When South Korean President Moon Jae-in arrives in Washington this week for his first official visit as Head of State, he will provide President Trump an opportunity to energize relations with a vital Asian ally. The U.S. Chamber of Commerce hopes the administration will seize this opportunity to ensure our trade ties fulfil their potential.
Our trading relationship reached a new stage five years ago when the U.S.-Korea Free Trade Agreement, or KORUS, went into effect. At the time, the treaty was hailed as one of the strongest trade deals the U.S. had ever negotiated. It opened new opportunities for U.S. exporters in a notoriously difficult market. It raised the bar on transparency and intellectual property protections. It addressed digital trade in groundbreaking ways. It also established a committee that allows either side to address any concerns about trade in areas covered by the agreement.
Despite this early optimism, U.S. exports to Korea have not risen as much as expected, and our merchandise trade deficit with Korea has grown.While economists agree the trade balance is the wrong yardstick to take the measure of a trade pact, this has nonetheless prompted some critics to call for ripping up the agreement.
Such a rash move would be a mistake. U.S. services exports to Korea, which are not included in merchandise trade measures, have jumped 25% to more than $US21 billion annually. The merchandise trade numbers are also moving in the right direction. American exports of goods benefitting from immediate tariff reductions have grown over the past five years, and with more Korean tariffs set for elimination over the next few years, U.S. exports will be even more competitive. With its economy now picking up, Korean imports of U.S. products are rising.
In short, KORUS puts American exporters on a level playing field against competitors from Europe, China and Australia, which also have free trade agreements with Korea. Without KORUS, U.S. exports of agricultural and manufactured products, as well as services, would likely have fallen substantially over the past five years.
Scrapping KORUS and starting over would put this progress at risk. It would put U.S. exports at a disadvantage to products from Europe and elsewhere in Asia. And it would send a negative signal to Korean firms looking to invest even more across the U.S.
To the extent KORUS has fallen short, it is largely because it hasn’t been rigorously enforced. Make no mistake: The trade agreements we enter into aren’t worth the paper they are written on if they aren’t implemented faithfully.
In this context, the Trump and Moon administrations should see this visit as a unique opportunity to recommit to full compliance with both the letter and spirit of KORUS. The text of the agreement is solid, and it came together with great effort and difficulty in both countries. Reopeningthe agreement could lead to its unravelling, which would only benefit our trade competitors.
As both President Trump and President Moon already know, it isn’t easy to separate our trading relationship from geopolitical realities. U.S. interests face significant security threats on the Korean Peninsula given North Korea’s nuclear ambitions. Adding economic uncertainty into the relationship under these circumstances would make our security cooperation more complicated.
Despite the constant threat of aggression from the North, South Korea has undergone a remarkable political and economic transformation over the past sixty years. The U.S. has played a significant role in this transformation as both a trusted strategic ally and trading partner. The KORUS agreement is central to this relationship. We should do everything we can to make sure it fulfils its potential.
Myron Brilliant is the US Chamber’s executive vice president and head of international affairs.