U.S. and South Korean flags waving with blue sky background. btgbtg/ThinkstockPhotos

Trump may terminate South Korean trade pact

Formal process to leave could start as early as this week.

by Toluse Olorunnipa 

President Donald Trump said he would discuss the future of the U.S.-South Korea free-trade agreement with his advisers following a newspaper report that he’s considering terminating the pact. 

“I am,” Trump said in response to a question about whether he’s discussing the issue with advisers. “It’s very much on my mind,” the president said during a visit to Houston on Saturday to view the damage from Hurricane Harvey.

Trump’s administration had begun talks with South Korea to revise a trade deal signed in 2012 by the Obama administration, but they failed to agree on a way forward after joint meetings in August. The dialogue comes amid rising tensions with North Korea over Pyongyang’s missile tests.

“Now is not the time for Washington to pull out of the KORUS FTA because a rift between the allies is exactly what Pyongyang wants and it’s being served to them on a silver platter,” Duyeon Kim, a visiting senior fellow at the Seoul-based Korean Peninsula Future Forum, said Sunday. 

The Washington Post reported earlier Saturday that Trump has ordered his advisers to prepare plans to withdraw from the pact, and that the formal process to leave could start as soon as this week. No final decision has been made and Trump could remain in the agreement to see if changes are still possible, the newspaper reported, citing several people close to the process whom it didn’t identify.

‘No Change’ 

No announcement is expected on the U.S.-South Korea trade deal at this time, an official with the U.S. Trade Representative office said Saturday. There is “no change” in South Korea’s policies on its free-trade agreement with the U.S., Yonhap cited an unidentified official from the Ministry of Trade, Industry and Energy as saying Sunday.

South Korea is “thoroughly preparing for all possibilities and will closely monitor” the U.S. developments over the trade agreement, the ministry official said, according to Yonhap. South Korean trade officials couldn’t be reached by phone for comment Sunday.

Trump’s push to revise the deal is part of his broader drive to tackle unfair trading practices and cut the trade deficit. He pulled the U.S. out of the Trans-Pacific Partnership agreement during his first week in office and his administration is currently in talks to rewrite the 23-year-old North American Free Trade Agreement. Trump said last month that Canada and Mexico are being “difficult” and he’ll probably need to scrap the pact.

Terminating the South Korea deal could complicate diplomatic relations at a time the nations are trying to cooperate in thwarting the threat posed by North Korea’s missile tests. On Friday, Trump spoke with South Korean President Moon Jae-In about working together to address North Korea’s “destabilizing and escalatory behavior” and to strengthen their defense alliance, according to a readout of the call between the two leaders.

Trump’s pressure on South Korea on trade also comes as the administration is considering whether to take broader action against foreign-made steel. The Commerce Department has been investigating whether imported steel threatens U.S. security under Section 232 of the Trade Expansion Act. South Korea has been accused of dumping and subsidizing steel products.

South Korea is the U.S.’s sixth-largest trading partner, while the U.S. is South Korea’s second-largest trading partner after China. The U.S. had a $17.6 billion trade gap with South Korea last year, wider than $7.7 billion in 2012.

Republican Senator Ben Sasse, of Nebraska, warned against pulling out of the pact, saying he stands with farmers and ranchers, according to a statement on Saturday. U.S. beef sales to South Korea rose to $1.1 billion in 2016 from $582 million in 2012, making South Korea the second-largest export market for U.S., according statistics from industry associations. 

National Security Adviser H.R. McMaster, Defense Secretary Jim Mattis, and National Economic Council Director Gary Cohn are among the advisers to Trump who are against withdrawing the U.S. from KORUS, the Washington Post reported. 

--With assistance from Jennifer Jacobs.

To contact the reporter on this story: Toluse Olorunnipa in Washington at [email protected]

To contact the editors responsible for this story: Brendan Murray at [email protected]

John McCluskey

© 2017 Bloomberg L.P

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