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New York Times | 24 September 2018
Trump signs revised Korean trade deal
By Jim Tankersley
WASHINGTON — President Trump signed a revised free trade agreement with South Korea on Monday in New York, cementing the first bilateral trade deal of his administration and suggesting the United States could soon win similar agreements with other trading partners.
“It’s a great day for the United States, and it’s a great day for South Korea,” Mr. Trump said during a meeting with President Moon Jae-in of South Korea.
The revised United States-Korea Trade Agreement includes steps to open up the Korean market to increased American exports, most notably for automobiles, and will allow the United States to continue imposing a 25 percent tariff on Korean trucks until 2041.
But analysts said there are few fundamental changes to the existing agreement, which was negotiated under President Barack Obama and which Mr. Trump has blamed for hundreds of thousands of lost American jobs. And they said the revised agreement includes few provisions that will appreciably change the trade balance between the two countries, which Mr. Trump has complained about.
For example: The agreement would double a cap on the number of American automobiles that may be easily exported to South Korea, to 50,000 from 25,000 a year per automaker. But no American automaker came close to reaching the existing, lower cap last year.
“The president referred to this deal as one of the worst agreements ever,” said Wendy Cutler, a vice president at the Asia Society Policy Institute, who helped negotiate the initial Korean agreement as a member of Mr. Obama’s administration. “And if you look at what was agreed to, it doesn’t seem to change the agreement dramatically.”
“I view this as a win-win deal, some solid improvements,” she added, “but nothing dramatic.”
Business groups cheered the updated pact, but stopped well short of calling it transformational.
“Manufacturers were glad to see the president recommit himself to the U.S. trading partnership with Korea today,” said Linda Dempsey, the vice president of international economic affairs at the National Association of Manufacturers. “A robust U.S.-Korea F.T.A. is essential to the jobs of hundreds of thousands of manufacturing workers across America.”
The United States’ trade deficit in goods and services with South Korea had already been falling before the agreement was signed, to just above $9 billion last year from just under $17 billion in 2016, as the country increased purchases of machinery, liquefied natural gas and other goods from America. South Korea was also among the countries subjected to steel and aluminum tariffs, making those metals less lucrative to export to the United States.
The trade deal will exclude South Korea from the steel tariffs, in exchange for that country capping its exports to the United States at 70 percent of the average of its export levels from 2015 through 2017. Korea will still face the aluminum tariffs.
The revised agreement also lacks the robust “side deal” on currency manipulation that administration officials said would be included to prevent South Korea from weakening its currency, the won. Currency devaluation, as it is called, has been of particular concern to Mr. Trump, who has accused other trading partners, like China and the European Union, of trying to weaken their currencies so that Americans using the United States dollar can buy more of their products.
“We’re going to be able to defend ourselves against currency undervaluations because, as part of this deal, there’s a very nice side deal agreement that the secretary of Treasury is negotiating over currency undervaluation,” Peter Navarro, a top trade adviser, told NPR in March. Mr. Navarro added that the currency agreement is “a benchmark for what we’ll be doing going forward.”
That side deal has yet to materialize. In August, the United States trade representative published the “agreed outcomes” from its negotiations with the Koreans: 24 pages of technical language and correspondence between officials from both countries, including agreements on American auto and prescription drug exports and Korean textile exports. There is no mention of currency in the agreement, or of any pending side deal.
In a fact sheet released Monday afternoon by the White House, Trump administration officials said that “outside” the Korea pact, “the Treasury Department has an understanding with South Korea to avoid competitive devaluation and practices that provide an unfair competitive advantage. The understanding includes strong commitments on exchange rate practices, robust transparency, and reporting.”
Mr. Navarro did not immediately respond to questions on Monday about what that “understanding” comprises, and whether it is in writing.
Asked about the lack of a side deal this month, Treasury officials did not respond directly to questions whether it exists or will exist, saying instead that they are happy with the state of talks with the Koreans over currency.
“Building on existing discussions, the U.S. Treasury and Korea’s Ministry of Strategy and Finance intend to meet frequently to discuss concerns arising from macroeconomic and foreign exchange policies,” a Treasury spokesman said in response to questions about the promised currency provisions.
“We welcome the Korean government’s recent announcement that it will begin disclosing information on intervention in the foreign exchange markets,” he said, adding that “both countries continue to maintain a market-oriented exchange rate and are avoiding currency manipulation.”
Some Democrats say the lack of a firm currency commitment in the Korea deal is a worrying sign given the administration’s continuing renegotiation of trade deals with Mexico and Canada, as well as its strategy with China.
“The White House went on record in March touting a currency deal with Korea that, it turns out, does not exist,” said Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee.
The Trump administration has been accused of overpromising on trade agreements before. This year, it announced a big victory with the European Union with a deal that was vastly similar to what had already been negotiated by the previous administration.
The agreement does not need congressional approval to take effect. But it still must clear political hurdles in South Korea — a process that could get complicated, Ms. Cutler said, if Mr. Trump’s administration recommends new tariffs on foreign-made automobiles, which could hit Korean automakers particularly hard. Mr. Trump has continually threatened to impose tariffs on cars and car parts, though he has yet to put those into effect.