JOINT STATEMENT – Today, Ambassador Lighthizer and Minister Kim are pleased to announce that the United States and the Republic of Korea have reached an agreement in principle on the general terms of amendments and modifications to the United States-Republic of Korea Free Trade Agreement (KORUS FTA). The nations have also agreed on terms for a country exemption for the Republic of Korea from tariffs imposed on steel imports under Section 232 of the Trade Expansion Act of 1962 pursuant to Presidential Proclamation 9705, as amended. The arrangement with respect to steel imports is expected to take effect on May 1, 2018. (link)
Ever since the original 2012 US-Korea free trade agreement (KORUS) went into effect, the U.S. trade deficit in goods with Korea increased by over 73 percent from $13.2 billion to $22.9 billion (2017), while the overall deficit increased by 70 percent from $6.3 billion to $10.7 billion (2017). President Trump committed his administration to changing this immediately and renegotiating a deal that benefited the United States.
“The improved KORUS agreement reflects the President’s leadership in delivering more reciprocal trade outcomes benefiting U.S. workers, exporters, and businesses. The United States and Korea have strengthened an important economic relationship by agreeing to substantial improvements to KORUS that will help rebalance our trade, reduce our trade deficit, and expand U.S. export opportunities.” ~ U.S. Trade Representative Robert Lighthizer
Here’s the historic details:
♦ 1. PROCESS FOR KORUS AMENDMENTS AND MODIFICATIONS
As directed by the President and with authority provided under the terms of KORUS, the U.S. Trade Representative has worked to resolve issues through the Joint Committee process under the Agreement.
In July 2017, Ambassador Lighthizer initiated trade discussions with Korea, leading to special sessions of the KORUS Joint Committee in 2017 and further negotiations for KORUS amendments and modifications in 2018.
Once completed, the amendments and modifications to KORUS will undergo the United States’ and Korea’s respective domestic review procedures. For the United States, modifications to the U.S. tariff schedule will undergo consultation and layover procedures provided under the implementing act for the KORUS Agreement, which include a 60-day consultation period with Congress.
♦ 2. KEY NEW KORUS FTA OUTCOMES
In these discussions, the United States achieved steps to improve the large trade deficit in industrial goods and to address KORUS implementation concerns that have hindered U.S. export growth.
◊ U.S. Truck Tariffs: Korea will extend the phase out of the 25% U.S. tariff on trucks until 2041, or a total of 30 years following the implementation of the KORUS FTA in 2012. (currently scheduled to phase out by 2021).
◊ Growing U.S. Auto Exports: Exports of U.S. motor vehicles to Korea will be improved through the following steps:
- Greater Access for U.S. Exports: Korea will double the number of U.S. automobile exports, to 50,000 cars per manufacturer per year, that can meet U.S. safety standards (in lieu of Korean standards) and enter the Korean market without further modification.
- Harmonization of Testing Requirements: U.S. gasoline engine vehicle exports will be able to show compliance with Korea’s emission standards using the same tests they conduct to show compliance with U.S. regulations, without additional or duplicative testing for the Korean market.
- Recognition of U.S. Standards for Auto Parts: Korea will recognize U.S. standards for auto parts necessary to service U.S. vehicles, and reduce labeling burdens for parts.
- Improvements to CAFE Standards: Korea will expand the amount of “eco-credits” available to help meet fuel economy and greenhouse gas requirements under the regulations currently in force, while also ensuring that fuel economy targets in future regulations will be set taking U.S. regulations into account and will continue to include more lenient targets for small volume manufacturers.
◊ Customs Improvement: Korea will address long-standing concerns with onerous and costly verification procedures through agreement on principles for conducting verification of origin of exports under KORUS and establish a working group to monitor and address future issues that arise.
◊ Pharmaceutical Reimbursements: Within 2018, Korea will amend its Premium Pricing Policy for Global Innovative Drugs to make it consistent with Korea’s commitments under KORUS to ensure non-discriminatory and fair treatment for U.S. pharmaceutical exports.
♦ 3. CURRENCY AGREEMENT
◊ The U.S. Department of the Treasury is leading discussions on currency with Korea’s Ministry of Strategy and Finance.
◊ An agreement is being finalized on robust provisions to prohibit competitive devaluation and exchange rate manipulation in order to promote a level playing field for trade and investment. Strong commitments on transparency and accountability are included in the provisions.
♦ 4. OUTCOMES FOR SECTION 232 EXEMPTION FOR KOREA
- The President’s action under Section 232 of the Trade Expansion Act of 1962, as amended, is designed to protect U.S. national security given the massive and persistent global excess capacity for steel and aluminum and the threatened impairment of U.S. national security from imports of such products.
- As the President’s proclamations state, the United States is willing to work with any country with which we have a security relationship to find alternative ways to address the threatened impairment of the national security caused by imports of steel and aluminum.
- The United States has a strong and enduring security relationship with Korea.
- U.S. negotiations with Korea have resulted in a satisfactory alternative for addressing U.S. national security concerns with respect to steel imports.
- Korean imports of steel products into the United States will be subject to a product-specific quota equivalent to 70% of the average annual import volume of such products during the period of 2015-17. This will result in a significant reduction in Korean steel shipments to the United States.