As the world turned its attention to the mysterious green train arriving in Beijing, later confirmed to be carrying North Korean dictator Kim Jong-un, the White House on Tuesday night announced a new trade regime with Pyongyang’s neighbor to the south.
As tensions heat up with China, Russia, Iran and the North Koreas, the Trump administration, the most outwardly protectionist team at 1600 Pennsylvania in decades, repeatedly emphasized their view of South Korean trade as a “national-security issue.”
Washington and Seoul have reached “an agreement in principle,” a senior administration official said Tuesday night, “That will significantly strengthen both the economic and the national-security relationship between the United States and South Korea. This is a good deal for both countries.”
The senior official later became more pointed: “This agreement is visionary and innovative and it underscores a pattern of failure by previous administrations to negotiate fair and reciprocal trade deals that benefit both countries.”
South Korea-U.S. free trade relations were originally proposed under George W. Bush and then inked under Barack Obama late last decade. President Trump has been deeply critical of both administrations—especially and consistently on the issue of trade.
The effort at a revamp was spearheaded by the U.S. Trade Representative Robert Lighthizer and his South Korean counterpart, Trade Minister Kim Hyun-chong, the White House said.
This is the first successful negotiation of a trade agreement in history, the administration emphasized. And it’s another step in the White House’s firmly hawkish tact on trade in the early months of 2018. In February, Peter Navarro, director of the national trade council, and his ally, Commerce Secretary Wilbur Ross, won a power struggle against National Economic Council Chair Gary Cohn, and White House Staff Secretary Rob Porter. Neither Cohn nor Porter work in the administration any longer (although Porter’s exodus was far more compelled by revelations of violence against his ex-wives).
Tuesday night, the White House made it sound like the South Korean renegotiation was merely an opening salvo: more to come. “While this agreement is small in size, relative to the horrible effects of NAFTA and China’s entry into the WTO,” the senior administration official said, it does rectify KORUS, which is “one of the worst deals the U.S. ever entered into.”
“He’s killing it,” a former senior administration official told me Wednesday morning, remarking on Navarro’s continued rise and consolidation of power in the White House.
In principle, this new agreement is a coup for American automakers. “At the tip of the spear is the American auto and auto parts industry,” the senior official explained. “Probably 80 percent of our trade deficit in goods to Korea is auto and auto parts.”
Additionally negotiated, or in the process of being finalized, is “a currency agreement, dealing with currency practices,” another senior official explained. “The U.S. Department of Treasury is, as we speak, leading discussions on currency [with the South Koreans]... And between them, an agreement is being finalized on robust provisions that will . . . prohibit competitive devaluation of currency.”
Steel and aluminum play prominently, as they have in all of the Trump administration’s trade imperatives this year. “As you all know, the president took action” on steel and aluminum “to protect national security,” the senior official emphasized.
“Korea, of course, was subject to these tariffs, and sought an exemption.” But no agreement was reached on aluminum. “They’re just going to be subject to the tariff,” the senior official said. On steel, the official noted that “Korea will be subject to a hard quota” that “will be a product-specific quota equivalent to 70 percent of the average annual export volume for these steel products.”
This is a “huge win” for the American people, the administration emphasized.
Kim In Beijing
The announcement of the new trade agreement with South Korea came as it was confirmed that North Korean leader Kim Jong-un had decamped to Beijing in recent days, with tensions between the United States and North Korea reaching their most explosive point since the 1953 armistice.
“Kim Jong Un invited, on behalf of the party and government of the DPRK, Xi Jinping to make an official visit to the DPRK at a convenient time and the invitation was accepted with pleasure,” North Korean state media said.
At the same time, Chinese President Xi Jinping agreed to a future trek to Pyongyang. And White House Press Secretary Sarah Sanders Tuesday night said a personal message from Kim was delivered to President Trump via Xi.
China on Tuesday may have upgraded itself from North Korea benefactor to the essential player in any future negotiations, putting the broader U.S.-China rivalry back center stage in the North Korean matter.
“The solution for Korea runs thru Beijing—Kim acts like a vassal,” the former senior administration official told me. “Nobody can counter” this dynamic now. For this source, this includes hawkish agitators such as John Bolton, the incoming national security advisor, who recently floated a plan to conduct a preemptive strike on North Korea. Xi has now put Beijing on the frontlines of the issue.