-trade agreement (FTA) and steel tariffs, Seoul's trade minister said today.
The South's economy is heavily dependent on trade, with the US as its second-biggest partner and Seoul's trade minister said Monday they had reached agreement on revising the KORUS deal after weeks of negotiations.
Under the pact, Seoul will further open its auto market to US manufacturers, while accepting a 20-year extension until 2041 to a 25 per cent US tariff on Korean pick-up trucks.
On steel, South Korea accepted an annual export quota of 2.68 million tonnes to the US, 70 percent of its average shipments in the past three years.
That amount will be exempted from the US steel tariffs, trade minister Kim Hyon-chong told reporters, but any excess will be liable to penalties.
He described the negotiations as "fierce" but insisted: "As a negotiator, I can say it was a negotiating table where I had nothing to feel inferior about."
But Sogang University international trade professor Heo Yoon told AFP: "The US got what it wanted."
"The Trump administration needed to harvest an outcome from the negotiation to show its supporters," he added, warning that Washington could in future "slap tariffs on semiconductors" -- a crucial South Korean export.
"I don't know what bargaining chips we have left to withstand trade pressures from the US."
Trump has long called the 2012 KORUS agreement a "horrible" deal and a job killer, arguing it was lopsided on the grounds that the US trade deficit had ballooned since it was signed.
The number of auto imports to South Korea from the US that will not have to meet Seoul's safety regulations was doubled to 50,000 vehicles, Kim said.
Apart from the steel tariffs exemption for the quota exports, he did not identify any other concessions on Washington's part.
He insisted that Seoul had been able to defend its "red line" on farm goods, obligatory use of US auto parts and avoid any backtracking on already exempted tariffs.
But he expected more turbulence in the relationship under the current US president.
"There are always risks in trade," Kim said.
"I think President Trump will be a two-term president and be at the White House for eight years and in my opinion, I think there will continue to be risks during this time."
The two sides will meet in the coming days to finalise the updated pact, Kim said.
All three major US automakers -- General Motors, Chrysler, Ford -- each shipped fewer than 10,000 vehicles to South Korea last year, Kim said, adding: "This is an important fact."
There were at present no South Korean pick-up truck exports to the US, he added, implying that no currently existing sales would be affected.
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