[APEC Super Week] A Golden Opportunity to Achieve a 'One-Shot Solution' for Tariffs, Security, and North Korea Issues

Korea-U.S. Tariff Negotiations: The Most Critical Issue
Seeking Security Consensus, Cooperation Expected to Strengthen
A U.S.-North Korea Meeting Could Signal Progress in Inter-Korean Relations
Korea-Japan Summit: Shuttle Diplomacy Continue

As the Asia-Pacific Economic Cooperation (APEC) summit approaches, global attention is turning to Gyeongju. This is because the leaders of major countries, including the United States, China, and Japan, are set to appear amid an unstable global trade order and security environment.

President Lee Jaemyung has been given a golden opportunity to resolve external risks. He may conclude the Korea-U.S. tariff negotiations that have continued since his inauguration and further solidify security cooperation with the United States. There is also significant interest in this summit as it could create conditions to open up new directions in future-oriented Korea-Japan cooperation and inter-Korean relations, both key issues on the Korean Peninsula.

Turning Point in Korea-U.S. Tariff Negotiations

From Korea’s perspective, the most important issue during the APEC summit is the Korea-U.S. tariff negotiations. Although a broad agreement was reached at the end of July, the two sides have been deadlocked for nearly two months over the detailed implementation plan for the U.S.-bound investment fund. Fortunately, after the Korean government submitted a revised proposal in early October, the U.S. government responded positively, and the negotiations rapidly gained momentum. Key negotiators, including Kim Yongbeom, Chief Policy Officer at the Presidential Office, and Kim Jeonggwan, Minister of Trade, Industry and Energy, made repeated visits to the United States every two to three days, making a concerted effort to reach a deal.

The two sides are currently finalizing the wording of the agreement, focusing on lowering mutual tariff rates from 25% to 15% and reducing tariffs on specific items such as automobiles. The key issues are the structure of the U.S.-bound investment package and the method of fund execution. Decisions need to be made on how to mix 'cash, loans, and guarantees' in the $350 billion (about 500 trillion won) investment, whether to execute the investment in a lump sum or in installments, how to distribute profits from the investment, and to what extent financial safety measures to absorb foreign exchange market shocks will be formalized in the agreement. If a dramatic breakthrough is achieved, uncertainties related to trade and the foreign exchange market will be reduced, and the burden on companies involved in automobiles, parts, and steel will be significantly alleviated.

If the U.S.-bound investment package is finalized, it is highly likely that Korea-U.S. security issues will follow. There is talk of reaffirming the gradual increase in the defense budget and linking cooperation on the purchase and supply chain of U.S. weapons to the 'economic security' framework. In particular, there is interest in whether the agreement will include language expanding the scope of the nuclear cooperation agreement. Since this is a sensitive issue directly related to spent nuclear fuel and the nuclear fuel cycle, a phased or conditional agreement is more realistic than a comprehensive one. If tariffs and security can be linked to create a virtuous cycle that strengthens mutual trust, rather than being handled separately, alliance risks could be significantly reduced.

In particular, there is interest in whether the agreement will include language expanding the scope of the nuclear cooperation agreement. Since this is a sensitive issue directly related to spent nuclear fuel and the nuclear fuel cycle, a phased or conditional agreement is more realistic than a comprehensive one. If tariffs and security can be linked to create a virtuous cycle that strengthens mutual trust, rather than being handled separately, alliance risks could be significantly reduced.

Finding Common Ground in Korea-U.S. Security Consultations

Compared to trade, the security consultations have largely found common ground. According to the Presidential Office, if the U.S.-bound investment package negotiations are concluded, the results of both the trade and security negotiations are likely to be announced simultaneously. At a press briefing related to APEC, Wi Sunglak, Director of the National Security Office, said, "There has been a certain understanding in the security field," and "The U.S. side prefers to announce both trade and security agreements together once both are finalized."

However, the situation remains challenging. While the Korea-U.S. negotiating teams have reached agreement on most issues, some points of contention remain unresolved. On his return from the final round of pre-APEC negotiations, Chief Policy Officer Kim told reporters, "There is no more time for additional face-to-face negotiations, and APEC is just around the corner," adding, "The day is drawing to a close, and if we are to reach an agreement at APEC, there is still a long way to go." The Presidential Office has also stated that there will be no separate announcement of only the agreed parts during APEC, emphasizing its commitment to a comprehensive agreement. Therefore, if the tariff negotiations are not concluded, the Korea-U.S. summit scheduled for the 29th may not produce any results, such as a memorandum of understanding (MOU).

Korea-Japan Summit: Steering Shuttle Diplomacy

Establishing relations with Japan’s new Prime Minister Sanae Takaichi is both a challenge and an opportunity. Prime Minister Takaichi, who will visit Korea during APEC, is known for her strong conservative image. This has raised concerns in diplomatic circles about potential cracks in Korea-Japan relations. However, if the leaders of Korea and Japan can build mutual trust in Gyeongju and agree to manage historical issues on a 'two-track' principle, shuttle diplomacy can continue without derailment. The idea is to manage historical and security issues separately while building trust through economic cooperation. In this process, the Korea-U.S. tariff package and supply chain diversification amid U.S.-China competition are expected to naturally interlink.

Xi Jinping's Visit to Korea: Opening Economic Opportunities?

President Xi Jinping of China, the next APEC host country, is scheduled to hold his first Korea-China summit with President Lee on November 1, where they are expected to discuss easing sanctions on Korean companies. Previously, the Chinese government announced sanctions on Hanwha Ocean’s U.S. subsidiary and strengthened controls on rare earth exports. These measures are largely seen as an attempt to increase leverage ahead of APEC and the U.S.-China summit. Trade and industry officials from both countries have agreed to continue discussions using the APEC summit as leverage, and if the U.S. and Chinese leaders ease their mutually hostile retaliatory measures, there is a possibility that China’s pressure on Korean companies could also be somewhat alleviated.

Trump-Kim Jongun Meeting: A Momentum for Change

Although the likelihood is low, if U.S. President Donald Trump were to hold a surprise meeting with North Korean leader Kim Jongun, it could signal a breakthrough in inter-Korean relations. Since taking office, President Lee has sought dialogue with North Korea but has failed to achieve meaningful progress. There is a view that even a brief meeting between North Korea and the United States in a symbolic location such as Panmunjom could open the door to lowering tensions between the two Koreas. If, based on this, low-risk cooperation channels such as humanitarian, health, and disaster response are restored, the Lee administration could accelerate its policy of 'normalizing inter-Korean relations.'

President Lee is also expected to provide strong support for Korean companies seeking to secure a foothold in the global market. Following his meeting with Larry Fink, Chairman of BlackRock, at the United Nations General Assembly in September, where he presented his vision for 'Asia’s AI Capital,' President Lee has chaired an open debate on AI as President of the UN Security Council and emphasized the need for multilateral cooperation. As such, the APEC summit could serve as an opportunity to further expand Korea’s role in the AI industry.

At this APEC summit, business events will begin on the 28th, ahead of the leaders’ meeting. At the main event, the 'CEO Summit,' leaders of global big tech companies, including Jensen Huang, CEO of NVIDIA, will be in attendance. As these companies are seeking cooperation with Korean semiconductor firms, President Lee is expected to pledge full government support.