Thread: US-South Korea trade deal is really 3 separate agreements, says US trade rep Robert L

US-South Korea trade deal is really 3 separate agreements, says US trade rep Robert Lighthizer

South Korea has agreed to cut its average annual steel exports to the U.S. by 30 percent.
A side deal from the U.S. Treasury is aimed at preventing the practice of competitive devaluation of the dollar, U.S. Trade Representative Robert Lighthizer says.
Lighthizer says the Trump administration is also extending 25 percent tariffs on small truck imports from South Korea by 20 years.

Kevin Breuninger
Published 1 Hour Ago Updated 8 Mins Ago CNBC.com

U.S. Trade Representative Robert Lighthizer said a deal with South Korea reforms three separate areas of the trade relationship: steel, currency and the 6-year-old pact known as KORUS.

"I would say you have to think of this as really three agreements that are independent but that define a relationship," Lighthizer said Wednesday on CNBC's "Squawk Box."

In the deal announced by the Trump administration Tuesday, South Korea has agreed to cut its average annual steel exports to the U.S. by 30 percent, which Lighthizer said is a boon for American steel makers.

"A lot of people believe, and I think I agree with them, that Korea is part of the problem on steel," he said.

The U.S. trading partner will also be subject to a 10 percent tariff on aluminum.

On currency, Lighthizer said the agreement will establish a process to prevent "competitive devaluation" of the dollar, whereby South Korea deliberately lowers its currency to give its exports a competitive edge. The Treasury's goal in working to prevent this practice is to stabilize the greenback, Lighthizer said.

The U.S.-Korea Free Trade Agreement, established in 2007 and known as KORUS, will also receive a tuneup on vehicle sales.

"The president's view has been — and I agree with it — it has not been particularly good for the United States. We've had increases in trade deficits and really not substantial increases in sales," Lighthizer said.

To revamp the deal, the Trump administration is postponing a scheduled phaseout of 25 percent tariffs on small truck imports from South Korea. Rather than allow the tariffs to expire in 2021, President Donald Trump has extended the tariff by 20 years, to 2041.

Doing so, Lighthizer said, will protect the U.S. automobile industry against an influx of Korean truck imports.

The deal also doubles the cap on U.S. truck exports to South Korea to 50,000 per manufacturer, and Lighthizer said it will get rid of "other barriers" to sales, including certain environmental standards and customs standards.

"So I guess I'd say all three of these are very important, I think they're very historic when taken together and we're very proud of them," Lighthizer said.

https://www.cnbc.com/2018/03/28/us-s...ighthizer.html

New US deal with South Korea: What you need to know

by Patrick Gillespie @CNNMoney March 27, 2018: 11:27 PM ET

US trade moves could spark Chinese retaliation
President Donald Trump has his first trade deal.

Senior US officials on Tuesday gave details on an agreement in principle with South Korea to revise a trade deal that originally went into effect in 2012.

The officials said the agreement was an example of Trump delivering on his promise to voters to negotiate better trade deals for the United States.

"This agreement is visionary and innovative," one senior administration official, speaking on background, told reporters.

The US officials made their case for why the revised deal is an improvement on the one that's currently in effect, which Trump has slammed as "horrible" and a "job killer." The South Korean government first announced details of the agreement on Monday.

Some economists have suggested the new deal isn't significantly different from the old one. South Korean exporters will be relieved that none of the tariffs that were lifted under the original agreement have been brought back, according to Krystal Tan, an economist at research firm Capital Economics.

Experts point out that the negotiations lasted only a few months, far shorter than trade talks typically take. Striking a deal quickly, they note, has the advantage of removing a potentially divisive issue between the two military allies at a time of tensions and delicate talks with North Korea.

Here are some of the main takeaways from the new agreement:

Auto exports

The Trump administration says some of the key changes affect the auto industry, which accounts for a big chunk of the trade deficit the United States runs with South Korea.

Under the revamped deal, each US carmaker will be allowed to export 50,000 vehicles per year to South Korea that meet American safety standards, up from 25,000 previously. Beyond that threshold, cars shipped from the United States will have to comply with South Korean safety rules, which American companies say put them at a disadvantage.

But analysts say the increased quota is unlikely to make much difference anytime soon. No US automaker sold more than 11,000 cars in South Korea last year.

Trump administration officials argue, though, that US car companies should benefit from an agreement by South Korea to ease "burdensome" auto regulations more broadly. That includes reducing additional tests and getting rid of labeling requirements that, the administration argues, hinder American automakers' ability to sell in South Korea.

The revised deal also postpones the phasing out of a US tariff of 25% on pickup trucks from South Korea. It will now end in 2041 rather than 2021. Capital Economics says no Korean automaker exports pickup trucks to the US at the moment.

Steel tariff exemption

The US government has linked the agreement on a revised trade pact with the decision to cut South Korea some slack on Trump's recent broad tariffs on steel and aluminum imports.

South Korea will still be subject to the 10% tariff on aluminum that was imposed on most nations. But it is largely exempt from the 25% tariff on steel.

Under the arrangement, 70% of the average amount of steel that South Korea exports to the United States each year will be permanently exempt from the new 25% tariff, officials said. Anything above that amount will still be subject to it.

Several other US allies -- including Canada, Mexico and the European Union -- have been granted temporary exclusions from the tariffs.

Currency clause

The United States and South Korea also agreed to try to make sure neither country devalues its currency intentionally to gain an unfair advantage on trade. But the measure lacks teeth.

When a currency is weaker, it makes exports cheaper -- and more attractive -- to foreign buyers. It also makes foreign imports more expensive for local consumers. On the campaign trail, Trump repeatedly railed against other countries that he accused of purposely devaluing their currencies to get an unfair edge over the United States.

The United States has never included a provision on currencies in a trade negotiation before, according to Trump administration officials.

But the devil is in the detail. The currency provision is not actually in the official agreement and has no enforcement mechanism. Including it in the text of the deal would have required a lengthy legislative approval process, a path that administration officials indicated they did not want to go down.

In effect, both countries are just agreeing to act in good faith with their currencies.

http://money.cnn.com/2018/03/27/news...eal/index.html

Sounds good! Protects steel with import quotas, protects aluminum and pick-up trucks with a tariff, protects American auto manufacturers with twice the volume and easier export opportunities and US standards as the base to qualify for entry into South Korea, and protects all American businesses with an agreement on currency manipulation, which can be enforced by the WTO, something the CNN article failed to mention. It's not earth-shattering, it's not disruptive, it's a reasonable solution that will help our businesses increase exports while limiting base industry imports and we'll collect some tax revenues from the tariffs on aluminum. Very good! The key now is for our auto industry to do a good job marketing their products and sell many more vehicles to South Koreans (tough job because the South Koreans actually make a nice car called the Hyundai and to date have the best advertising campaigns. Get smart American Auto, ramp it up, and hire better advertising companies because the ones you've been wasting your money on were terrible, almost anti-buy campaigns that let you down, big time.)

Ink it and seal it, and move on to the next ones.

Oh, and thank you, thank you very very much.

Maybe we'll be cheering this deal in a couple years and maybe we won't. Devils in the details. Only time will tell.