United States: Is The U.S.-Korea Trade Deal Headed For Trouble?

On June 30, 2007, the United States signed a historic free trade agreement with South Korea.¹ The Korea-United States Free Trade Agreement ("KORUS"), like most FTAs in which the U.S. is engaged, eliminates "tariffs and non-tariff barriers to trade in goods and services" between the two countries in an effort to enhance trade and promote economic growth.² In 2006, just before the deal was made, U.S. exports to South Korea totaled over $32.5 billion, making South Korea the U.S.'s seventh largest trading partner.³ Among its other provisions, KORUS sought to grow the relationship between the U.S. and South Korea with regards to the export of U.S. autos, pharmaceuticals, machinery, IP, and agriculture.

Despite the perceived success of KORUS, under which exports of U.S. goods and services to South Korea were estimated at $63.8 billion in 2016,⁴ on the morning of September 1, 2017, President Donald Trump reportedly informed his senior officials of his intent to withdraw from the agreement.⁵ Although this announcement may be unsurprising to those following the administration's renegotiation of NAFTA, the news sparked some controversy across industries that rely heavily on South Korean markets, such as the agricultural industry.  Pork exporters, for example, expressed concern over losing the South Korean pork market—the U.S.'s fifth largest pork export market—to the European Union, Chile, and "other countries that have preferential trade access" to South Korea.⁶

The future of FTAs like KORUS and NAFTA is unclear because there is no precedent governing the legal provisions at issue in President Trump's decision to withdraw from these agreements. Each U.S. trade agreement is governed by various U.S. laws, including the Trade Act of 1974, which provides a general outline for U.S. entry into FTAs with foreign countries.⁷ Although the Act provides for U.S. withdrawal from established FTAs,⁸ Presidential action under this provision has never been seriously considered until the recent NAFTA renegotiations. However, it is clear that the outcome of the NAFTA discussions will likely affect the future of the other FTAs in which the U.S. is involved, including KORUS.

For the time being, KORUS remains intact. The foreign policy issues regarding North Korea may affect the future of the U.S.'s relationship with South Korea, and it is likely that the outcome of the NAFTA renegotiation will also have a strong impact on any decision pertaining to KORUS. Torres Law will continue to monitor the NAFTA renegotiations, as well as any new developments with respect to KORUS and other FTAs and will keep you appraised of any significant updates. 

Footnotes

1 U.S.-Korea Free Trade Agreement, Office of the United States Trade Representative, Resource Center, https://ustr.gov/trade-agreements/free-trade-agreements/korus-fta?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiossneakpeek&stream=top-stories (last visited, Sept. 11, 2017).

2 Fact Sheet: Four Year Snapshot: The U.S.-Korea Free Trade Agreement, Office of the United States Trade Representative (March 2016), https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2016/March/Four-Year-Snapshot-KORUS.

3 Id.

4 U.S.-Korea Free Trade Agreement, supra note 1.

5 Jonathan Swan, What's Really Happening with the U.S.-Korea Trade Deal, Axios (Sept. 10, 2017),https://www.axios.com/whats-really-happening-with-the-u-s-korea-trade-deal-2483767711.html.

6 Cheryl Day, Tossing Out KORUS Is Risky Business for U.S. Hog Farmers, National Hog Farmer (Sept. 5, 2017), http://kticradio.com/agricultural/korus-withdraw-would-harm-pork-producers/.

7 19 U.S.C. §§ 2101 – 2497(b).

8 Id.

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