Bracing for renegotiationIt had not been a bluff. As soon as he took office, U.S. President Donald J. Trump warned Canada and Mexico of renegotiation on the decades-old North American Free Trade Agreement (Nafta). Then he signed an executive order to pull out of the Trans-Pacific Partnership, a signature deal of his predecessor, Barack Obama.
The global trade order has to undergo a major makeover redesigned by Washington. The next on the trade agenda catering “America First” policy could be an attack on China by labeling it as a currency manipulator and calling upon Korea and Japan to revisit the bilateral free trade deals.
Since Korea has yet to join the Trans-Pacific Partnership (TPP), jointly led by the United States and Japan, there may be more gains than harms in the short run. But indirect damages may not be small. Korean manufacturers, including Samsung Electronics, run major production bases in TPP member countries like Vietnam. The U.S. pullout of the TPP could undermine access to the single largest economic bloc. There are over 180 Korean enterprises that have plants in Mexico to take advantage of Nafta benefits.
Seoul also should brace for demands for renegotiation on the bilateral FTA. During his campaign, Trump accused the bilateral FTA with Korea of wiping out 100,000 jobs in the United States. The government must muster all its negotiation capacities to keep up its reputation as an FTA powerhouse with 15 trade deals with 52 nations.
A conflict between the United States, a traditional security ally, and China, Korea’s biggest trade partner, does not bode well for Korea. Trump’s withdrawal from the TPP also suggests his opposition to the Pivot to Asia, with the United States poised to engage less in the affairs of the Asia-Pacific region. The U.S. phase-out instead could strengthen China’s regional influence. Global trade could be drawn more to the China-led Regional Comprehensive Economic Partnership.
JoongAng Ilbo, Jan. 25, Page 30
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