US, South Korea can bury the trade barrier hatchet this week

The first meetings between President Trump and newly-elected South Korean President Moon Jai-in Thursday and Friday offer a key opportunity to blaze a new path for U.S./South Korean economic relations.

A month ago, I wrote here about the opportunities for U.S. companies in South Korea given the environment of uncertainty following the impeachment and arrest of the former president, Park Geun-hye and the arrest of Samsung Vice Chairman Lee Jae-yong. Now, Presidents Trump and Moon can work toward a renewal of our trade relations with a focus on Moon’s anti-corruption agenda — including the reining in of regulatory abuses against U.S. companies. 

{mosads}One of the key hurdles to the improvement of trade relations will be the aggressive and abusive tactics implemented by the Korean Fair Trade Commission (KFTC) against U.S. companies — often companies that are in direct competition with South Korean firms — especially in the tech, pharmaceutical and manufacturing industries.

The 2017 National Trade Estimate Report on Foreign Trade Barriers, released by the U.S. Trade Representative’s Office notes: “[A] number of U.S firms have raised the concern that the KFTC has targeted foreign companies with more aggressive enforcement efforts, and that KFTC procedures and practices have inhibited their ability to defend themselves during KFTC proceedings.” 

The accusations leveled by U.S. firms would bring into question whether South Korea has played by the rules, per the U.S. Korean Fair Trade Agreement (KORUS), which stipulates that South Korean and United States companies should not be treated in a differing or preferential manner. President Trump and U.S. officials must raise these issues with President Moon to ensure U.S. companies are afforded the due process rights outlined in KORUS — something that has not always been done in the past. 

Senate Finance Committee Chairman Orrin Hatch (R-Utah) has hit the nail on the head on where to begin to improve and strengthen KORUS.

In a letter to the South Korean ambassador last year, Sen. Hatch wrote, “I believe that the agreement overall has been a success. However, implementation of and compliance with the agreement has fallen short in several areas, resulting in limited benefits to U.S. firms seeking to benefit from the agreement and to expand their economic partnerships with Korean firms.”  

Sen. Hatch also noted that KFTC’s caseload “appears to have shown a concerted effort to prioritize antitrust investigations against U.S companies.”

Under the previous government and others prior to that, the political and corporate class of South Korea had set out in pursuit of a mercantilist economy, which uses its legal system to clamp down on U.S. companies to protect its own. Yet, their own ambitions have now allowed for serious reforms to occur in South Korea and hopefully an end to, if not rollback, of this mercantile system.

A market is healthy when there is fair and open trade among individuals and nations. The United States, South Korea and companies from each country will need to work together to ensure KORUS and other economic agreements are enforced properly and the mercantilist path set out by previous governments is abandoned.  

When Donald Trump campaigned for the presidency, he promised to put America first and ensure our trade deals were fairly and justly enforced. This week, he will have a chance to keep that promise. The United States can’t afford to fall victim to cronyism and mercantilist collusion between foreign companies and foreign governments. To do so could harm innovation, American companies and free and fair trade.

President Moon has indicated a sincere willingness to implement reforms of Korea’s government regulators and to put an end to corruption and the cozy relationships that often dictate economic policy. President Trump should ensure that the United States is a proactive and assertive partner in this endeavor moving forward. 

Ken Blackwell was a domestic policy advisor on President Trump’s transition team. He served as the U.S. Ambassador to the United Nations Human Rights Commission. He is the former state treasurer of Ohio, the former secretary of state of Ohio and the former mayor of Cincinnati. 

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