07:39 GMT +324 March 2018
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    A person gets out of the World Trade Organization (WTO) headquarter in Geneva (File)

    South Korea's WTO Dispute Challenging, Unlikely to Change US Trade Policy

    © AFP 2018/ FRED DUFOUR
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    South Korea’s recent WTO complaint against Obama-era US steel tariffs puts the Trump administration’s foreign trade agenda at odds with international rules, albeit is unlikely to change the White House’s broader strategy on trade.

    Kristian Rouz — South Korea launches a WTO petition against the US decision to slap higher customs tariffs on its steel and transformer imports dating back to mid-2016. This comes against the backdrop of Washington's more recent decisions to impose prohibitively high duties on washing machines originating from East Asia.

    The new WTO challenge adds international pressure against the Trump administration's efforts to protect American industries and workers. President Trump has repeatedly reiterated that foreign nations have taken advantage of the solid US consumer market by resorting to unfair trade practices — such as dumping and subsidizing — in order to gain a competitive edge over US manufacturers.

    READ MORE: How China is Fighting Corruption as It Faces Trade War With US

    South Korea's filing with the World Trade Organization (WTO), dated February 14, disputed the US anti-dumping and anti-subsidy tariffs introduced under the Obama administration. Albeit the action is targeting laws enacted before President Trump was elected into office, South Korea's move is seen as precedent-setting.

    Experts say Seoul could go farther, targeting the Trump administration's most recent measures restricting South Korean imports in the US in an effort to protect American jobs.

    "I personally think this may not be the end, with more to come," South Korea's Minister of Trade, Industry and Energy Paik Un-gyu said. "(Steel duties) are part of (President) Trump's policy aimed at his political supporters ahead of the November mid-term elections and for his second term for president."

    The US has 60 days to address the complaint. If the sides don't come to a mutual settlement, Seoul can ask the WTO to enforce its free trade rules.

    This comes as the US is fighting a WTO complaint from Canada, which challenges President Trump's decision to limit the imports of Canadian softwood lumber (and import more lumber from Russia instead).

    In its WTO filing, South Korea alleges the US Department Commerce made its decision to impose the tariffs based on ‘adverse facts available' from the Korean manufacturers. At least six anti-dumping cases reviewed by the Commerce Department are deemed to be rooted in misinformation, Seoul claims.

    Additionally, China is using the WTO mechanism to convince the US to treat it as a "market economy" — despite Beijing's restrictions on capital movement and currency manipulations.

    South Korea threatened a separate WTO action if President Trump enforces a 53-percent steel tariff proposed by the Commerce Department last week. This comes as the US and South Korea are planning to renegotiate their bilateral trade agreement known as KORUS.

    "I hope that you raise the issue of unfairness (of protectionist measures) aggressively during negotiations for revising the Korea-US Free Trade Agreement," South Korea's President Moon Jae-in said in a meeting with his key aides at the Blue House.

    Under WTO rules, individual countries can't impose unilateral trade restrictions in the form of tariffs unless there are facts available at the time of decision showing the targeted manufacturer is consciously uncooperative with a trade remedy probe.

    READ MORE: US-China 'Trade War': Is It Just a Diversion Tactic for Trump Voters?

    South Korea alleged the US didn't review the available facts "properly and objectively."

    South Korea is heavily reliant on the exports of its manufactured goods, and the US is one of its largest overseas markets. Experts point out that US restrictions on imports could affect economic growth, employment and currency valuations of its trade partners, which, aside of South Korea, also include Japan, nations of Southeast Asia, and beyond.

    At the same time, prominent South Korean steelmaker, Posco, said President Trump's protectionist measures would not have substantial negative effects on its business. Meanwhile, automotive enterprise Hyundai could take a blow.

    "Due to the series of anti-dumping and countervailing duty orders imposed in the past couple of years, Posco has reduced US exports significantly, and the US currently represents less than 1% of carbon steel sales volume," Cindy Park of Nomura Holdings said. "Hyundai Steel has larger exposure, around 5% of total tell sales volume, especially on the steel pipes and cold-rolled-steel that it sells to the Hyundai Motor Group plants located in Alabama."

    South Korea also complained directly to the US during the preliminary meetings between their respective representatives aimed at renegotiating the five-year KORUS agreement.

    Seoul said US tariffs on washing machines and solar panels could hurt the South Korean economy, while US officials urged Seoul to review bilateral trade in cars, as the US seeks to lower its foreign trade deficit.

    Additionally, South Korean officials are now saying the nation needs to diversify the structure of its exports in the face of the rising US trade restrictions. This as the Trump administration has made it clear it seeks to raise the costs of imports for the domestic market.

    "To better manage risks down the road, we have to explore new markets and develop value-added products and innovative materials," Trade Minister Paik said. "We will have to expand the united front against the rising protectionism."

    This also comes as American carmaker GM said it will shut down its underused facility in South Korea and bring more jobs back to the US — a move lauded by President Trump as helping his economic agenda.


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