South Korea said it was prepared to discuss changes to its free-trade agreement with the U.S. but wouldn't rush into renegotiations, after the Trump administration signaled it wants to modify the deal to address a significant trade imbalance.
In a letter Wednesday to South Korea's trade minister, U.S. Trade Representative Robert Lighthizer proposed that both sides should meet in Washington to discuss "possible amendments and modifications" to the pact, which took effect in 2012. The trade deal, known as Korus, calls for talks to begin within 30 days after such a request from either side.
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"When the Korus agreement was negotiated, expectations were high that both of our economies would realize significant gains. However, our overall deficit with Korea has increased, and our goods deficit has doubled since the agreement entered into force," Mr. Lighthizer said in his letter to South Korean trade minister Joo Hyung-hwan.
On Thursday, South Korea said it would soon send trade ministry officials to Washington to discuss the issue. Still, the ministry indicated Seoul was in no hurry to start renegotiations on the deal, suggesting any changes would likely be limited.
"The government basically recognizes the South Korea-U.S. free-trade agreement as mutually beneficial, and so do the businesses from both countries. The government wants to keep the framework as it is, not shaking it up greatly," said Yeo Han-koo, director general of the ministry's Bureau of Trade Policy.
The U.S. imported $69.9 billion in goods from South Korea last year but exported only $42.3 billion.
Trade items at issue include steel and cars. The U.S. exported $1.6 billion in passenger cars last year to South Korea, compared with $417 million five years ago. South Korean car exports to the U.S. were far higher, coming in at $16 billion last year.
Some U.S. industry and labor critics have said South Korea has kept its currency artificially weak against the dollar in the past to gain a trade advantage. Seoul has denied this, saying it intervenes only to smooth out short-term market fluctuations.
Tensions over trade between the two allies were evident when South Korea's new left-leaning president, Moon Jae-in, visited the White House last month.
During Mr. Moon's visit, President Donald Trump described the trade agreement as "a rough deal for the United States," and said in a tweet that Washington and Seoul were renegotiating it.
South Korean officials have denied reaching any agreement with the Trump administration on renegotiating the pact. However, with Washington making clear its intention to review the agreement as early as next month, the second-largest U.S. deal by trading volume faces an uncertain future.
The American Chamber of Commerce in Korea couldn't be immediately reached for comment, though it has been largely supportive of the agreement in the past.
The South Korean trade ministry said Seoul would propose evaluating what had caused the trade imbalance with the U.S. before seeking to amend or renegotiate the agreement.
Most economists say that trade deficits stem from broad economic factors and that the U.S. benefits from its imports as well as its exports.
The trade tensions between Seoul and Washington come as the allies face a growing military threat from North Korea, which has been advancing its nuclear and missile programs.
Write to Kwanwoo Jun at email@example.com
(END) Dow Jones Newswires
July 13, 2017 08:50 ET (12:50 GMT)