South Korea would limit its steel exports to the United States and open its markets to more American-made cars and trucks under a preliminary agreement to revise the 2012 bilateral trade deal between the countries, the White House said Tuesday.
Under the pact, which still needs to be finalized, South Korea would allow U.S. automakers to double their vehicle exports to 50,000 a year, while Seoul would win a permanent exemption from the 25 percent tariffs on steel imports President Donald Trump announced March 8. It’s unclear when the final agreement could be reached.
In a background briefing with reporters, senior administration officials said the agreement in principle to the Korea-United States (KORUS) trade agreement will reduce South Korean regulatory and policy barriers that limited U.S auto sales. The U.S. Trade Representative’s Office is the lead negotiator on revising the Korean trade agreement.
The U.S. Treasury Department also is negotiating a side agreement with its South Korean counterpart with a goal of monitoring Seoul’s intervention in currency markets. U.S. carmakers have accused South Korea of manipulating its currency at times to keep South Korean vehicles priced at artificially lower levels than U.S. goods. Whatever the final details, the currency provisions will not be part of the final trade pact, and there are questions about how it would be enforced.
South Korea also has agreed to limit steel exports to the United States to 70 percent of the average of what it sent during the period of 2015 to 2017, approximately 2.68 million tons. Exports that fall within the quota will be exempt from the 25 percent tariff.
South Korea is currently among six countries and the European Union with temporary exemptions from a 25 percent steel tariff on imports ordered by Trump. It will remain subject to the 10 percent aluminum tariff imposed by Trump that took effect March 23.
“This is a huge win,” a senior administration official said of the steel quota.
The United States is likely to pursue similar quota agreements with the other countries including Canada and Mexico, which are currently in talks to renew the North American Free Trade Agreement.
In an interview with a government-backed website, South Korea’s Minister for Trade Kim Hyun-chong said the quota on steel and the agreement to allow more U.S. auto imports “removed the two biggest uncertainties through these negotiations. I believe this will help Korean firms to trade stably with the U.S., without concern.”
Here are other areas covered by the agreement in principle:
- U.S. tariffs of 25 percent on imported Korean pickups will remain in place until 2041 rather than phase out to zero over the next three years.
- South Korea will no longer require additional testing for U.S. vehicles certified to meet U.S. standards.
- South Korea will change its pharmaceutical payment program for innovative drugs to make U.S. companies eligible for reimbursements. The program has been limited to Korean companies.
- South Korea will consider U.S. vehicle emission standards in formulating its emissions standards for 2021-2025.
The White House announcement answers some questions members of two major congressional trade committees asked last week about the status of the talks that began in 2017. Provisions in KORUS allow the two countries to rework sections of the trade pact without the congressional oversight and consultations required under Trade Promotion Authority as long as there are no changes to U.S. law.
Under this approach, Congress does not have to approve the final agreement between the United States and South Korea.
Trade Representative Robert Lighthizer indicated that the phase out of tariffs on Korean automotive products and currency were in the mix.
Rep. Terri A. Sewell, D-Ala., told Lighthizer she and other members of Congress worried that changes to KORUS could have financial repercussions in their districts.
At the House Ways and Means hearing on March 21, Republicans and Democrats said they wanted more details about the South Korea negotiations.
“There are lots of members of Congress who will be directly impacted by any changes in that agreement, like my district,” Sewell said, alluding to the Hyundai car plant. “And we obviously would want to be kept abreast and in the loop as to the changes that are going to be made and as to our consideration as to how it will affect our districts.”
U.S. trade negotiators have said that South Korean car exports to the United States — namely Hyundai, Daewoo and Kia — are contributing to what the administration called a trade imbalance.
The White House announcement comes as the Trump administrations is using the threat of tariffs to try to leverage better trade deals with key economic partners, while also trying to increase pressure on China to make concessions. Envoys from Seoul and Washington have been holding talks to renew the deal for months.
Watch: Ryan Talks Mueller Investigation, Tariffs