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| Cars manufactured in Korea are parked at Mokpo New Port in the southwestern city of Mokpo to be shipped to other countries, in this file photo. Korea is expected to face extra pressure from the United States to decrease its vehicle exports to the United States in negotiations to revise the bilateral trade pact. / Korea Times file |
The United States temporarily exempted Korea from heavy tariffs on steel, but it will face bigger pressure from the United States over amendment of the bilateral trade pact.
The White House announced Thursday that Korea, along with five countries and members of the European Union (EU), got authorization by President Donald Trump to get temporary exemption from tariffs planned for steel and aluminum imports. The pause will last until May 1 and each county will have to negotiate with the United States for extension of the exemption.
Korea was relieved as it was desperately lobbying to avoid 25 percent tariffs on steel exports and 10 percent on aluminum, which Trump said aims at protecting U.S. workers and benefiting domestic businesses. As the third largest steel exporter to the United States, Korea feared a huge damage. According to the Korea International Trade Association, 73.7 percent of Korea's $3.8 billion steel exports to the United States last year was subject to tariffs. Hyundai Research Institute also has estimated that Korea's steel exports to the United States would dip by $880 million annually while loss in production will be 7.23 trillion won for three years if the U.S. levies tariffs as planned.
The announcement, however, means that Korea will be driven into a corner in its talk with Washington to amend the bilateral free trade pact. The two countries have been engaged in negotiation since Trump's denunciation that the pact is responsible for job loss and trade deficit.
U.S. Trade Representative Robert Lighthizer hinted that the FTA renegotiation will determine whether Korea will get extended exemption. The United States has said that it will exclude Canada and Mexico from the steel tariffs if their renegotiation of the NAFTA succeeds, and Lighthizer said that Korea is in similar circumstances.
While the country's trade negotiators say that nothing has been decided yet in the revision talks, market watchers agree that Korea's automobiles will be the main target.
"The United States is facing an election, and the result is difficult to predict in states like Arizona, Nevada, West Virginia, Indiana, and Missouri. These states have a lot of automobile industry workers," said Kwon Soon-woo, an analyst at SK Investment and Securities.
"When taking this into account, the U.S. protectionist policy is likely to be used for political purpose in the future as well," he said, adding that these uncertainties stemming from U.S. politics will weigh on Korean automobile makers.
Automobiles took 72.6 percent of Korea's total trade surplus with the United States. According to Korea Automobile Manufacturers Association, Korea exported 960,000 cars to the United States, worth $14.6 billion, while importing 61,000, worth $1.68 billion.
As the FTA renegotiation aims at decreasing U.S. deficit, it would take any measures, including demolishing Korea's safety and environmental regulations. Korea allows an annual 25,000 units of U.S. cars to enter Korea without meeting the country's industry regulations, and the U.S. is known to demand raising the quota. The U.S. automakers have also been claiming that Korea's vehicle emissions standards is a kind of non-tariff barrier. While the U.S. wants to increase its automobile exports to Korea, industry watchers have explained that the U.S. deficit is not due to the FTA, pointing out that the U.S. cars are not as popular as German or Japanese carmakers here as they lack competitive edge in the market.
Korea's trade surplus has also been diminishing recently due to sluggish sales of automobiles and steel. It has been increasing imports of U.S. beefs and natural gas.
