In addition to new automotive provisions, amendments in principle recently reached between the United States and South Korea for their bilateral free trade agreement include modifications related to customs, pharmaceutical exports, and currency text, according to a fact sheet distributed Wednesday by the Office of the U.S. Trade Representative (USTR).
South Korea will address “long-standing concerns with onerous and costly verification procedures” related to customs, through implementing new procedures to verify product origin under the U.S.-Korea Free Trade Agreement (KORUS), and establish a working group to monitor and address future issues.
This year, South Korea will also amend its Premium Pricing Policy for Global Innovative Drugs to ensure the program doesn’t discriminate against and provides fair treatment to U.S. pharmaceutical exports, as KORUS requires, USTR said.
To date, the reimbursement program has applied only to South Korean companies, and U.S. companies have been subject to discrimination under those rules, a senior Trump administration official said during a call with reporters on Tuesday night. U.S. pharmaceutical companies will now get fairly reimbursed under the program, the official said.
Treasury and the South Korean Ministry of Strategy and Finance are also finalizing “robust provisions” to prohibit competitive currency devaluation and exchange rate manipulation, according to the official and the fact sheet. “Strong commitments on transparency and accountability are included in the provisions,” the fact sheet said.
The new currency provisions will be in a side agreement and won’t be subject to dispute settlement, the official said. The point of the provisions is for KORUS parties to be able to determine if and when currency manipulation is occurring, the official said.
The U.S. and South Korea also agreed to auto provisions in addition to doubling the number of cars per U.S. manufacturer that South Korea will allow into its market that can meet U.S. safety standards in lieu of Korean safety standards from 25,000 to 50,000, as American Shipper reported earlier this week.
Under the modified KORUS, U.S. gasoline engine vehicle exports will be able to show compliance with South Korea’s emission standards using the same tests to show compliance with U.S. regulations, without additional or duplicative testing for the Korean market, according to the fact sheet.
“Under the negotiations that we have just concluded, Korea has agreed to align their testing standards with ours, and so they just will be in a position where they will accept our testing data when they are issuing certificates for environmental regulation for our vehicles in Korea,” the senior administration official said.
South Korea will also recognize U.S. standards for auto parts necessary to service U.S. vehicles, and “reduce labeling burdens,” as well as expand the amount of credits available to help U.S. auto manufacturers meet current South Korean fuel economy standards, USTR said.
“Korea will expand the amount of ‘eco-credits’ available to help meet fuel economy and greenhouse gas requirements under the regulations currently in force, while also ensuring that fuel economy targets in future regulations will be set taking U.S. regulations into account and will continue to include more lenient targets for small volume manufacturers,” the fact sheet said.
After they are finalized, KORUS amendments and modifications will undergo respective review procedures in both countries, USTR said.
USTR also confirmed that the U.S. is exempting South Korea from generally global 25 percent tariffs on steel beyond the May 1 deadline that is scheduled to conclude several other countries’ exemptions. South Korea will be exempt in exchange for a yearly quota on steel exports to the U.S. of 2.68 million tons, about 70 percent of the annual average of U.S. steel imports from the nation between 2015 and 2017.
However, no agreement was reached to exempt South Korea from generally global 10 percent U.S. aluminum tariffs proclaimed earlier this month, the official said.
The U.S. agreed to South Korean requests for KORUS to adopt language deterring frivolous investor-state dispute settlement (ISDS) claims, and language forbidding instances in which a firm can concurrently file an ISDS claim and a dispute claim in another forum, the official said.
Negotiators also agreed to a Korean request for “procedural guarantees” that the U.S. will undertake thorough evidentiary standards in unfair trade investigations, including in-person inspections of Korean facilities and providing South Korea with “essential facts” of investigations conducted pursuant to U.S. trade remedy laws, the senior administration official said.
“Those are the types of clarifications that are widely agreed upon within the United States, and with many of our trading partners,” the official said.
Initial congressional GOP reactions regarding the KORUS modifications were positive, as results of the talks drew commendations from Senate Finance Committee Chairman Orrin Hatch, Utah, House Ways and Means Committee Chairman Kevin Brady, Texas, and Ways and Means Trade Subcommittee Chairman Dave Reichert, Wash.
“Since KORUS went into force more than five years ago, it became clear that Korea needed to do more to fully implement the agreement in order to remove trade and investment barriers for American exporters,” Hatch said in a Wednesday statement. “The agreement in principle announced today [by USTR] makes steps toward improved implementation and maintains the strong economic ties between our two nations.”
Brady said the announcement demonstrates the administration’s commitment to strengthening the bilateral relationship and increasing U.S. competitiveness in the Asia-Pacific region.
Reichert echoed those sentiments, adding that the KORUS modifications indicate an “even stronger partnership” between the U.S. and South Korea.