March 15 marks the sixth anniversary of the Korea-U.S. Free Trade Agreement.
The United States and South Korea have been close economic partners for decades. Since March 2012, however, this free trade agreement has allowed economic interaction between the two countries to become more comprehensive and institutionalized.
It is still premature to weigh the full, comprehensive impact of the agreement, particularly as tariffs on certain products continue to phase out and other provisions are yet to take effect. But one point is quite clear: The South Korea-U.S. free trade deal is not broken.
U.S. protectionists have long complained that the deal has resulted in more imports to the U.S. from South Korea. That’s true, but it has also resulted in more exports from the U.S. to South Korea. In fact, the U.S. reached record levels of exports to South Korea in 2017.
Encouraging more trade is the whole point—to increase specialization and exchange so that both countries have access to more goods and services at better prices, creating more opportunities for workers and producers as well as beneficial choices for consumers.
That increased trade happens naturally when governments get out of the way and reduce their interference in international trade relations.
The bottom line was put succinctly by The Wall Street Journal editorial board: “The agreement, which reduced 95 percent of the tariffs on goods and opened the market for U.S. services, has been an economic boon to both countries.”
In July 2017, at the direction of President Donald Trump, U.S. Trade Representative Robert Lighthizer initiated talks with South Korea regarding the trade deal and its current operation, and discussed some possible amendments and modifications.
Since then, Washington and Seoul have conducted two rounds of talks on possible revisions. Given that the remaining trade restrictions that exist between the two countries are the ones that both governments are most attached, these talks are likely to morph into a game of economic hardball.
Amid the strikes and balls, there are sure to be a few brushback pitches, and maybe even a beanball or two. With no real umpires in a game like this, it will be the responsibility of both sides to ensure that the noise and controversy don’t get out of hand. A brawl that empties the benches will have only losers.
Undoubtedly, these ongoing talks come with economic risk for both sides, but modifying the agreement does provide some opportunities as well. If the U.S. and South Korea approach the discussions with the goal of making their economies more dynamic and competitive, both parties could benefit.
The bigger risk in these talks is to the overall strategic alliance. Both countries have boisterous democratic political environments, and it may not be easy for politicians to quell the strong emotional responses from the public to talk of a trade war. Hopefully, leaders on both sides will recognize the risk and tread carefully.
In his powerful speech to South Korea’s National Assembly last November, Trump eloquently remarked:
We are helping the Republic of Korea far beyond what any other country has ever done. And in the end, we will work things out far better than anybody understands or can even appreciate. I know that the Republic of Korea, which has become a tremendously successful nation, will be a faithful ally of the United States very long into the future. … What South Koreans have achieved on this peninsula is more than a victory for your nation. It is a victory for every nation that believes in the human spirit.
Indeed, South Korea has proven to be a reliable and strong ally for America in advancing freedom, opportunity, and prosperity in the region and around the globe.
More importantly, there is much more to gain from the U.S.-South Korean partnership on a number of key policy fronts. The United States and South Korea have a great deal to offer to each other in a spirit of cooperation, friendship, and alliance.
That is the spirit that Washington and Seoul should preserve and build on in reviewing their free trade agreement.