South Korea says unclear if FTA is cause of trade imbalance

Markets Associated Press

A South Korean Foreign Ministry spokesman has responded to a U.S. request for talks on the two countries' free-trade agreement by saying it's unclear if the pact is causing a growing imbalance.

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The spokesman told reporters Thursday the two countries should consider revising the trade agreement only after reaching a consensus on the need for a change.

As explained during a summit between President Moon Jae-in and President Donald Trump in June, the two sides "need to closely analyze and evaluate the effects of the (existing) South Korea-U.S. FTA after it went into effect and talk about whether the South Korea-U.S. FTA is the cause of the trade imbalance between the two countries," said the spokesman, Cho June-hyuck.

President Donald Trump has criticized existing trade deals and has begun an effort to renegotiate the North American Free Trade Agreement with Mexico and Canada.

The administration also wants to renegotiate the free-trade deal with South Korea, which took effect five years ago. Since then, U.S. goods exports to South Korea have fallen and the U.S. trade deficit has more than doubled, to $27.6 billion.

U.S. Trade Rep. Robert Lighthizer said in a letter Wednesday to South Korean Trade Minister Joo Hyung-hwan that the United States wants to meet to discuss "possible amendments and modifications" to the pact.

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Terms of the trade deal call for the talks to begin within 30 days.

South Korea is considering the request for a special session of a joint FTA committee, Cho said.

But he noted that the committee's decision on whether to consider revising the FTA "should match the consensus of the two countries, so the committee can decide to begin negotiations for the FTA revision only when we agree with the proposals of the U.S."

At the time the FTA was set, President Barack Obama predicted it would increase U.S. exports to South Korea, the world's 11th-biggest economy.

The Trump administration blames the rising trade gap on continuing South Korean barriers to U.S. exports, especially in the auto market. But other analysts cite South Korea's sluggish economy and note that other countries have seen their exports to South Korea fall even more.

The U.S. runs a trade surplus with South Korea in services such as banking and tourism.

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AP Economics Writer Paul Wiseman contributed to this report.