Nightmare could become realityRevisiting the five-year-old bilateral free trade deal agreement with the United States could generate a loss of up to $17 billion in exports over the next five years, according to a study by the Korea Economic Research Institute. If the U.S. readjusts the tariff rates against Korean imports to bring down the commodity trade deficit figure to pre-FTA levels, the toll on shipments to the country could extend to $17 billion, it claimed. Automakers would lose most at $10.1 billion and machinery and steel makers $5.5 billion and $1.2 billion if the zero to 0.07 minimum customs rates are pushed up to 8 percent to 11.8 percent.
The Korean economy would be hit hard. A plunge in exports would translate into losses of 100,000 jobs. As many as 90,000 workers in the automobile production lines could be sacked. From the machinery and steel sector, job losses would reach 56,000 and 8,000, respectively. The renegotiation in the bilateral trade pact could trigger massive layoffs, dampen investment, consumption, and exports to cause output losses of 46 trillion won ($40 billion) for the country.
Worse, the nightmarish scenario could become an imminent reality. U.S. President Donald Trump in an interview said he wished either to renegotiate or kill the FTA with Korea.
Last month, Trump signed an executive order to reexamine all the trade pacts. Washington wants to reevaluate the free trade deal with Seoul, pointing to the bilateral trade balance where Korea’s trade surplus expanded to $23.2 billion last year from $11.6 billion before the FTA took effect. But the benefit was hardly one-sided. The U.S.’s services surplus jumped to $14.1 billion last year from $10.9 billion five years before.
Yet the candidates aspiring to become the next president are not taking the matter seriously. Trump has raised a controversy in Korea with his comment saying he could charge $1 billion for the deployment of the Terminal High Altitude Area Defense missile shield in Korea.
He may be setting the ground for increases in Seoul’s share in sustaining U.S. troops in Korea, but may not go through with it. He, on the other hand, could be serious about the FTA renegotiation that would be less politically-resistant from the U.S. congressman. The next president must have a strong strategy to generate a reasonable compromise with Washington ready before stepping into the presidential office.
JoongAng Ilbo, May 1, Page 26