With the international trade community’s focus on China (tariffs) and Mexico/Canada (NAFTA negotiations), it would be easy to forget another significant trade matter that the Trump administration has been seeking to finalize. According to reports, the revised Korea-U.S. Free Trade Agreement (KORUS) will be signed today after President Trump and South Korean President Moon Jae-in meet in New York City, where both are attending the start of the United Nations’ General Assembly plenary session. Continue Reading Revised Korea-U.S. Free Trade Agreement to Be Signed
The Office of the U.S. Trade Representative has released the Trump administration’s Trade Policy Agenda and Annual Report detailing how the administration “is promoting free, fair, and reciprocal trade and strongly enforcing U.S. trade laws.” USTR Robert Lighthizer, in releasing the report, stated that, “President Trump has launched a new era in American trade policy. His agenda is driven by a pragmatic determination to use the leverage available to the world’s largest economy to obtain fairer treatment for American workers.”
The policy rests on these five major pillars:
- Adopting Trade Policies that Support Our National Security
- Strengthening the U.S. Economy
- Negotiating Better Trade Deals
- Aggressively Enforcing U.S. Trade Laws and U.S. Rights under Existing Agreements
- Reforming the Multilateral Trading System
The report adheres closely to past statements and well-known positions of President Trump’s trade team. According to Lighthizer, “President Trump is keeping his promises to the American people on trade, from withdrawing the United States from the flawed Trans-Pacific Partnership, to renegotiating NAFTA, to strongly enforcing U.S. trade laws. We are already seeing the results of President Trump’s agenda pay off for American workers, farmers, ranchers, and businesses.”
Of note in this voluminous report are these planned policy actions and activities:
- Trade Agreements – The United States will continue to renegotiate the North American Free Trade Agreement and amend the Korea-U.S. Free Trade Agreement. The Trump administration will prepare for a potential bilateral agreement with the United Kingdom once the UK leaves the European Union. It will also pursue other bilateral agreements in the Indo-Pacific and African regions. The administration’s primary goals in NAFTA negotiations are to modernize provisions and to rebalance NAFTA for fair, reciprocal trade. The goals for KORUS are also to establish a more balanced trade relationship and to eliminate non-tariff barriers to exports of U.S.-made motor vehicles and motor vehicle parts.
- Enforcing/Defending U.S. Trade Laws – The report states that the Trump administration will continue to “use all tools available” to combat unfair trade, and that there are “no successful trade agreements without enforcement.” The report highlights, but provides little new information or insight into, many of the trade actions undertaken in 2017 (i.e., trade actions under Sections 201, 232 and 301 of the Trade Act of 1974) and ongoing antidumping and countervailing duty investigations.
- China – Several sections of the report discuss China and state that the scope of its economy means that “its economic practices increasingly affect the United States and the overall global economic and trade system.” It notes, however, that despite China’s WTO membership, the country is “moving further away from market principles” and as a result the United States “will resist efforts by China – or any other country – to hide behind international bureaucracies in an effort to hinder the ability of the United States to take robust actions, when necessary, in response to unfair trade practices abroad.”
- World Trade Organization – The administration will work with all WTO members “who share the U.S. goal of using the organization to create rules that will lead to more efficient markets, more trade and greater wealth for our citizens.” However, the report notes that the United States is “concerned that the WTO is not operating as the contracting parties envisioned and, as a result, is undermining America’s ability to act in its national interest.”
A fact sheet on the report can be viewed here. Congress requires the USTR to submit the President’s Trade Policy Agenda and Annual Report by March 1 each year.
President Trump and several Cabinet members hosted a meeting with congressional Republicans and Democrats on February 13, 2018 at the White House to discuss possible trade remedies in the Section 232 steel and aluminum investigations. The purpose of a Section 232 investigation is to determine the effect of imports on the national security of the United States, and the president stated that his administration is reviewing the final Department of Commerce reports submitted last month and considering all options. He told those attending that quotas and tariffs are options on the table.
In opening the discussions, President Trump stated that while he wants to keep prices down, he also wishes to “make sure that we have a steel industry and aluminum industry, and we do need that for national defense. If we ever have a conflict, we don’t want to be buying the steel from a country that we’re fighting because somehow that doesn’t work very well.” Several senators urged caution, however, including Senator Roy Blunt, who said, “we do need to be careful here that we don’t start a reciprocal battle on tariffs” because the United States not only makes aluminum and steel but also must buy and import these products to satisfy domestic demand. Others cautioned President Trump on the issue of jobs, noting that with so many items manufactured in the United States using steel and aluminum, import tariffs could actually result in a net job loss. In response, the president stated, “In one case, you’re going to create jobs. You may have a higher price or maybe a little bit higher, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs; it’s going to be made in China and other places.”
Senator Pat Toomey cautioned the president to proceed cautiously under Section 232 for national security reasons, arguing that U.S. defense needs account for only about 3 percent of domestic steel consumption. “So I think it’s implausible to believe that we’re not able to meet the needs of our defense industry,” he said, indicating that invoking national security concerns could be difficult to support and invite retaliation. Others urged caution in the scope of any enforcement action resulting from the investigations. Commerce Secretary Ross noted that Section 232 remedies do not require “the same tariff on every single country. It doesn’t have to mean the same tariff on every single product. It can be applied in a much more surgical way. And we presented the President with a range of alternatives that goes from a big tariff on everything from everywhere, to very selective tariffs from a very selective group of countries.”
The meeting also included brief comments by multiple participants on other trade matters, including South Korea (the KORUS FTA is a “very bad trade deal”), China (is “violating the international rules, stealing our intellectual property, overproducing steel products”), Canada (has “treated us very, very unfairly when it comes to lumber and timber”), and NAFTA (the renegotiations are “making real headway” but still working through a number of issues).
A full transcript of the meeting is available on the White House website: Remarks by President Trump, Members of Congress, and Members of the Cabinet in Meeting on Trade.
On January 5, the United States and South Korea held their first meeting to discuss potential renegotiation of the U.S.- South Korea (KORUS) free trade agreement. In addition to discussing procedural and timetable issues, the United States discussed proposals to move toward fair and reciprocal trade in key industrial goods sectors, such as autos and auto parts, and to resolve cross-cutting and sector-specific barriers affecting U.S. exports. South Korea noted its interest in resolving “sensitive issues,” including the investor-state dispute settlement (ISDS) clause and trade remedies.
At the conclusion of the negotiating session, Ambassador Robert Lighthizer said, “We have much work to do to reach an agreement that serves the economic interests of the American people. Our goals are clear: we must achieve fair and reciprocal trade between our two nations. We will move forward as expeditiously as possible to achieve this goal.”
The United States first announced its intent to seek modifications to KORUS in July 2017. During President Trump’s visit to Seoul in November 2017, the two countries agreed to expedite the talks. The U.S. delegation is led by Michael Beeman, Assistant U.S. Trade Representative for Japan, Korea and APEC. South Korea’s delegation is led by Myung-hee Yoo, Director General from the Ministry of Trade, Industry and Energy (MOTIE).