White House considered ending FTA with Korea

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White House considered ending FTA with Korea

The Trump administration spent the first four days of September contemplating withdrawal from the free trade agreement with Korea, but was dissuaded from doing so by Congress and industry groups, Korea’s Trade Ministry said Thursday.

In a report submitted to the National Assembly’s industry and trade committee for a legislative audit, the ministry detailed Washington’s disgruntlement with the Korea-U.S. FTA for causing a trade deficit for the past five years.

“From Sept. 1 to 4, the U.S. administration seriously considered terminating the FTA,” the ministry said, “but such a consideration was met with opposition from the U.S. Congress, government and industry officials, among others.”

The report said Korea’s trade minister, Kim Hyun-chong, recognized the possibility of Washington pulling out of the agreement as real - rather than mere bluff from President Trump - after meeting with White House officials last month during a trip to the United States.

The realization prompted Kim to schedule another meeting with his American counterpart, Robert Lighthizer, the U.S. trade representative, on Oct. 4 in Washington. From there, the two sides agreed to amend the pact.

Kim told lawmakers during a legislative session Friday that the Korean government was well aware of the possibility of Washington’s “unilateral decision to terminate the FTA.”

“In light of the Trump administration’s withdrawal from the Trans-Pacific Partnership, we took the possibility of the Korea-U.S. FTA being terminated as a plausible prospect,” he said.

In order to win support from U.S. industry and government officials, the ministry said it reached out to a number of American business groups, think tanks and state governments that have benefitted from Korean companies’ investments. Alabama, Georgia, Texas and Tennessee were among the states, the ministry said.

Hyundai Motor Group, the country’s largest automaker, has an assembly line in Alabama, while its affiliate, Kia Motors, runs a factory in Georgia. Samsung Electronics and LG Electronics also operate factories in Texas and Tennessee.

But even U.S. officials who support the pact have been demanding changes, leaving little room for the Korean delegation to wiggle out of renegotiation, the ministry said.

According to Inside U.S. Trade, an online media outlet, there was sentiment in Washington that Korea underestimated how much Trump “detested” the trade pact, citing unnamed sources, due to the country’s trade deficit with Korea under the FTA.

Facing Washington’s demands to fix the pact, Trade Minister Kim sent a message to U.S. officials that Korea would have no choice but to drop the FTA if the U.S. listed demands that were out of line, according to a report by the JoongAng Ilbo on Thursday.

“Our negotiation team is waging brinkmanship facing its U.S. counterpart, keeping in mind the possibility of renegotiation going toward a dead end,” Kim Tae-nyeon, chief policy maker of the ruling Democratic Party, told the JoongAng Ilbo after a closed-door meeting with Minister Kim on Tuesday.

Korea’s trade surplus with the United States was $23.25 billion last year, a 53 percent increase from 2012, the first year of the FTA, when it was $15.18 billion, according to figures from the Trade Ministry and Bank of Korea.

Both Seoul and Washington need to hold public hearings and consultations with their respective legislatures before formally declaring a renegotiation, which could start by the year’s end at the earliest. Korean exports of automobiles and steel are likely to be high on the agenda as the two have often been blamed for the U.S. trade deficit with Korea.

Hyundai Motor, Korea’s largest automaker, exported 335,762 cars to the United States last year after tariffs on imported American cars and exported Korean cars were lifted in January, in accordance with the free trade agreement’s stipulations.

BY KANG JIN-KYU [kang.jinkyu@joongang.co.kr]
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