SEOUL (Reuters) - A key policy adviser to South Korea’s presidential frontrunner said on Wednesday he doesn’t expect a renegotiated free trade agreement with the United States to hurt trade between the two major export nations.
“Statistics show the United States has achieved much through the free trade agreement,” said Kim Kwang-doo, the head of frontrunner Moon Jae-in’s campaign advisory group, told Reuters in an interview.
“They (the United States) have a trade deficit with us and they can complain about that, sure. But the deficit is in partly due to the fact South Korean products have the upper hand when it comes to trade.”
U.S. Vice President Mike Pence told business leaders in Seoul on Tuesday the Trump administration would review and reform the five-year-old free trade agreement between the United States and South Korea.
South Korean government officials said Pence’s statement does not necessarily mean a complete overhaul of the agreement. However, industry leaders are watching the situation closely, as are market participants who sold off the won and shares briefly on Tuesday following Pence’s comments.
Kim said Washington is likely to demand South Korea buy more U.S. products, but in order to increase exports, the United States would need to create products that South Korean customers would want.
“There won’t be any harm to the essence of what the trade agreement stands for,” he said.
Capital Economics said in a research note on Wednesday a renegotiated FTA would likely mean South Korea opens more of its economy to U.S. companies but would “have a relatively small impact on the economy.”
Meanwhile, Kim said the Chinese backlash against the deployment of the U.S. Terminal High Altitude Area Defence (THAAD) anti-missile system to South Korea would likely end in one or two years based on previous similar instances in other countries subjected to Chinese retaliation via economic pathways.
China has this year curbed South Korean businesses operating on the mainland and banned group tourists from visiting South Korea as a retaliation against the deployment, although Beijing has denied its moves are linked to THAAD.
“It’s not all win for China,” said Kim, pointing out Chinese consumers’ demand for South Korean goods and how they have likely been affected by the curb and tourism ban.
Both the United States and acting South Korea president Hwang Kyo-ahn have said they would proceed with the early deployment to South Korea of THAAD despite Chinese objections.
As for the issue of the deployment itself, Kim declined to say what decision Moon would make on the issue. Moon himself has said that decision should be made by the next president and stayed away from taking a clear stance.
Reporting by Christine Kim; Editing by Sam Holmes