U.S. Releases Country-by-Country Trade Barrier Report
First Official Criticism of South Korea's Defense Offset Trade
Recurring Issues Include Network Usage Fees and Location-Based Data
Potential for These Issues to Become Key Points in Future U.S. Trade Talks
"Most Tariffs on U.S. Goods Eliminated Under FTA," Report States
The Donald Trump administration in the United States released the 'National Trade Estimate Report on Foreign Trade Barriers (NTE Report)' detailing trade barriers of various countries two days before announcing reciprocal tariffs on the 2nd of next month. Regarding South Korea, the report pointed out for the first time the government's offset trade policy requiring technology transfer when importing large quantities of weapons, and also meticulously listed import car environmental regulations, restrictions on imports of U.S. beef over 30 months of age, network usage fees, and other major trade barriers. Although many of these complaints are common grievances from U.S. industries, President Trump, who is accelerating the 'tariff war,' can use this as a basis for imposing reciprocal tariffs, raising the possibility that such non-tariff barriers will become contentious issues in future trade negotiations with the U.S.
However, contrary to President Trump's statement that "South Korea's average tariff rate is four times that of the U.S.," the report clearly states that South Korea has eliminated most tariffs on U.S. goods under the Korea-U.S. Free Trade Agreement (FTA).
The U.S. Trade Representative (USTR) described South Korea in seven pages of the 397-page NTE report, stating, "The South Korean government has pursued a policy prioritizing domestic technology and products over foreign defense technology through its defense offset trade program," and "Offset trade obligations may arise when foreign defense contract amounts exceed $10 million."
Offset trade refers to a trade practice where the government demands countermeasures such as technology transfer or re-export of parts from the selling country or company as a condition for purchasing weapons. This is the first time that South Korea's offset trade has been included in the NTE report, which is analyzed as reflecting the U.S. defense industry's claims that offset trade is unfair. Although the report briefly mentions this in three lines, it may become an issue in future trade negotiations.
Recently, the U.S., which has imposed a 25% tariff barrier on imported cars, pointed to South Korea's automotive environmental regulations as one of the non-tariff barriers. The report noted, "Expanding market access for U.S. automobile manufacturers in South Korea remains a major priority for the U.S.," and "The U.S. government has raised concerns about South Korea's regulations on imported car emission-related parts under the 'Clean Air Conservation Act.'" U.S. automakers are concerned that the standards for certification or report submission when changing emission-related parts are unclear. Additionally, U.S. companies argue that they could face criminal prosecution by the Korea Customs Service for violating import car regulations, while the customs authorities lack investigative authority over Korean companies, which is also criticized as unfair.
Trade barriers in South Korea considered unfair by U.S. industries, such as restrictions on imports of U.S. beef over 30 months of age, network usage fees, and cloud service security certifications applied to the public sector, were also comprehensively mentioned. Although the content is not significantly different from last year's report, the attention is greater than usual as President Trump has announced that he will closely examine non-tariff barriers by country.
Regarding South Korea's import of only beef under 30 months of age, the report pointed out, "South Korea signed a bilateral agreement in 2008 to fully reopen its beef market to the U.S., but this 'transitional measure' has been maintained for a full 16 years," and "Ground beef patties, jerky, and sausages are still prohibited regardless of cattle age."
The report also listed South Korea's digital trade barriers. It criticized a bill requiring overseas content providers like Netflix to pay network usage fees to South Korean Internet Service Providers (ISPs), noting that the U.S. raised this issue with the South Korean government several times last year. Regarding the online platform bill promoted by the government, it stated, "It is expected to apply to two South Korean companies along with many major U.S. corporations operating in the South Korean market," and "Many other major South Korean companies and companies from other countries are excluded."
Restrictions on the cross-border transfer of location-based data and the prohibition of foreign cloud service providers under the Industrial Technology Protection Act were also cited as trade barriers.
Furthermore, the report stated that South Korea has eliminated most tariffs on U.S. goods through the FTA. It said, "South Korea eliminated tariffs on 80% of trade items between the two countries immediately upon the Korea-U.S. FTA coming into effect on March 15, 2012," and "Most remaining tariffs were phased out over the next 10 years, completely eliminated as of January 1, 2021." Although President Trump said in a congressional speech earlier this month that "South Korea's average tariff rate is four times that of the U.S.," trade authorities confirmed that South Korea's tariffs on U.S. goods are effectively 0%.
The country-specific trade barrier report released by USTR on this day came two days before the announcement of reciprocal tariffs on the 2nd of next month. While the content repeatedly mentions issues the U.S. side has raised several times, since President Trump has announced imposing reciprocal tariffs corresponding to non-tariff barriers as well as tariffs, it cannot be ruled out that the U.S. side will leverage these issues as 'leverage' in negotiations and make them contentious.
USTR Representative Jamison Greer stated, "No U.S. president in modern history has recognized the broad and harmful foreign trade barriers faced by American exporters more than President Trump," and "Under his leadership, the administration is working to address unfair and non-reciprocal practices, help restore fairness, and prioritize hardworking American businesses and workers in the global market."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
