NEW YORK: The trade pact that the Trump administration renegotiated with South Korea this year is in jeopardy as the US considers imposing tariffs on auto imports.

While the two sides agreed in March on a revised Korea-US free trade agreement, known as Korus, they still haven’t signed it into law. And the parliament in Seoul won’t be able to ratify the deal if the US slaps new tariffs on Korean car imports on national security grounds, according to the ruling Democratic Party’s Hong Young-pyo.

It would be “highly irrational” of the US to impose such tariffs after Korea met most of the US demands on cars during the renegotiation, said Hong, the party’s leader on the floor of the National Assembly. “This would make it hard for parliament to ratify the deal.”

His view is echoed by opposition and minor parties, as well as editorials in local newspapers, as Korean and global automakers await a report on the US investigation into auto imports that is due by February.

America’s other trading partners are closely watching the developments, with any move that undermines Korus likely to discourage them from entering bilateral talks.

Under the revised Korus deal, Seoul had agreed to double to 50,000 the number of cars each US automaker can sell in Korea without meeting local safety standards, senior Trump administration officials told reporters in March. The two sides also agreed the US wouldn’t reimpose tariffs on Korean car exports, though America did extend its 25 per cent levy on pickup-truck imports until 2041, from 2021 previously.

Cars from Korea, which currently face no US tariffs, were the biggest source of the nation’s $18 billion trade surplus with the US last year, according to the Korea International Trade Association. The imbalance was one reason the US demanded that Seoul lower non-tariff barriers to imports of US vehicles in the revised agreement.

Trump in May ordered US officials to investigate global auto imports for potential trade penalties, including higher tariffs, on national security grounds, using the same 1960s trade law that he employed to justify steel and aluminum tariffs.

The investigation appeared to put carmakers around the world in the administration’s sights, including South Korea, although Trump in July agreed to suspend the threat against the European Union.

Thomas Byrne, president of the Korea Society in New York and formerly a senior vice president at Moody’s Investors Service, said at a seminar in Seoul this month that the US is unlikely to slap tariffs on Korean cars.

Bloomberg/The Washington Post

Published in Dawn, August 16th, 2018