Stabilizing the U.S.-Korea Trade Agenda Under Trump and Moon

The Donald J. Trump administration’s unconventional approach and focus on “fair and reciprocal trade” have serious implications for the U.S.-South Korea economic relationship. Despite relative satisfaction with the status quo in the two business communities, the bilateral economic relationship has received political attention at the highest levels. This has also spilled over into the security realm.

Careful management, including the cultivation of new areas of cooperation, is needed to prevent economic issues from hindering close security cooperation on North Korea policy and to put the overall relationship on more solid footing.
Since the 2006‒2007 negotiation and 2011 ratification of the Korea-U.S. Free Trade Agreement (KORUS FTA), U.S.-South Korea economic cooperation has emerged as a pillar of their alliance.

Other steps to expand the security relationship included cooperation on nontraditional security issues beyond the Korean Peninsula and the 2015 signing of a new U.S.-South Korea nuclear cooperation agreement. The two countries carried out this expansion under both Republican (George W. Bush) and Democratic (Barack Obama) U.S. administrations, as well as under progressive (Roh Moo-hyun) and conservative (Lee Myung-bak and Park Geun-hye) presidencies in South Korea.

South Korea, or the Republic of Korea (ROK), has actively embraced trade promotion since the mid-2000s, enabling it to expand its exports through free trade agreements with China, Southeast Asian countries, and the European Union (EU). This expansion has enhanced South Korea’s value to the United States as an economic partner by broadening South Korea’s economic options and enhancing international competition for a share of its markets.

But ongoing U.S.-China competition has put pressure on the U.S.-ROK economic relationship. The United States and China have pushed South Korea to choose between its security guarantor and its primary economic partner.Negotiations that resulted in revised U.S.-ROK trade arrangements, conducted under the auspices of the KORUS FTA, have temporarily lessened tension in U.S.-ROK relations.

Most recently, in early 2018, at the Trump administration’s insistence, the two sides agreed on relatively small modifications to the KORUS FTA and negotiated limits on South Korea’s exports of aluminum and steel to the United States. The economic relationship will require further attention as South Korea addresses its vulnerability to fallout from the U.S.-China trade war and adjusts to China’s growing economic power.

South Korea will also have to maneuver within the new trade environment resulting from the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP), an eleven-nation agreement finalized in 2018 that emerged from the Trans-Pacific Partnership (TPP) after Trump’s January 2017 withdrawal. Although South Korea could be interested in joining the CPTPP, the recent decline in relations with Japan, a founding member of CPTPP, complicates that prospect.

Using the revised KORUS FTA as a platform for future cooperation, the United States and South Korea should work to expand their partnership to include economic cooperation in the Indo-Pacific, energy security, and plans for inter-Korean economic initiatives. They should also address unfair trading practices, the challenges aging societies face, and fourth-industrial-revolution issues.

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