Trade critics point out that the U.S. trade deficit with South Korea is widening in the wake of a free-trade pact launched in 2012, but increased investment from the country may take some of the sting out of an argument that the deal’s benefits flow in one direction.
U.S. imports from Korea have indeed soared 24 percent from $67 billion in 2011, the year before the deal was enacted, to $83 billion in 2015, a nearly 25 percent jump. Meanwhile, exports to the country grew just 5 percent. The U.S. trade deficit more than tripled to $18.6 billion during that period.
After the Republican convention in July, Korea made a rare cameo in presidential politics when Republican Donald Trump singled out the deal as an example of how U.S. trade policy — specifically free trade deals — was shoring up foreign competitors at American workers’ expense. Many have complained that Korea didn’t do enough to open crucial sectors of its economy. Taxes on American cars in the historically closed market weren’t phased out until the beginning of this year (as were 2.5 percent American tariffs on Korean autos).
A strong U.S. ally, Korea is usually immune to “trade-bashing” attacks normally pointed at China, a perennial political punching bag.
But after Trump’s assault, supporters of Korea-U.S. ties shifted into high gear, pointing out that trade is a two-way street and that while 5 percent growth in goods sales is nothing to sneeze at, the sales of U.S. services have soared as the deal has opened new areas like legal and financial services and removed other barriers to the flow of commerce.
U.S. Korea Connect, a publication of the Korean Embassy in the U.S., says Korea has been returning the favor by investing heavily in the U.S. market, more than making up for being slower to purchase more U.S. goods:
In our increasingly globalized marketplace, international trade plays a central role for a country. Free trade agreements like the Korea-U.S. Free Trade Agreement help foster trade, but true success comes when foreign businesses decide to invest in a trading partner.
Indeed, the stock of Korean investment in the U.S. since the FTA was launched more than doubled to $40.1 billion in 2015, according to figures released by the Bureau of Economic Analysis in July. Korean-owned firms in the U.S. employ 45,000 people, paying more than $4.1 billion in wages. (So far, Korea outshines China in both dollars invested and workers employed.)
The Southeast U.S. has been among the primary beneficiaries of this largesse. Georgia is home to a Korean automaker, Kia Motors’ factory employing 3,000-plus in West Point, plus suppliers. It also welcomed Kumho Tire to Macon. Wells Lighting, a smaller company, chose Augusta last year for a factory. Hyundai is next door in Alabama. One of the largest Korean investments announced to date is also in the Southeast U.S. — the $3 billion Lotte Chemicals plant in Louisiana, which broke ground in June.
Still, there is evidence that the wave of investment may be subsiding. In 2015, according to the BEA figures, expenditures by Korean companies in their first year of U.S. operations stood at $481 million, down from $2.3 billion the year before.