By Phil Eskeland
Yesterday, we looked at the possibility of renegotiation of the Korea-U.S. Free Trade Agreement (KORUS FTA) in light of the recent release of the President’s National Trade Policy Agenda for 2017. The President’s trade agenda included two primary points of reference to rest its case that KORUS agreement did not produce the outcome that the American people expected from the agreement: the value of U.S. goods exported to South Korea fell by $1.2 billion and the total value of U.S. imports of goods from Korea grew by $13 billion, resulting in a “dramatic increase in our trade deficit with that country.”
As mentioned in the previous blog post, the U.S. merchandise trade deficit with Korea actually declined in 2016, as compared to the previous 2015 level. Nonetheless, earlier this morning, the Foreign Trade Division at the U.S. Census Bureau revealed a more complete picture of the U.S.-South Korea trade relationship because services trade data for the 4th Quarter of 2016 was included in their monthly release. U.S. services exports to Korea hit a record level of $21.55 billion in 2016, which contributed to producing the highest trade surplus in services ($10.7 billion) for the United States in the history of U.S.-South Korea trade relations.
Thus, instead of a decline of U.S. exports to Korea, the latest trade statistics shows that total exports of both goods and services to Korea from the U.S. increased by $2.05 billion from 2011 and 2016. As a result, the total trade deficit between the U.S. and Korea in 2016 was $17.46 billion, not $27.6 billion. This combined goods and services trade deficit was a decline from the 2015 level. U.S. imports of both goods and services from Korea also dropped from 2015 levels.
Though manufacturing is important to the nation’s economy, this should not mean the service sector’s contribution to the GDP should be downplayed or ignored. Whereas the effect of the trade balance on the economy is debatable, it is also critical to include the full panoply of statistics and information in order to have an informed discussion on the future of the KORUS FTA.
Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.
Photo from CosmicDust’s photostream on flickr Creative Commons.