With the international trade community’s focus on China (tariffs) and Mexico/Canada (NAFTA negotiations), it would be easy to forget another significant trade matter that the Trump administration has been seeking to finalize. According to reports, the revised Korea-U.S. Free Trade Agreement (KORUS) will be signed today after President Trump and South Korean President Moon Jae-in meet in New York City, where both are attending the start of the United Nations’ General Assembly plenary session.
On September 3, 2018, the Office of the U.S. Trade Representative (USTR) released the agreed outcomes of the negotiations to amend and modify the agreement. These outcomes include amendments and modifications to KORUS as well as additional agreements and understandings to improve implementation of the trade pact. USTR prepared a summary of the key negotiated outcomes, including:
- Korea will extend the phase out of the 25 percent U.S. tariff on trucks until 2041, or a total of 30 years following the implementation of the KORUS free trade agreement in 2012.
- Exports of U.S. motor vehicles to Korea will be improved through the following steps:
- Korea will double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year, that can meet U.S. safety standards.
- S. gasoline engine vehicle exports will be able to show compliance with Korea’s emission standards using the same tests they conduct to show compliance with U.S. regulations.
- Korea will recognize U.S. standards for auto parts necessary to service U.S. vehicles, and reduce labeling burdens for parts.
- Korea will expand the amount of “eco-credits” available to help meet fuel economy and greenhouse gas requirements under the regulations currently in force, and in the future take U.S. regulations in this area into account.
- Korea will address concerns with onerous and costly verification procedures through agreement on principles for conducting verification of origin of exports under KORUS.
- Korea will amend its Premium Pricing Policy for Global Innovative Drugs.
In addition, the revised KORUS will address currency issues and include a memorandum of understanding with provisions to prohibit competitive devaluation and exchange rate manipulation, and to provide for better transparency and accountability.
Separately, the United States and South Korea came to an agreement on steel imports under the Section 232 investigation, which assisted in completing KORUS renegotiations. As agreed, imports of South Korean steel products into the United States will be subject to a product-specific quota equivalent to 70 percent of the average annual import volume of such products during the period of 2015-17. Once these quotas are filled, U.S. companies may seek from the U.S. Department of Commerce exclusion for individual products from the duties that apply to products entering outside of quota limits.
The publication of the text of the negotiated outcomes follows the completion in mid-August 2018 of U.S. domestic consultation procedures. South Korea has initiated the next step required in its domestic procedures by opening for public comment the provisional Korean translations of the negotiated outcomes. Once complete translations are certified by both governments, the documents may then be finalized for signature, to be followed by further procedures in both countries as needed to bring the outcomes – and a revised KORUS – into force.
The Trump and Trade team has prepared a slide presentation that provides a brief background and update on the status of KORUS negotiations.