US Vice President Mike Pence said on April 18 Washington will “review and reform” the free trade pact with Seoul, citing growing trade deficits and “too many barriers” to US businesses.
"Most concerning is the fact that the U.S. trade deficit with South Korea has more than doubled since the KORUS came into effect five years ago. We have to be honest about where our trade relationship is falling short. That's the hard truth," Pence said at a meeting of the American Chamber of Commerce in Seoul on the day.
"Our businesses continue to face too many barriers to entry which tilts the playing field against the American workers and American growth... We are reviewing all of our trade agreements across the world to ensure they benefit our economy as much as they benefit our trading partners," he added at the meeting.
"Make no mistake about it. Under President Donald Trump, over-regulations' days are over and there's a new era of jobs, growth and prosperity in the United States of America," he said. "Truth is a stronger America means a stronger economy for South Korea and for all of our trading partners. You will be glad to know the U.S. will continue to be a driver of global growth and we will drive the growth like never before."
His remarks are in line with what President Donald Trump said before taking office. On the presidential campaign, Trump criticized the Korea-US free trade agreement as a “job killer” especially in the US auto industry, raising the need for adjustments to the terms of the trade pact. Consequently, Pence’s remarks are interpreted as the most explicit signal that the administration will push for a renegotiation of the bilateral deal.
"We are reviewing all of our trade agreements across the world to ensure they benefit our economy as much as they benefit our trading partners, Pence said, adding, “We know that you can help us level that playing field between our two countries and move toward a system that maximize jobs and growth and a brighter future for the people of the U.S. and people of South Korea. We will work toward that end to reform the KORUS in the days ahead
Since its inauguration in January this year, the Trump administration has raised the voices to revise the KORUS. A recent report by the U.S. Trade Representative (USTR) recommended a major review of the bilateral deal. The report accused the FTA of causing a "dramatic increase" in the country's trade deficit.
According to the US Census Bureau, the country’s trade deficit with South Korea rose to $27.7 billion in 2016 from US$16.6 billion in 2012 when the KORUS FTA went into effect. In the meantime, South Korea’s surplus with the US soared from US$15.2 billion to US$23.2 billion during the same period, the data of the Korea International Trade Association (KITA) shows. .
In the meantime, local experts say the report fails to take into account South Korea's service-sector deficit with the U.S. During the same period, South Korea's trade deficit in the service sector jumped 28.4 percent from US$10.97 billion in 2011 to US$14.09 billion in 2016, according to the data compiled by the KITA. In that vein, the FTA has equally benefited both countries rather than just one side, experts say.
The Korean government seems to place more weight on improvement rather than on renegotiation in its interpretation of Pence’s “reform” of the free trade pact. An official at the foreign ministry said that what Pence said during the meeting appears to be in line with the Trump administration's stance on free trade and that there is no need to read too much into every single word in his remarks. Kim Sung-tae, a senior economic researcher at the Korea Development Institute (KDI), said, adding, “Pence used the word ‘reform’ instead of renegotiation, and just automobile and auto parts sectors have been enjoying a little big trade surplus since the FTA agreement amid other sectors showing not so much change. This would justify the remark is focusing on the reform in some sectors.”
Experts, however, still paid the caution that his remarks should be seen as providing an overall direction in Washington's trade policy for Seoul that will choose its next President soon.
Wrapping up his three-day visit to Seoul after the morning meeting with some 70 South Korean and US business leaders, Pence left for Tokyo on an Asia Pacific trip that will also bring him to Indonesia and Australia.