A senior U.S. Chamber of Commerce official called on the governments of South Korea and the United States to "fully and faithfully" implement their open trade agreement for the mutual benefit of all sides.
The Korea-U.S. free trade agreement (FTA), referred to as KORUS, went into effect on March 15, 2012, with the two sides starting the process of modifying the pact. The talks recently began after U.S. President Donald Trump called KORUS "a horrible deal," citing a large U.S. trade imbalance with South Korea.
"There have been some areas over the past five years where the implementation of the agreement has not been to the fullest extent possible. So we are working with our member companies to identify some specific areas where we will communicate to the Korean and American governments to focus on addressing (outstanding) implementation issues to make sure the KORUS agreement is implemented to the letter and spirit of the agreement," James W. Fatheree, the vice president for Asia at the U.S. Chamber of Commerce, told Yonhap News Agency in a recent interview in Seoul.
The official cited things pertaining to customs issues, medical devices and pharmaceuticals as priority areas to be discussed in the negotiations. He also mentioned the auto sector as an area that needs improvement under KORUS due to non-tariff barriers which restrict movement and non-transparent regulations.
The value of U.S. auto exports to Korea started from "a very low base" from less than US$4 million in 2012 and now it's over $1.6 billion. But "the problem is Korea's auto exports to the U.S. is many times that, so the U.S. administration is very focused on the trade deficit in autos," Fatheree said.
As for the business environments in Korea, the Texas native said there has been an improvement and clearly KORUS FTA has helped in that regard.
"But we continue to see regulations and standards that continue to pose some challenges for foreign companies doing business in Korea. So what we are focused on is trying to find opportunities and have conversation about right kind of policies that minimize challenges and allow growth and more partnerships to follow," he said.
In spite of Korea's room for improvement, the vice president said the U.S. agricultural and services industries have been major beneficiaries of what he analyzed is "the best U.S. trade agreement we have reached with any trading partner in a sense that it's the most up to date."
Since it's been enforced, U.S. exports of agricultural goods, industrial goods and services have all increased. There was a period in 2015 and 2016 when Korea's total imports fell sharply over 20 percent, he said. Korea is the sixth-largest trading partner of the U.S.
"The KORUS FTA has allowed U.S. goods to keep competitiveness in this market at a time when Korea's economy was weaker. So in that sense, it's important."
South Korean growth fell from 3.7 percent in 2011 to 2.8 percent in 2016 due to sluggish domestic demand, which affects import levels. In contrast, U.S. growth rates have been in the 1.5 percent-2.5 percent range and U.S. domestic demand has picked up, which drove up imports.
As a result, the U.S. has experienced a trade deficit with the Northeast Asia country. But experts say the trade deficit is influenced by macroeconomic forces, like relative growth rates in each country, not simply the KORUS pact.
Asked if Seoul's recent announcement to buy millions of dollars of U.S. military equipment to help defend against North Korea's nuclear and missile threats will lower the U.S. trade deficit, he said it will obviously help in one sense yet it's a one-off kind of situation.
"It's a sign of the closeness of our security relationship particularly at this critical time so we want to encourage that absolutely," said Fatheree.
But he added there are ways to help cut into the U.S. trade deficit with Korea.
"There's been a lot of discussions about energy exports. So I think those two things going forward will be important contributors to U.S. exports to Korea. But we want to see across the board gains to many, many sectors and not just focused on two, as important as they are."