Trump’s trade plans worry analysts

As U.S. Republican front-runner Donald Trump gains increasing support, the Korea Trade Investment Promotion Agency (Kotra) decided to prepare for possible trade sheltering by the U.S. against Korea with the publication of a report on Monday entitled “Forecasts on Trump Administration’s Trade Policy and Possible Trade Remedy Measures by the U.S.”

During a foreign policy speech in April, Trump said that free-trade agreements (FTAs), including the Korea-U.S. FTA and North American FTA, have “emptied our states of our manufacturing and our jobs.” He also introduced rather extreme pledges against American trade partners such as Korea, Japan, China and Mexico.

Experts have parting views on whether Trump’s so-called America First trade policy will become a reality, but the concern is that there are a handful of trade measures that the U.S. president and its administration can directly impose without the consent of the Congress, the Kotra report said.

Possible trade restrictions against U.S. partnering countries, including Korea, could be imposed through Section 301 of the Trade Act of 1974, which authorizes the president to take all appropriate action to obtain the removal of any act or practice of a foreign government that violates international trade agreement or restricts U.S. commerce. The Office of the U.S. Trade Representative (USTR) has, as of 2008, released Korea from being on its observation list for its Section 301 report, but has, in its 2016 report, criticized the Korean government for using certain software without U.S. approval.

There is also some debate as to whether the president has the right to cancel ratified FTAs. Michael C. Dorf, a Cornell University professor, has hinted at the possibility of doing so while Fred Gergsten, a senior analyst at the Peterson Institute for International Economics, has argued that already-ratified FTAs can only be cancelled by a new bill.

“Trade retaliation may take place by renegotiating the Korea-U.S. FTA and tightening tests for technological and sanity standards of Korea-imported goods,” said Heo Yoon, International Trade professor at Sogang University. “U.S. Republicans were specially eyeing the effectiveness of Korea-U.S FTA deal and Korea needs to check in advance whether there is anything to be questioned by the U.S.”

Trump’s America First rhetoric includes designating China as a currency manipulator and imposing 45 percent tariffs on all imported goods from China, as well as suing the country for copyright infringement and unfair trade activities. As for U.S. neighbor Mexico, Trump said he will impose 35 percent customs tax on cars made in Mexico so that U.S. automakers will refrain from building up manufacturing plants for their cars in the country instead of at home.

“But major Trump supporters - low income white people - need to note that such trade policies could return to them as a bigger hit as a raise on tariffs means costlier goods,” said political diplomacy professor Seo Jung-kun of Kyunghee University. “For example, made-in-China sneakers, sold at Wal-Mart for $5, could cost as much as $8 after such protective trade policies take effect.”

Possible actions Korea can take to prepare for a Trump administration include consulting legal experts regarding foreign trade policies in order to minimize the damage that a U.S. sheltering may cause, and developing project-type exports to provide more appealing products to the U.S. market.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]