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(News Focus) Steel tariff, GM to complicate KORUS FTA negotiations

2018/02/20 17:41

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By Kim Eun-jung

SEOUL, Feb. 20 (Yonhap) -- When South Korea and the United States return to the negotiating table for talks to rewrite the free trade agreement (FTA) next month, things could get more complicated, as Seoul has vowed to use all available means to defend its economic interest in the face of Washington's growing protectionist stance.

The two sides have been in talks to amend the five-year trade deal since last month, but very little progress has been made on major issues.

In the second meeting, Seoul complained about rising U.S. trade remedies, including steep safeguard duties on its washers and solar panels, while American negotiators called for an easing of regulations on the auto sector to reduce its trade deficit.

Ahead of the third round of dialogue, the U.S. Commerce Department last week recommended to President Donald Trump the imposition of tariffs or quotas on imported steel. One of the three options was to levy a 53 percent duty on imported steel from 12 nations, including South Korea, China and Brazil.

South Korea's inclusion in the list for extra duties embarrassed Seoul officials, who did not think the country would be bundled together with China, as the recommendations were set on national safety grounds. Other traditional U.S. allies, including Canada, Japan and Germany, were exempt from the list although they were among the top 10 steel exporters.

To make matters worse, American automaker General Motors last week said it will shutter an underutilized plant in South Korea. President Trump immediately hailed GM's decision and took credit for the move.

A banner opposing General Motors' shuttering of a South Korean plant hangs in a street in Gunsan, 270 kilometers south of Seoul, on Feb. 20, 2018. (Yonhap) A banner opposing General Motors' shuttering of a South Korean plant hangs in a street in Gunsan, 270 kilometers south of Seoul, on Feb. 20, 2018. (Yonhap)

In response to the rising pressure, President Moon Jae-in ordered his government to use all available means to stand against unfair trade practices, including the lodging of complaints with the World Trade Organization (WTO) and reviewing the implementation of the bilateral trade pact.

"I want you to confidently and resolutely deal with unfair trade protectionist measures by considering filing a formal complaint with the WTO and reviewing possible violation of the Korea-U.S. free trade agreement," Moon said in a meeting with top aides on Monday.

South Korea's trade ministry said it will file suits against steep tariffs on washers and solar panels and the proposed steep duties on its steel once Trump takes action.

Seoul officials worry that the Trump administration will continue to ratchet up pressure on its trading partners to rally support from white working class voters.

"I personally think this may not be the end, with more to come," Paik Un-gyu, Minister of Trade, Industry and Energy, said in a meeting with reporters. "(Tariffs on steel) are part of Trump's policy aimed at his political supporters ahead of the November mid-term elections and for his second term for president."

   In addition to the dispute settlement process, Paik stressed the need to craft new business strategies to deal with Trump's "America First" policy.

"To better manage risks down the road, we have to explore new markets and develop value-added products and innovative materials," Paik said. "We will have to expand the united front against the rising protectionism."

   A WTO complaint is not a rapid response when resolving trade disputes. Once a country notifies the WTO of its intention to make a complaint, it has to go through at least 60 days of consultations with the other side before a panel can hear the complaint. The deliberation process usually takes months to reach a decision, and appealing the process can drag the final decision out to a couple of years.

While GM made a decision to shut down the Korean plant as part of its global restructuring program, Seoul officials say its business plan in the Korean market could inevitably affect the FTA negotiations on the auto sector.

"Nothing is unrelated now, including GM and steel (duties). We are taking a comprehensive approach," Paik said. "GM can't take part in the FTA negotiations and the matter can't be put on the negotiating table, yet the issue could affect the FTA talks in terms of the auto industry."

   Conservatives worry that intensifying trade disputes could undermine the military alliance with Washington at a time when the two nations need close cooperation to resolve North Korean issues.

The main opposition Liberty Korea Party (LKP) criticized Moon's North Korea policy, which it says is drawing skepticism from the hawkish Trump administration. The party claimed the tariffs issue is a sign of a weakening alliance between the two nations.

"Among U.S. allies, South Korea would be the only one to face the steel import restrictions," LKP floor leader Kim Sung-tae said during a party meeting on Monday. "We express serious concerns that the traditional U.S. alliance is starting to show cracks in the trade relations under the incumbent administration."

   Ruling party lawmakers also said it's time for the Seoul government reassess its alliance with the U.S. to separate security and economic issues.

"The U.S. has already been imposing anti-dumping and countervailing duties on Korean steel products since 2016. Additional duties will deal a heavy blow to Korean steel exports," Woo Won-shik, the floor leader of ruling Democratic Party, said. "We have to consider all available legal means to counter unreasonable actions that violate the global trade order, including the WTO petition and countervailing duties."