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S. Korea Opposes US Tariff Hikes, But Military Alliance Remains United

by Brian Padden

   SEOUL --

   A looming trade dispute could cause friction in the U.S-South Korea
   military alliance, but leaders in Washington and Seoul maintain their
   economic disagreements will not impact their continued security
   cooperation to deal with the North Korean nuclear threat.

   Trade dispute

   South Korean President Moon Jae-in promised on Monday to retaliate
   against U.S. protectionist trade polices, after the U.S. Commerce
   Department recommended to impose a sharp rise in steel import tariffs
   on 12 countries, including China, Brazil and South Korea, and also in
   response to a recent U.S. imposed tariff increase on South Korean
   washing machines of up to 50 percent.

   "I ask the government to act firmly and sternly to unreasonable
   protectionist measures, such as lodging complaints to the World Trade
   Organization (WTO) and checking for violations of the U.S.-South Korea
   free-trade agreement," said Moon.

   In a report issued on Friday, the U.S. Commerce Department cited the
   flood of cheaper steel and aluminum imports as a threat to U.S.
   national security by weakening an essential U.S. industry, and
   recommended that U.S. President Donald Trump take one of the following
   measures on steel imports:

   * Impose a global tariff of 24 percent on all steel imports.

   * Target 12 major steel exporting countries, including China and South
   Korea with new tariffs of 53 percent or higher.

   * Set a quota on all steel imports, up to 63 percent of import 2017
   levels.

   The Commerce report also recommended similar restrictions on aluminum
   imports. Trump must respond to the Commerce Department recommendations
   by early April and can selectively decide which countries to target or
   exempt based on national security needs.

   Job killing deal

   Trump's "America First" economic nationalism agenda advocates more fair
   and reciprocal trade between the United States and its allies. The
   president has also singled out the U.S.-South Korea free trade
   agreement, known as KORUS, as an American "job killing deal," that is
   responsible for doubling the U.S. trade deficit with South Korea from
   $13 billion to $27 billion since it took effect in 2012. Washington and
   Seoul are currently in the process of renegotiating terms of the
   bilateral trade deal.

   Nearly 80 percent of the KORUS trade deficit is in the automobile
   industry, with Korean carmakers Hyundai and Kia prospering, while the
   U.S.-based General Motors recently announced plans to close a major
   automotive plant in South Korea due to declining sales. The GM plant
   closure has raised concerns that without government subsidies of some
   sort, the company might pull out of Korea entirely, putting over 16,000
   employees, plus thousands of subcontractors, out of work.

   The recent move by the United States to impose steep tariffs as high as
   50 percent on South Korean washing machines and solar panels was also
   made to protect American manufacturers. Trump has said that South
   Korea, China and Japan have "gotten away with murder for 25 years" by
   taking unfair advantage of U.S. free trade policies and his
   administration would seek a reciprocal tax to compensate.

   South Korea and China protested the tariffs as unfair protectionism and
   said it would seek a dispute settlement at the WTO. However it could be
   difficult to refute the claim of a national security exemption. The
   dispute process could also take years to resolve, and it is unclear if
   the Trump administration would follow a ruling from the WTO.

   "The United States is a powerful country in the world, so even if Korea
   files a complaint with the World Trade Organization, gets it accepted
   and even if the WTO makes recommendations to the U.S., I am skeptical
   about how much of a powerful influence it would have," said Jae Yoon
   Lee, a researcher at the Korea Institute for Industrial Economics and
   Trade (KIET.)

   As the seventh-largest export market for the United States, South Korea
   could also retaliate by targeting American agricultural products and
   financial sectors, two areas where U.S. imports have been growing. But
   taking such action would risk getting into a trade war with the United
   States, South Korea's second largest trading partner after China.

   Security cooperation

   In addition to being important economic trading partners, the United
   States and South Korea are also longstanding military allies that have
   been closely coordinating to resolve the growing North Korean nuclear
   threat.

   The South Korean newspaper Hankoreh in an editorial on Monday
   criticized the Trump administration's punishing trade polices against
   its key ally in Asia and asked, "Can a country that behaves in such a
   way really be called an ally?"

   Both the Moon and Trump administrations say they will not allow a
   bilateral trade dispute to undermine their security cooperation to
   defend against and ultimately halt North Korea's growing nuclear and
   ballistic missile capabilities.

   If North Korea again engages in threatening missile or nuclear tests,
   Washington and Seoul would likely prioritize security cooperation over
   economic division, said political analyst Bong Young-shik, with the
   Yonsei University's Institute for North Korean Studies in Seoul.

   "There is a probability that South Korea and the United States are
   likely to set aside their trade dispute for the sake of dealing with
   the more urgent issues they face together," said Bong.

   Seoul's engagement efforts with Pyongyang has reduced tensions for now
   and led to the North's participation in the Olympics. But South Korea
   also remains committed to support the U.S.-led sanctions to pressure
   the North to give up its nuclear program.

   Lee Yoon-jee in Seoul contributed to this report.