US-Korea trade pact lives to see another day, thankfully

I wasn’t alone Wednesday in breathing a sigh of relief after U.S. Trade Representative Robert Lighthizer and Korean Trade Minister Kim Hyun-chong reached an agreement on the next steps for the U.S.-Korea Free Trade Agreement (KORUS).

Their meeting could have easily gone the other way, paving the way for a U.S. withdrawal from the deal. That would have been disastrous for both countries, setting back the U.S.-Korea alliance just as the North Korea nuclear threat looms large.

{mosads}Security concerns aside, American manufacturers, farmers and service suppliers would lose preferential access to the world’s 11th-largest economy. Other trading partners, China included, would be waiting in the wings, having their own bilateral free trade agreements with Korea in place.

New Korean investments in the U.S. manufacturing sector from companies like Samsung and Hyundai and the high-paying jobs they bring would also be at risk.

What’s more, walking away from KORUS, particularly after withdrawal from the Trans-Pacific Partnership (TPP), would solidify the view in Asian capitals that the U.S. is not a credible nor trustworthy partner. This would accelerate current efforts, whether through the Regional Comprehensive Economic Partnership (RCEP) or a version of TPP without the U.S. (TPP-11), to advance economic integration without the U.S.

That scenario has been temporarily averted as KORUS lives another day. Over the coming weeks and months, the two countries will work on implementation issues and consider amendments. Korea will start its legislative procedures to enter into negotiations, which will require an economic impact assessment, a public hearing and other steps.

This is the beginning of a tough road ahead. It was hard not to notice the dissonance between each side Wednesday. Ambassador Lighthizer talked about the need to engage on “amendments that will lead to fair and reciprocal trade.” Minister Kim stressed the need to “strengthen mutual benefits” and Korea’s political parties emphasized the need to prioritize national interests.

As the U.S. chief negotiator during the original KORUS talks in 2006-07 and again in 2010 its renegotiation, I learned that South Korea is a formidable and proud negotiating partner, but that its negotiators are also pragmatic and prepared to make a deal if they can show its benefits at home.

Based on my experience, here’s my advice on how both sides should approach the negotiations: 

First, it’s critical that Korea step up its implementation of KORUS, both the letter and spirit. A senior-level commitment among the Korean ministries to resolve the range of outstanding issues in such areas as customs, competition policy and financial services, would be a good first step, along with quick actions on at least a few specific issues.

The U.S., in the interest of an expeditious negotiation, should clearly convey to Korea its priorities for amendments. Korea will have limited time and resources to work on issues, so it’s important it knows what to focus on. South Korea, in turn, should calibrate its requests based on the scope and nature of the U.S. requests. 

Both sides should be realistic in their demands and not overreach. While it may be tempting for the U.S., for example, to seek acceleration of Korean tariff cuts on agricultural products, this would be extremely controversial and consume a great deal of domestic bandwidth.

The U.S. agricultural community seems pleased overall with the access they are currently enjoying in the Korean market. There’s an understanding that it stands to lose a great deal should these talks fail. At the same time, Korea may be interested in asking for U.S. concessions on trade remedies, a topic which they pressed in 2007. Such requests will be dead on arrival at the U.S. door, so Korea would be wise to look elsewhere.

Keeping in mind that most of the agreement was negotiated over 10 years ago, both sides should use this opportunity to identify areas for updating where they have shared objectives and interests, such as digital trade.

Finally, both sides should not forget the nature to negotiation: Any chance of success requires a win-win proposition. This doesn’t mean that an exact score should be tallied, but a recognition that the U.S. and Korea will each need to have gains in hand to show at home.

An important step forward was taken Wednesday, but that was the easy part. It’s now up to both sides to work together to navigate the next and more difficult road ahead. 

Wendy Cutler is the vice president and managing director of the Washington, D.C. office of the Asia Society Policy Institute, an organization that seeks to be a bridge in problem-solving within the region and between Asia and the wider world. Cutler served as acting deputy U.S. trade representative, working on a range of U.S. trade negotiations and initiatives in the Asia-Pacific region, including the U.S.-Korea (KORUS) Free Trade Agreement.