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Thankfully, President Donald Trump’s threats to summarily “terminate†the free-trade deal between the US and South Korea have so far proved empty. Now, as the two sides sit down to renegotiate, there’s a chance to make some real improvements.
By most measures, the agreement, known as Korus, has been broadly beneficial since it came into effect in 2012. Trade between the two countries has expanded significantly, tariffs have been greatly reduced, and a crucial strategic alliance — now being strained by North Korea’s nuclear aggression — has been strengthened.
Korus has also advanced some of Trump’s stated goals. Exports of US manufactured goods to South Korea, for instance, have risen by 4 percent, to $36 billion. Intellectual property protections have been bolstered, regulation has been streamlined and US exporters have much freer access to the Korean market.
Yet Trump’s approach to this deal has been characterized by extravagant criticism, erratic threats and incoherent goals — notably, a misguided fixation on the bilateral trade deficit. A better approach is to press South Korea for some modest reforms in areas where US companies still face barriers.
One such area is the automotive business. Korus made substantial progress on this score by slashing tariffs on US car imports, resulting in a 280 percent increase in US exports from 2011 to 2016. But Korea still imposes unreasonable red tape on American automakers, and arbitrarily limits the number of cars it allows in under US safety standards. This doesn’t add up to the “terrible deal†Trump has alleged, but there is room for improvement.
Another area of contention is agriculture. Although Korus cut tariffs on many goods, US agricultural exports have declined by 11 percent since the deal began. Korea still lavishly subsidizes its farmers and impedes some American biotechnology products. It also imposes excessive paperwork on US exporters, and is taking its time making some agreed-upon tariff and quota reductions. Again: fairly standard stuff that shouldn’t
require hardball negotiation.
Finally, Korea is inhibiting US technology companies in a variety of ways. Government procurement of some imported tech equipment is subject to unusually burdensome review. Exports of location-based data are restricted, which protects Korean startups at the expense of foreign competitors. US cloud computing services are similarly disadvantaged by data-protection requirements that favor local brands.
All these issues are eminently resolvable, especially if the US is willing to hear out some of South Korea’s own concerns with the deal. On balance, the benefits of Korus — economically and strategically — far outweigh its drawbacks for both sides. Far from terminating it, Trump should be trying to strengthen it, while keeping his focus on some rather more pressing concerns in the neighbourhood.
—Bloomberg