SEOUL, Sept. 5 (Korea Bizwire) — While the alleged development of a hydrogen bomb by North Korea is keeping the military on alert, Donald Trump’s allusions to a possible termination of the Korea – U.S. Free Trade Agreement is keeping the nation’s economy in a similar state.
In the latest stream of news either decrying or dissuading any potential breakup of the trade deal, an analysis of a potential post-FTA scenario has revealed that South Korea’s trade surplus from its American counterparts will actually increase by at least $200 million (compared to figures from 2016).
An inter-departmental study conducted by the Korea Institute for International Economic Policy, the Korea Rural Economic Institute and the Korea Institute for Industrial Economics and Trade revealed that though both imports and exports would shrink, the decline in imports would be greater than the decline in exports.
Exports of manufactured goods to the United States accrued a total monetary value of $65.5 billion and imports of the same were calculated at $36.4 billion last year, producing a trade surplus of $29.1 billion.
If the FTA were to be called off, the analysts concluded that exports would be whittled down by 2 percent to $64.2 billion. As mentioned above, the drop in imports would be greater, dropping by 4.3 percent to $34.8 billion. In this scenario, the trade surplus would actually increase to $29.4 billion (an increase of $260 million).
Tariffs were another aspect of Korea – U.S. trade that would incur higher monetary damages on the Americans than the reverse.
While South Korea would lose $1.16 billion, the United States would lose $1.32 billion without the existing protections from tariffs.
The agricultural industry would be hit hardest by the loss of protections as U.S. agricultural products would be on the hook for $770 million, more than half of all losses.
The Korea Institute for International Economic Policy added that South Korea may turn its gaze towards other FTA partners like Canada and the European Union for imports of agricultural products in the future.
The implications of a terminated FTA might also mean American firms settled in South Korea will have to pack up and leave.
There are currently 22 American consulting agencies specializing in international law that employ 103 lawyers.
According to a report by the Wall Street Journal, Trump will hold another round of discussions with advisors to discuss the KORUS FTA on September 5. The report also added that whether the talks will tilt towards negotiation or termination is still up in the air.