South Korea, US prepare for summit with details of trade deal unresolved

SEOUL – As South Korea and the United States prepare for a summit of their leaders, topics left unresolved by a recent trade deal provide scope for more disputes between the key allies and trade partners, six former negotiators and experts said.

US President Donald Trump may use the summit with counterpart Lee Jae Myung to seek more concessions on defence costs and corporate investments, left out of the deal, while non-tariff barriers and currency could prove thorny issues, experts said.

No official summit date has been disclosed, though Mr Trump last week gave a timeframe of two weeks.

The absence of a written agreement underpinning last week’s talks could open the way for disputes, with some differences already emerging in the two sides’ accounts of the deal.

Key among these was Aug 3’s denial by a South Korean presidential adviser of US claims that Washington would take 90 per cent of the profit from project investments of US$350 billion (S$450 billion) by South Korea, which also agreed to open up its domestic rice market.

“Even a binding deal like the FTA has been efficiently scrapped,” warned Mr Choi Seok-young, a former chief negotiator for the Korea-US free trade deal, signed in 2007. “And this is just a promise.”

Last week’s pact was scaled down from South Korea’s previous plans for a package deal on trade, security and investment envisioned in the run-up to the summit between Mr Trump and the newly elected Mr Lee.

But Japan struck a deal with the US sooner than expected, spurring South Korea into a scramble for a trade-focused pact, leaving issues of security and investment for the coming summit, presidential adviser Kim Yong-beom said.

Uncertainty clouds plans for US$350 billion in funds Mr Trump has said South Korea would invest in the US in projects “owned and controlled by the United States” and selected by him, though he gave few details of the plan’s structure or timing.

The allies face challenges in ironing out details of the fund at upcoming working-level talks, South Korean Finance Minister Koo Yun-cheol told reporters on Aug 1.

“People say the devil is in the details,” he added.

In a post on social media, US Commerce Secretary Howard Lutnick gave an assurance of “90 per cent of the profits going to the American people”, while White House spokeswoman Karoline Leavitt said that a part would go to the US government to help repay debt.

But Mr Kim, the presidential adviser, said the two sides did not discuss profit distribution during talks, and South Korea expected the profit to be “reinvested” in the US.

‘Political rhetoric’

The idea of the US potentially taking most of the profit is “hard to understand in a civilised country”, he added, while dismissing as “political rhetoric” Washington’s claim that it would make all decisions about the fund.

South Korea had added a safety mechanism to reduce financing risk, including US commitments to buy products from the projects, under an “offtake” clause, and invest in commercially feasible projects, he said.

Seoul officials have said US$150 billion would go to the shipbuilding industry, with the rest earmarked for areas such as chips, batteries, critical minerals, biotechnology, nuclear power and other strategic industries.

The specifics of the structure have not been determined, said Mr Kim, adding that loans and guarantees make up a majority of the funds, with equity investments accounting for a small part.

Ms Leavitt said South Korea would provide “historic market access to American goods like autos and rice”, echoing earlier comments by Mr Trump.

But South Korea said repeatedly that there had been no agreement on the agriculture market, including beef and rice, despite strong pressure from Washington.

Mr Trump expressed keen interest in South Korea’s quarantine process for fruits and vegetables, Seoul said, improvements to which will figure in planned technical talks on non-tariff barriers that will also cover vehicle safety rules, but no details were given.

Other non-tariff barriers such as regulation of Big Tech could be hurdles.

“We cannot be relieved because we do not know when we will face pressure from tariffs or non-tariff measures again,” South Korean Trade Minister Yeo Han-koo said last week on returning from Washington.

Defence costs are expected to emerge as a key issue during the upcoming summit, with Mr Trump having long said South Korea needed to pay more for the US troop presence there.

In addition to the US$350 billion, Mr Trump said South Korea agreed to invest a large sum of money in the US, to be announced during the summit, which he said on July 30 would be held within two weeks.

The allies are holding working level-talks on currency policy, put on the agenda at April’s opening round of trade talks. REUTERS