Concerns that South Korea can become a “nutcracker” in the global trade war is becoming a reality.
The United States is isolating China in earnest by creating the anti-China climate at the World Trade Organization (WTO) taking the imposition of steel tariffs as hostage. South Korea is striving to avoid the imposition of steel tariffs in Washington D.C. in the U.S., while the country is starting the second phase of negotiations on the Korea-China FTA on services and investment with China in Seoul.
According to the Ministry of Trade, Industry and Energy (MOTIE) on March 21, the South Korean government will begin the second phase of negotiations the Korea-China FTA on services and investment with China in Seoul for two days from the 22nd to the 23rd. It aims for major liberalization of the service and investment sector using the negative method which was postponed at the first phase of negotiations of the Korea-China FTA which took effect in December 2015.
The problem is that the timing is peculiar. The U.S. will finalize its plan to impose 25 percent tariffs on imported steel and 10 percent on aluminum on the 23rd (local time). In this regard, the U.S. government is now in the final stages of negotiations with countries that are potentially exempt from tariffs on imported steel and aluminum, including South Korea. The blade of the sword of the tariff imposition is aiming for China. In particular, the U.S. Trade Representative (USTR) gave an explicit condition at the negotiation with the European Union (EU): The EU need to cooperate with the U.S. that oppose to China’s move at the WTO. The U.S. is seeking to establish the anti-China climate in the international stage in earnest.
It is not an urgent issue for now. However, South Korea can lose its footing due to the intensification of conflicts between the U.S. and China. The U.S. is assuming more offensives against China. After the imposition of steel tariffs, the U.S. is expected to announce a plan to levy additional tariffs on US$60 billion (64.32 trillion won) worth of imports from China. The U.S.’ move to isolate China can become more conspicuous. Market experts say the second half of this year can be a starting point when the conflicts among China, the U.S. and the EU that has begun to obtain the Market Economy Status in 2016 will be outlined.
Professor Huh said, “The result of the conflicts among China, the U.S. and the EU over the Market Economy Status can come out in the second half of the year. Regardless of the outcome, South Korea’s trade policy will be greatly influenced by it. As President Donald Trump nominated CNBC commentator Larry Kudlow, who has a philosophy that the economy and the national security go together, as the director of his National Economic Council (NEC), South Korea may need to choose a side.”