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The Peninsula

Implications of Trump’s Election on U.S. Trade Policy Towards Korea

Published November 9, 2016
Category: South Korea

By Phil Eskeland

Unlike past U.S. elections, President-elect Donald Trump has made trade a centerpiece of his campaign.  In many appearances, he severely criticized what he characterized as “disastrous trade deals” made over the past two decades.  In fact, his closing argument included pictures of padlocked factory gates and abandoned machinery on the shop floor as his evidence of a failed U.S. trade policy.  Usually, his ire is targeted at Mexico and China.  However, sometimes his criticism of U.S. trade policy extends to the Korea-U.S. Free Trade Agreement (KORUS FTA) because he considers it as a poor model for the Trans Pacific Partnership (TPP) due to the rising merchandise trade imbalance between the U.S. and Korea.

Now that the campaign is over, will this rhetoric become U.S. policy?  First, several times in the past, presidential candidates have campaigned against trade and, in particular, on getting tough on China.  In 1992, Bill Clinton said he would not sign the North American Free Trade Agreement (NAFTA) as negotiated by President George H.W. Bush.  Presidential candidates going back to Ronald Reagan have promised to get tough on China, but relented once in office.   Even Barack Obama spoke numerous times pledging to “amend” NAFTA and expressed opposition to the FTA with Korea.  But President Obama did not renegotiate NAFTA and signed the KORUS FTA into law.  So, what a candidate says on the campaign trail often does not convert into public policy.

Second, do not expect the TPP to be ratified in the United States at any time in the near future.  In fact, it is dead.  It was already doubtful that TPP could pass either during a “lame duck” session of the U.S. Congress during the last weeks of the Obama Administration or during the early part of the next administration even if Hillary Clinton won the presidency because of the growing political backlash against trade and globalization in the United States.  The 2016 platforms of both political parties expressed deep skepticism about the benefits of trade and the TPP.  The Democratic Party platform called for higher standards on labor, environment, and enforcement, to be applied to all trade agreements, including the TPP.  The Republican Party platform specifically called for not passing any significant trade agreements during the “lame duck” session.  Thus, Korea should not look to join the TPP at any time soon.

However, President-elect Donald Trump has also repeatedly said that he wants to negotiate smart trade deals and preferably with individual countries.  This means that Trump is not philosophically opposed to trade, as evidenced by all his business dealings all around the world.  He just wants the right people to be negotiating the best deals possible for the United States with specific countries (not groups of countries) that create U.S. jobs, increases wages for American workers, and reduces the U.S. trade deficit.  Does the KORUS FTA fit these parameters?    Yes – KORUS is a bilateral trade agreement; over 350,000 U.S. workers are now the dependent upon exports to Korea, an increase of 87,000 jobs from 2009; the annual compensation of U.S. workers employed in firms with investment from Korea have increased to $92,000; and the KORUS FTA has improved the U.S.-Korea merchandise trade balance by 14 percent.  So, the KORUS FTA should be insulated from the anti-trade rhetoric from the Trump camp that is primarily aimed at Mexico and China.

Looking at President-elect Trump’s nominees for various international economic posts will also determine the extent of the conversion of campaign rhetoric to public policy.  Perhaps a strong-minded trade advisor will be able to convince President Trump to overcome his aversion to multi-country trade deals to revise the TPP.  But if he selects Trump campaign trade advisors Wilbur Ross or Dan DiMicco, who are business leaders from the U.S. steel industry, expect more attention to trade enforcement and little or no progress on negotiating or revising any new trade agreements.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo by KEI’s Troy Stangarone, Senior Director of Congressional Affairs and Trade. 

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