Execution challenge: The logo of South Korea’s biggest automaker Hyundai Motor is pictured at Pyeongtaek port. Down from 25% to 15%, the new tariff figure brings the country’s carmakers on par with Japanese and European rivals. — Reuters
SEOUL: After months of negotiations, South Korea and the United States have released their long-delayed joint fact sheet, detailing trade and security agreements and alleviating some uncertainties about tariffs that had weighed on the export-dependent country.
The document, released by the White House, put into writing guidelines that the two countries broadly agreed upon in July and finalised during the Oct 29 summit between South Korean President Lee Jae Myung and US President Donald Trump.
The fact sheet formalises the long-sought-after cut of US tariffs on South Korean goods, including autos and auto parts.
Down from 25% to 15%, the new figure brings South Korean carmakers on par with Japanese and European rivals.
The fact sheet also outlines the structure of South Korea’s US$350bil package for planned investment in the United States, with US$200bil set aside for unspecified strategic industries and US$150bil earmarked for shipbuilding. The US$200bil cash portion will be distributed over 10 years and capped at US$20bil a year to prevent financial instability.
While the agreement removes the worst uncertainties around tariffs and delivers headline gains on auto and nuclear cooperation, major questions remain, observers say.
From still-high steel tariffs and the implementation of South Korea’s promised US$350bil in US investment to a political rift over whether the deal must be ratified in the South Korean Parliament, the real work starts now.
Following the announcement, political division has intensified as rival parties clash over whether the document requires ratification by the National Assembly.
The Lee administration and the ruling Democratic Party of Korea argue the document is a non-binding memorandum of understanding (MoU), not a treaty, and therefore is exempt from the constitutional requirement for ratification.
Meanwhile, the main opposition People Power Party counters that, considering the enormous fiscal implications of the US$350bil investment, parliamentary approval is essential. Seoul officials warn that ratifying a non-binding MoU could tie South Korea’s hands.
Industry Minister Kim Jung-kwan, who led the negotiations, warned that forcing ratification could bind the country into unfavourable clauses in the MoU, even when Washington is not seeking congressional ratification.
“There are concerns that (ratification) can become a shackle while negotiations are continuing,” Kim told a parliamentary committee on Monday, adding that key terms such as a 50-50 profit-sharing structure between the two countries are still open for discussion.
Finance Minister Koo Yun-cheol echoed these concerns, warning that delays could cause financial harm. “Auto tariffs could fall starting Nov 1, but the longer ratification takes, the more costly the delay could become,” he told the lawmakers.
Under the deal, the United States will apply the reduced auto tariffs retroactively from the first day of the month in which a bill is submitted to the National Assembly to implement the MoU. — The Korea Herald/ANN
