The US and South Korea have reached an agreement to revise their six year-old trade pact, a senior administration official said today, describing it a "historic" development and a big political win for President Donald Trump.
The agreement has come after Trump recently told reporters while signing a USD 1.3 trillion spending bill that his administration was "very close" to striking a trade deal with South Korea.
Trump has been a big critic of the existing trade deal between the two countries, slamming it as "horrible" and threatening to yank America out of it altogether.
The agreement "will significantly strengthen the economic and national security relationships between the United States and South Korea," the official told reporters.
"This agreement is visionary and innovative, and it underscores a pattern of failure by previous administrations to negotiate fair and reciprocal trade deals," the official said on condition of anonymity.
According to the deal, South Korea will double its annual quota for imported cars that meet American environmental and safety standards, but not necessarily Korean standards, from 25,000 per manufacturer to 50,000.
"They will reduce some of the burdensome labelling requirements when it comes to auto parts," the official said.
South Korea has also agreed to include US pharmaceutical manufacturers in its national health program's premium reimbursement plan.
The United States on the other hand has agreed to indefinitely exempt South Korea from recently imposed 25 per cent and 10 per cent steel and aluminium tariffs respectively.
It will also extend expiring tariffs on Korean pickup trucks from 2021 to 2041.
The senior official described the deal as a big political win for President Trump.
"This is a good deal for both countries and very big deal in the history of US trade negotiations," the official said.
According to another official, the US maintain 25 per cent tariff on pickup truck.
"Several of our free trade agreements have allowed for zero per cent pickup truck tariff, which has resulted in many cases outsourcing a pickup truck production to other countries.
"So what has happened now with the course renegotiation is we have been able to maintain that 25 per cent pickup truck tariff," the official said.
The official said it was slated to go to zero per cent by 2021 and has now been extended till 2041.
"That's a big win for US producers and the workers," the official said.
In addition to having some of the large trade deficit issues that have arisen from an imbalance in the auto trade, there have been persistence, implementation issues, the official added.
"The Korean have agreed that they will abide by several principles for conducting verification of origin of export under KORUS to make sure that when there is a verification they're not clerical errors, but only when they're real issue or suspicion of legitimate problem.
"At the same time we're establishing working group to monitor and address these issues when they arise to make sure our exporters are playing on a level playing field. We're able to take full advantage of the agreement as negotiated," the official said.
Earlier, White House Press Secretary Sarah Sanders told reporters at her daily news conference that "We have come to an agreement in principle, and we expect to roll out specific details on that very soon".
US Trade Representative Robert Lighthizer had initiated a process last July under the US-South Korea trade deal to negotiate changes to the pact to address market access issues and the trade imbalance between the two countries, one of Trump's chief complaints about the deal.
Disclaimer: No Business Standard Journalist was involved in creation of this content
