South Korea earned an exemption from the US heavy tariffs on steel imports in a deal to revise their six-year-old free trade agreement (FTA), Seoul's trade minister said Monday. The government will allow United States manufacturers to sell up to 50,000 cars in South Korea that don't meet local standards.
"This leaves a bad precedent of exchanging steel tariffs - which is a breach of global trade law - for a legitimate free trade agreement in negotiations", he said. "It will help our companies have stable business in the U.S".
South Korean automakers should make investments and hire new workers in the United States to build pick-up trucks to avoid the 25 per cent tariff, he added.
South Korea is one of seven economies temporarily exempt from the duties that went into effect Friday and were mainly aimed at overproduction by China. Shipments from the Asian country will now be limited to 2.68 million tons, a figure equivalent to 70 percent of the average annual Korean steel exports between 2015 and 2017.
United States exempts South Korea from steel import tariffs, but imposes import share.
Although the renegotiated trade deal appears to heavily favour the USA, the South Korean Government will no doubt be delighted to become the first U.S. ally to avoid Trump's newly enforced tariffs.
The South's economy is heavily dependent on trade, with the U.S. as its second-biggest partner and Seoul's trade minister said Monday they had reached agreement on revising the KORUS deal after weeks of negotiations.
"It was easy for me to negotiate because the president gave me the full authority".
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While the United States posted a trade surplus of $10.7 billion with South Korea in the services sector, it recorded a goods trade deficit of $27.7 billion in 2016, leaving an overall deficit of $17.0 billion.
While South Korea made some concessions to US demands on the key auto trade issues, the revision of the free trade pact aligns with South Korea's own interests, experts said.
South Korea and the United States also agreed that U.S. tariffs on Korean pickup trucks will remain in place until 2041, extended by 20 years from the previous phase-out schedule of 2021.
South Korea's steel industry will "try to pave the way to ease USA restrictions on steel exports", the association said in a statement.
"We expect to sign that agreement soon", Mnuchin said on Fox News Sunday, calling the agreement an "absolute win-win".
The U.S. imported $16 billion worth of South Korean passengers but exported only $1.5 billion American vehicles, according to CNN Money. Currently, no auto company exports these vehicles from South Korea to the U.S., which factored into the talks, Kim said.
"This is not a free trade, but a managed trade".
The South Korean government is renovating a building in which the summit between President Moon Jae-in and North Korean leader Kim Jong-un will be held in April, the Unification Ministry said on Monday.
But the impact of the tariffs is increasingly in question - most major US trading partners have been granted exemptions, at least temporarily, meaning the upside for domestic producers in the United States could be limited.