Korea, U.S. sign agreement on defense budget for American troops

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Korea, U.S. sign agreement on defense budget for American troops

Published: 04 Oct. 2024, 19:44 Updated: 04 Oct. 2024, 20:57

SEO JI-EUN
seo.jieun1@joongang.co.kr

Lee Tae-woo, Korea's chief negotiator for the defense cost-sharing talks, right, signs the preliminary agreement for the 12th Special Measures Agreement (SMA) with Linda Specht, U.S. Senior Advisor in the Bureau of Political-Military Affairs, at the Ministry of Foreign Affairs building in Seoul on Thursday. [MINISTRY OF FOREIGN AFFAIRS]

Korea and the United States finalized the 12th Special Measures Agreement (SMA), which will determine Seoul's share of the cost for the upkeep of American troops stationed in the country from 2026 to 2030, the Foreign Ministry announced Friday.

The deal, which concluded on Wednesday, will increase Korea's first-year contribution by 8.3 percent in 2026, with subsequent annual increases linked to inflation rather than defense budget growth.

The new deal reverts to a system based on the consumer price index (CPI), which was used in earlier SMAs. Under the 12th SMA, Korea's contribution for 2026 will start at 1.52 trillion won ($1.1 billion), with subsequent increases for 2027 through 2030 tied to the CPI from two years prior. If inflation remains around 2 percent, the total contribution for 2030 is expected to reach 1.64 trillion won, representing a 17.2 percent increase from 2026, with an average annual increase of 3.2 percent — about half of the 6.2 percent under the previous agreement.

"The switch from the defense budget growth rate to the CPI as the benchmark for annual increases, alongside the reintroduction of a cap, was a significant achievement," said Foreign Ministry spokesperson Lee Jae-woong on Friday. He added that concluding the 12th SMA well before the expiration of the current 11th SMA, which is set to end in 2025, ensures stability in the deal's implementation.

The previous agreement, signed in 2021 under the previous Moon Jae-in administration, linked Korea's annual increases in contributions to the defense budget, resulting in sharp increases. The total contributions grew from 1.04 trillion won in 2020 to 1.4 trillion won in 2025, with an average annual increase of 6.2 percent. However, this structure faced criticism for placing an excessive financial burden on Seoul, as contributions rose in tandem with defense spending.

Had the defense budget growth rate remained the benchmark, Korea’s contributions could have risen to 1.85 trillion won by 2030, based on the average defense budget growth rate of 5.25 percent over the past decade. To prevent such sharp increases, a 5 percent annual cap was reintroduced in the new SMA.

“This cap limits the overall rise in contributions and protects against unexpected economic conditions that could lead to sharp increases,” the ministry said. The new agreement also includes reforms, such as eliminating the use of Korea’s defense contributions for the maintenance of U.S. military assets stationed outside the Korean Peninsula.

The fifth meeting for the 12th SMA negotiations between Korea and the United States is being held at the National Defense University Seoul Campus in Yongsan District, central Seoul, on July 10. [MINISTRY OF FOREIGN AFFAIRS]

Despite these changes, the first-year increase of 8.3 percent will bring Korea's contribution to 1.52 trillion won in 2026. This figure is close to the 1.59 trillion won demanded by former U.S. President Donald Trump during his administration, reflecting the increased costs related to the expansion of the U.S. Forces Korea work force and higher construction management expenses for military projects.

Efforts by Korea to transition to a needs-based model, where specific spending items are agreed upon before determining the total contribution, were once again rejected by the United States. Instead, the total amount was agreed upon first, with spending categories allocated afterward. Japan, the only other country with a similar SMA with the United States, uses a needs-based model.

The five-year deal was finalized after eight rounds of negotiations over five months, with the last discussions held between Sept. 25 to 27 and Oct. 1 to 2. Lee Tae-woo, Korea’s chief negotiator, and Linda Specht, representing the United States, led the negotiations, and the preliminary signing took place on Thursday.

The 12th SMA negotiations began earlier than usual, starting in April, nearly 20 months before the expiration of the current agreement. Analysts suggest this early start was driven by concerns over the potential re-election of Donald Trump, who previously criticized Korea as a “free rider” on U.S. security.

Unlike the United States, where SMAs do not require congressional approval, Korea's SMA must be ratified by its parliament, which could make it more challenging for a future administration to invalidate the agreement without significant justification.

Addressing concerns Trump could overturn the agreement if re-elected, a Foreign Ministry official said it cannot comment on hypothetical scenarios, adding, "However, internationally binding agreements like the SMA have the same legal force as domestic laws in both Korea and the United States, ensuring legal stability."

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]