A Passive Congress Allows the KORUS Renegotiation to Proceed Without It

A Passive Congress Allows the KORUS Renegotiation to Proceed Without It

“We are renegotiating a trade deal right now as we speak with South Korea, and hopefully it will be an equitable deal… a fair deal to both parties.” – President Donald J. Trump, June 30, 2017

Although just five years old, the U.S.-Korea Free Trade Agreement (KORUS) could be drastically modified or even abolished by the Trump Administration.  President Trump has repeatedly called KORUS a “horrible deal” that must be renegotiated or terminated, which has raised the alarm of free trade advocates on both sides of the Pacific.  While many experts have detailed the damaging effects that ending the agreement could bring, one influential group has been largely quiet: Congress.

Congress typically involves itself in U.S. trade policy through its constitutional powers, by advocating for priorities set forth in Trade Promotion Authority (TPA) legislation and through consultations with the Executive Branch required under TPA. The TPA requirements are triggered when the Administration intends to negotiate a new free trade agreement or make certain changes to an existing agreement. However, TPA does not specify Congress’s role in the abolishment of an existing agreement. To guarantee a seat at the table, Congressional leaders must proactively engage with the Administration. This article examines how the current state of KORUS affairs arose and the implications of an inactive Congress failing to meaningfully affect the debate.

In February 2006, the United States and South Korea agreed to negotiate a Free Trade Agreement, the initial negotiations of which concluded on April 1, 2007. It would take another five years for the two countries to enact the agreement after leaders in Congress insisted upon additional concessions. Representative Sandy Levin (D-MI) and then-Senator Max Baucus (D-MT), the leading Democrats at the time on the House Ways and Means and Senate Finance Committees (the two Congressional committees with jurisdiction over U.S. trade policy), respectively, delayed consideration of the agreement over concerns regarding automobiles and market access for beef. Congress finally approved the deal in October 2011 after American negotiators secured additional concessions. KORUS entered into force on March 15, 2012.

Four years later, Donald Trump regularly attacked KORUS on the campaign trail, claiming it had “destroyed nearly 100,000 American jobs” and that the Obama Administration had misled the public about the benefits of the agreement. These beliefs have carried through to his presidency. Just two months after his Senate confirmation, President Trump’s U.S. Trade Representative Robert Lighthizer called for the first special session held under Article 22.2 of KORUS since the agreement was enacted. During this session, Lighthizer’s team presented Korean officials with a list of 50 demands from the United States. Following a second special session, President Trump and Korean President Moon Jae-in announced that the two countries would “expedite” the process of considering changes to the agreement.

Congress has been notably quiet throughout these developments. In July, House Ways and Means Chairman Kevin Brady (R-TX) expressed “surprise” upon learning about the desire for a special session and called on the Trump Administration to follow the requirements set out under TPA and meet with Congress. Shortly thereafter, Brady and other Congressional leaders wrote a letter to Lighthizer urging him to consult with Congress throughout his discussions with Korea “in accordance with U.S. law and longstanding practice.” A handful of other lawmakers have weighed in, but not to the same extent as on other high-profile issues such as healthcare, tax reform, and renegotiation of the North American Free Trade Agreement (NAFTA).

A review of Congressional transcripts illustrates the stark contrast in Congressional concern over the renegotiations of KORUS and NAFTA. During the five general trade-related hearings held by the Senate Finance Committee and House Ways and Means Committee in 2017, lawmakers asked a total of 63 questions related to NAFTA; they asked just seven questions related to KORUS.[1]

Perhaps a focus on NAFTA makes sense, as the discussions are further along and the agreement likely has a more tangible impact on constituents. However, the disparity in Congressional focus does not match the economic significance of the different markets. While Canada and Mexico respectively rank as the first and third largest trading partner of the United States, South Korea still holds an important role in U.S. trade as our sixth largest trading partner with $112.2 billion in total trade in 2016. The agreement has moreover produced positive results for American exporters. U.S. goods exports to Korea have increased an average of 5 percentage points each year since 2012, and U.S. services exports to Korea are up by more than 34 percent over the same period. Specific sectors have seen considerable gain. U.S. seafood producers, for instance, have increased exports to Korea by 20 percent. While the Trump Administration would counter that the U.S. trade deficit with Korea has increased by $11 billion since 2011, the focus on the bilateral trade deficit has not been persuasive on the Hill. 

Wendy Cutler, former chief negotiator for the U.S. on KORUS, warns that pulling out of the agreement would grant U.S. competitors an advantage in the world’s eleventh largest market. For example, goods from the European Union and Canada would continue to enter the Korean market mostly duty free while American goods would face tariffs that average 14 percent. Pulling out of KORUS, or disrupting the alliance during the renegotiation, could also result in negative geopolitical ramifications for the United States. Korea could develop closer ties with China or could lose enthusiasm for U.S.-led efforts to counter North Korea’s nuclear program.

The importance of KORUS is not lost on members of Korea’s National Assembly, many of whom have forcefully pressured the Korean Government to adhere to the country’s consultation process outlined in the Korean Trade Procedure Act (KTPA). As a result, the Korean Government has already initiated the consultation requirements of KTPA, including drafting an economic impact study, submitting the research to the Korean National Assembly, and holding public hearings on potential amendments to KORUS. Both the ruling and opposition parties are united in calling for a comprehensive analysis on the effects of KORUS before the country considers specific amendments.

Trade policy is always messy, seemingly more so in the Trump era, but three things are clear with regards to KORUS: (1) the Trump Administration’s effort to rework the agreement is well underway; (2) many free trade advocates in the United States and Korea are working diligently to demonstrate the value of the agreement; and (3) Congress has not adequately inserted itself into the KORUS debate.  The reasoning behind Congress’s inaction is unclear, and President Trump’s negotiators won’t wait around for them to get organized. To avoid risking a meaningful seat at the table, Congress must quickly assert its role in KORUS renegotiations.

 

[1] We examined the transcripts for the following hearings:

  • Senate Finance: “Hearing to Consider the Nominations of Jeffrey Gerrish, to be a Deputy United States Trade Representative, Gregory Doud, to be Chief Agricultural Negotiator, Office of the United States Trade Representative, and Jason Kearns, to be a Member of the United States International Trade Commission (October 5, 2017);
  • Senate Finance: “Hearing to Consider the Nominations of Gilbert B. Kaplan, to be Under Secretary of Commerce for International Trade, United States Department of Commerce” (August 7, 2013);
  • Senate Finance: “The President’s Trade Policy Agenda and Fiscal Year 2018 Budget” (June 21, 2017);
  • Senate Finance: “Hearing to Consider the Nomination of Robert Lighthizer, to be United States Trade Representative” (March 14, 2017);
  • House Ways and Means: “Opportunities to Expand U.S. Trade Relationships in the Asia-Pacific Region” (October 11, 2017);
  • House Ways and Means: “U.S. Trade Policy Agenda” (June 22, 2017)

We did not examine the transcripts for two hearings that were focused specifically on NAFTA. 

 

Frank Samolis is a Partner at Squire Patton Boggs.  In 2009-2011, he represented The Korean International Trade Association (KITA) during Congressional Consideration of KORUS.

Rory Murphy is an Associate at Squire Patton Boggs.  In 2011, he served as a Trade Policy Advisor to then-Senate Finance Committee Chairman Max Baucus (D-MT) during the KORUS debate.