FTA renegotiation weighing on economy

Korea is facing growing economic pressure over a series of international political uncertainties.

The latest setback came this month when Korea and the United States came to terms with amending the Korea-U.S. Free Trade Agreement (KORUS FTA). Even if the world’s largest economy did not confirm its timing, the U.S. has in recent months stepped up its provocative rhetoric to withdraw from the five-year pact clinched in 2012.

No concrete steps have been taken for its renegotiation, but its possible aftermath is likely to put a damper on local economic growth.

As the potential revision of the KORUS FTA can affect every circle of the local economy, the government is seeking to come up with countermeasures.

“The U.S. requested us to ease regulations on cloud server management in the financial industry,” Choi Won-ho, a foreign affairs director at the Ministry of Science and ICT, said during the National Assembly’s 20-day audit last week.

“Under the current legal system, foreign companies here should manage financial and private information of their customers by using servers in Korean territory,” he said. “Local watchdogs are in a position that easing the regulation can cause problems in protecting private datasets.”

The official said the ministry is analyzing economic impacts in case the government complies with the U.S. request, but has yet to ascertain the extent of the possible damage.

The Ministry of Agriculture, Food and Rural Affairs said it will never make concessions in any terms of the pact, as the agriculture sector has accumulated growing trade deficits ever since signing the pact with the U.S. Agriculture is expected to suffer the biggest damages in the wake of the upcoming FTA renegotiation.

“The U.S. will likely demand more of our industry while renegotiating the pact,” Agriculture Minister Kim Young-rok said in the Assembly audit.

“But our losses have continued piling up at least in agriculture business with the U.S. We are going to let the U.S. understand our losses.”

But the U.S. has yet to deliver their agriculture requests over the FTA renegotiation, according to him.

“It is too early for us to share our trade strategies, as the U.S. has yet to notify us of their demands. But we have come up with countermeasures for each product.”

Despite the hard-line stance of the ministry, Korea is expected to face uphill trade battles with the U.S., as shown by the latter’s latest regulation on the Seoul-based tech giants Samsung and LG.

Last week, the U.S. International Trade Commission voted in favor of imposing trade barriers on washing machines from the two Korean companies.

Seoul’s dilemma

Observers point out U.S. President Donald Trump threatens to terminate the free trade deal with Korea to gain more concessions through renegotiation of the five-year-old contract, which has been praised as an example of a win-win bilateral pact.

They recommend the Moon Jae-in administration should not back off because such an attitude would prompt the U.S. government to ask for more concessions.

But the problem is Trump may actually carry out its bold threats, dubbed the “madman strategy.”

“Trump suffers very low approval ratings in less than a year after his inauguration. He might come up with drastic measures to gain popularity,” said an analyst in Seoul who asked not to be named.