US and South Korea Embark on Complex Trade Talks

Strategic Insights -

Top American drug makers, car companies, and farmers are joining forces to push for more access to South Korea's massive market, with the world's 10th-largest economy expected to become a crucial player in global trade. The negotiations between the two countries, set to be one of the most arduous, aim to unravel a web of regulations that have hindered sales of foreign goods, including prescription drugs, automobiles, insurance, and farm products. The talks will also focus on tackling tariffs, quotas, and other measures that protect South Korean industries.

Key Takeaways:

  • Pharmaceutical manufacturers, including Merck, want South Korea to roll back regulations that exclude many foreign drugs from its prescription reimbursement system.
  • Ford Motor and General Motors aim to secure specific pledges to cut tariffs on car imports and eliminate measures preventing foreign automakers from gaining market share.
  • The talks will focus on addressing a range of contentious issues, including drugs, cars, and agricultural products.
  • The US industry has numerous demands, with tariffs being only one part of the complex trade negotiations.
  • A successful agreement could increase US exports to South Korea by at least two-thirds and South Korean sales in the US by 20 percent.
  • The talks will be pivotal in assessing the success of free trade agreements in the post-Doha environment.

Statistics:

  • The US shipped about $27.7 billion of goods to South Korea last year, and imported $43.8 billion of South Korean goods.
  • A successful agreement could increase US exports to South Korea by $19 billion and add $20 billion to the US economy.
  • South Korea could see a $10 billion increase in its exports to the US.
  • Over 280 South Korean farm, labor, media, and other groups joined in a rally in March to fight against the trade negotiations.
  • The talks are set to last seven months, with meetings at six- to eight-week intervals until the end of the year.

Sources:

  • Jeffrey Schott, fellow at the Institute for International Economics in Washington and author of "Free Trade between Korea and the United States?" published in 2001.
  • Myron Brilliant, president of the U.S.-Korea Business Council in Washington.
  • Charles Uthus, vice president of the Automotive Trade Policy Council in Washington.
  • Amy Jackson, director at C&M International in Washington.
  • Philip Turner, director for strategy and trade at Fonterra Cooperative Group, Auckland.