U.S. Launches Economic Dialogue with Japan, Pledges Review of Korea FTA
Vice President Mike Pence said this week that the U.S. will review its bilateral free trade agreement with Korea and is open to an FTA with Japan. The U.S. trade deficit with Korea has more than doubled since the KORUS agreement took effect in 2012 and President Trump has made reducing trade deficits a top economic priority. Trump has also expressed interest in a bilateral deal with Japan after withdrawing in January from the Trans-Pacific Partnership both countries had negotiated with ten others.
Japan. In Tokyo, Pence and Japanese Deputy Prime Minister Taro Aso launched the U.S.-Japan Economic Dialogue and agreed to structure it along three policy pillars.
- Common strategy on trade and investment rules and issues: This pillar will cover a bilateral framework for setting high trade and investment standards, trade and investment initiatives in the regional and global trading environments, and third-country concerns. Pence said the U.S. will focus on “breaking down barriers” to the Japanese market for U.S. exporters.
- Cooperation in economic and structural policies: This pillar will cover active use of the G7’s three-pronged approach (mutually-reinforcing fiscal, monetary, and structural policies), cooperation on global economic and financial developments and challenges, and cooperation on regional macroeconomic and financial issues.
- Sectoral cooperation: This pillar will cover specific sectors where improved commercial relations will promote mutual economic benefits and job creation. Aso cited high-speed rail and energy as examples.
The two leaders said the dialogue should generate concrete results in the near term and plan to hold a second meeting before the end of the year. Pence said the Department of Commerce, the Treasury Department, and the Office of the U.S. Trade Representative “will lead discussions for each of these three pillars” and are expected to provide input on their “progress and accomplishment … over the coming months.” Pence added that “at some point in the future, there may be a decision made between our nations to take what we have learned in this dialogue and commence formal negotiations for a [bilateral] free trade agreement.”
Korea. In remarks to the Korean business community in Seoul, Pence noted that since KORUS took effect two-way trade in goods and services has grown by nearly $20 billion and U.S. exports have increased by more than six percent. On the other hand, he said, “we have to be honest about where our trade relationship is falling short.” The U.S. trade deficit with Korea has more than doubled, and U.S. businesses “continue to face too many barriers to entry.” Pence said the Trump administration will therefore work to “reform KORUS in the days ahead” but pledged to work with businesses in that effort.