[News Analysis] President Moon responds forcefully to Trump’s imposition of trade tariffs

Posted on : 2018-02-20 17:18 KST Modified on : 2019-10-19 20:29 KST
South Korea to make complaint to WTO about US’ “unreasonable protectionist measures”

South Korean President Moon Jae-in is making a sharp turnaround in the face of the US Donald Trump administration’s onslaught of tariffs on South Korean steel, with hints that he is willing to risk a trade war with Washington. Speaking at a meeting of Blue House secretaries and aides on Feb. 19, Moon called for an “assertive and resolute response to [the Trump administration’s] unreasonable protectionist trade measures,” including “a complaint to the World Trade Organization (WTO) and examination for possible violations of the South Korea-US Free Trade Agreement (KORUS FTA).”

His unusually forceful remarks appeared rooted in a conclusion that the Trump administration has been crossing the line with its recent string of retaliatory trade measures against South Korean imports, which reached its peak when the Commerce Department cited Section 232 of the Trade Expansion Act in announcing a recommendation concerning the “security effects of steel imports.” Trade industry observers have suggested Moon’s response have been triggered by serious concerns about “Korea bashing” after the US singled out South Korea by including it in its Commerce Department’s second recommendation of a minimum 53% tariff on 12 countries – while exempting other allies and friends such as Japan, Germany, and Taiwan from steel import regulations.

On numerous occasions since Trump’s Apr. 2017 executive order for an investigation into the national security effects of steel imports, Seoul has stressed to Washington that South Korea is a both a security ally and large-scale weapons importer, that US imports of South Korean steel have recently been in decline, and that South Korean steel companies were contributing to the US through investment and local hiring. In spite of this, US trade authorities have indiscriminately invoked 31 regulations on South Korean imports: 22 anti-dumping measures, seven anti-dumping and countervailing duties, and two safeguards as of late 2017.

In reality, the claims about security effects from steel imports are a mere pretext. In the case of oil well pipes for petroleum drilling, the two sides have been in close competition, with South Korean nudging the previously top-ranked US aside to assume a 43.4% share of the world export market to the US’s 32.9%. According to the Korea International Trade Association (KITA), South Korea is a US rival for three of the 15 steel-related items where it currently ranks first in the world export market. The Commerce Departments “Section 232” steel investigation is less a matter of security or the alliance that a simple retaliatory measures against a trade competitor.

Moon’s orders in response were seen as unusually forceful. Minister for Trade Kim Hyun-chong and others had made repeated reference to a WTO complaint and other responses to the Trump administration’s washing machine safeguards and other protectionist trade measures against South Korean items. But Moon’s remarks on Feb. 19 are being taken as declaring plans for a strong response to the Trump administration on trade.

Share of the US steel market by country
Share of the US steel market by country

Concerns rise that US import restrictions could harm South Korean economy

Moon’s change in stance also betrays a sense of urgency over the dark clouds Trump’s import regulations spell for exports that have been on the rise for 15 straight months. Trump’s all-out protectionist trade onslaught – which extends to South Korean steel, washing machines, solar panels, chemical products, and automobiles – is raising concerns that the exports shoring up growth in the real economy could end up dropping off.

With the South Korean administration establishing a new trade focus of reduced dependence on the US market in favor of the “new north” including China and Russia and “new south” including the countries of Southeast Asia, the response is also being read as Moon’s declaration that he plans to speak his mind with the US at risk of hurting the two sides’ trade relationship. The same day, Moon stressed that the “actual pursuit of the new north and new south policies must be used as an opportunity to diversify exports.” A Blue House source explained that the President “regards these matters as having a crucial impact on South Korea’s export-driven industries.”

Moon aims to separate trade and security interests in dealing with US

“While the matter of North Korea-US dialogue on the nuclear issue is currently at stake, [Moon] believes security arguments need to be kept separate from trade ones,” the source said.

Moon’s remarks are also being seen as a pressure tactic to avoid the worst-case scenario of Trump making the final decision to go with his second recommendation, which appears likely to deal the heaviest blow to South Korea’s steel companies.

“If the second option becomes a reality, the blow to South Korea’s steel exports to the US is expected to be extremely large,” explained a senior Ministry of Trade, Industry and Energy official.

“While there is an exception in Article XXI of the General Agreement on Tariffs and Trade (GATT) stating that import regulations may be recognized in cases involving national security, we do not believe that exception will be recognized when a 53% tariff is applied discriminately against 12 specific countries. If [the US] does decide on option two, we plan to actively consider a complaint with the WTO,” ” the official added.

By Cho Kye-won, staff reporter

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