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Congress warns Trump against scrapping South Korea trade agreement

Responding to reports that the Trump administration is considering withdrawing from the U.S.-South Korea free trade agreement, congressional leaders overseeing trade are calling on the White House to pursue further discussions instead of pulling out of a pact with an important economic and geopolitical partner, particularly at a time of heightened tensions in the Korean peninsula.

In a rare bipartisan statement Tuesday, the Republican and Democratic heads of the Senate Finance and House Ways and Means committees acknowledged that the 5-year-old free trade accord with South Korea “has presented frustrations for some important U.S. industries and stakeholders” and that the U.S. should press for compliance.

But the lawmakers said that moving to scrap the agreement would be neither effective nor constructive. South Korea, they noted, is America’s seventh-largest export market.

The Trump administration reportedly could decide as early as this week on whether to give notice of withdrawal from the agreement. But lawmakers and some of Trump’s top advisors do not want to risk alienating a decades-old ally while the administration is seeking support in the region and internationally to take more aggressive actions to halt North Korea’s efforts to build nuclear weapons.

“North Korea’s latest nuclear test underscores yet again the vital importance of the strong alliance between the United States and South Korea,” said the statement from House Ways and Means Committee Chairman Kevin Brady (R-Texas) and ranking member Richard Neal (D-Mass.), and Senate Finance Committee Chairman Orrin Hatch (R-Utah) and ranking member Ron Wyden (D-Ore.).

American businesses and trade groups, including the National Assn. of Manufacturers, are concerned that a decision to withdraw would have severe consequences for American farmers and other exporters, and they have urged their members to contact congressional representatives.

“The U.S. Chamber of Commerce opposes U.S. withdrawal from [the pact] in the strongest possible terms. We do not believe this move would create a single American job — but it would cost many,” said Thomas J. Donohue, the organization’s president.

“Ironically, states across mid-America that voted for the president would take the hit from withdrawal as their agricultural and manufactured goods exports fell in the wake of such a move,” he added. “It would damage White House relations with allies in the business and agriculture communities and in Congress, greatly complicating other initiatives such as tax reform.”

U.S. goods and services trade with South Korea totaled about $145 billion last year, with the U.S. running an overall deficit of $17 billion, according to the office of the U.S. trade representative.

Top American exports to South Korea include machinery, aircraft and optical and medical instruments. U.S. shipments of farm products surpassed $6 billion in 2016, making South Korea the fifth-largest agricultural export market.

However, the total amount of U.S. goods exports to South Korea has changed little in the four full years since the agreement took effect in 2012.

During that same four-year period, American imports of Korean-made goods have jumped almost 19%, with vehicles and car parts accounting for much of the increase.

Trump, who has made revamping trade deals a top priority, has sharply criticized the accord with South Korea, which was signed by President George W. Bush and finalized under President Obama. Trump has also threatened to withdraw from the North American Free Trade Agreement; officials from Canada, Mexico and the U.S. on Tuesday completed the second round of talks to renegotiate that 23-year-old pact.

Last month, Trump’s chief trade negotiator, Robert Lighthizer, held a daylong meeting by video with South Korea’s trade minister, Kim Hyun-chong, and U.S. officials have continued to pressure South Korea to renegotiate the agreement to resolve complaints that South Korea has not fulfilled its commitment to open up its services market, among other issues.

As with other major trading partners, the U.S. enjoys a significant surplus in services trade with South Korea, approaching $11 billion last year. That includes businesses such as travel, software and other intellectual property, and transport services.

Still, Lighthizer said the U.S. service exports have seen virtually no growth in the last four years, while the American trade deficit in goods with South Korea has nearly tripled since the agreement took effect.

“Unfortunately, too many American workers have not benefited from the agreement,” he said after that videoconference meeting on Aug. 22.

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