The Donald J. Trump administration’s focus on “fair and reciprocal trade” has serious implications for the U.S.-South Korea economic relationship. Despite relative satisfaction with the status quo in the two business communities, the economic relationship has received political attention at the highest levels. Careful management, including the cultivation of new areas of cooperation, is needed to prevent economic issues from hindering close security cooperation on North Korea policy and to put the overall relationship on more solid footing.
Since the ratification of the Korea-U.S. Free Trade Agreement (KORUS FTA), U.S.-South Korea economic cooperation has emerged as a pillar of their alliance. South Korea has expanded its exports through free trade agreements with China, Southeast Asian countries, and the European Union, enhancing its value to the United States as an economic partner by broadening its economic options and increasing international competition for a share of its markets. But ongoing U.S.-China competition has put pressure on the U.S.-South Korea economic relationship and pushed South Korea to choose between its security guarantor and its primary economic partner.
Negotiations that resulted in revised U.S.-South Korea trade arrangements have temporarily lessened tension in the relationship. In early 2018, at the Trump administration’s insistence, the two sides agreed on relatively small modifications to the KORUS FTA. The economic relationship will require further attention as South Korea addresses its vulnerability to fallout from the U.S.-China trade war and adjusts to China’s growing economic power. South Korea will also have to maneuver within the new trade environment resulting from the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP). Although South Korea could be interested in joining the CPTPP, the recent decline in relations with Japan, a founding member of CPTPP, complicates that prospect.
Using the revised KORUS FTA as a platform for future cooperation, the United States and South Korea should work to expand their partnership to include economic cooperation in the Indo-Pacific, energy security, and plans for inter-Korean economic initiatives. They should also address unfair trading practices, the challenges aging societies face, and fourth-industrial-revolution issues.
The Council on Foreign Relations U.S.-Korea Policy program is supported in part by generous grants from the Smith Richardson Foundation and the Korea Foundation.