US: "Buy American, Ensure No Violation of KORUS FTA"... Full-Scale Discussions on Bilateral Trade Issues Begin

US Tells Our Government "KORUS FTA, WTO Government Procurement Agreement Not Violated"
Minister of Trade to Visit US Next Month... Likely to Discuss Various Issues Including Trade and Industry

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kwon Haeyoung] The Joe Biden administration in the United States has expressed to our government that its 'Buy American' policy, which prioritizes the purchase of American-made products in the government procurement market, will not go beyond the framework of the Korea-US Free Trade Agreement (FTA). However, this was a confirmation of principle, and it is pointed out that the true intentions of the US can only be judged after the detailed policies of Buy American are disclosed. Meanwhile, Sung Yun-mo, Minister of Trade, Industry and Energy, who heads the trade authorities, is planning a visit to the US with trade policy officials in early next month in line with the inauguration of the new US administration, drawing attention to whether broad discussions between the two countries can take place not only on Buy American and various trade issues but also on industrial and resource cooperation measures.

According to the government on the 17th, the US conveyed to our side that it intends to operate the Buy American policy within the scope that does not violate the government procurement chapter of the existing Korea-US FTA and the Government Procurement Agreement (GPA) of the World Trade Organization (WTO).

An official from the Ministry of Trade, Industry and Energy said, "After the Buy American executive order was issued, we inquired with the US side about its impact on the existing agreements, and received this response," adding, "Once the detailed plan of Buy American is established, we will monitor whether the US implements the policy within the promised scope and prepare countermeasures."

The details of the Buy American policy are expected to be announced in the first half of the year. President Biden signed an executive order on January 25th to prioritize the purchase of American-made products when procuring goods for the federal government. According to this executive order, the relevant authorities must establish specific implementation plans within 180 days.

According to the Korea-US FTA, when purchasing goods or services worth more than 100 million KRW, the two governments must not discriminate against companies from the other country. For construction services, the threshold is 7.4 billion KRW. Exceptions are recognized for small and medium-sized enterprises and national security, but the key issue is how far the US government will expand these exceptions through the Buy American policy. According to the executive order signed by President Biden, the exceptions allowing the purchase of foreign products will be reduced, and the standards for American-made products will become stricter.

The government and industry are closely watching the impact of the Buy American policy on our companies. The US government procurement market is worth 600 billion USD. Foreign products account for 5% of this, so the damage to foreign companies is estimated to be up to 30 billion USD. Through the executive order announced in January, President Biden declared that government official vehicles will be replaced with electric vehicles, and these will be limited to vehicles with more than 50% American-made parts, signaling the future policy direction.

Concerns have arisen that the Biden administration might use stronger protectionist measures than the Trump administration, raising the tension within our trade authorities.

While the Trump administration used tariffs as a means of protectionism, the Biden administration’s agenda covers a much broader spectrum including labor, environment, and human rights, which could have comprehensive impacts on the agreements we have already signed. For example, in terms of labor, based on the United States-Mexico-Canada Agreement (USMCA), the Biden administration could demand the 'strengthening of enforcement' of labor conditions stipulated in the Korea-US FTA. If imports of products that do not meet certain labor standards in the production process are regulated, companies with production bases in developing countries could be adversely affected.

Meanwhile, the government is seeking ways to strengthen industrial and resource cooperation between Korea and the US in line with the inauguration of the new US administration, beyond just trade issues.

Minister Sung Yun-mo is planning a visit to the US in early next month. He is scheduled to meet with the Secretary of Commerce and the Secretary of Energy to discuss various issues. Regarding the US Trade Representative (USTR), since the representative is still a nominee, it is uncertain whether a meeting will take place. It is expected that issues such as Buy American, carbon border tax, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be discussed, and positions aimed at creating a favorable environment for our industries and companies will be conveyed.

A government official said, "We are currently coordinating the schedule with the US side," adding, "After the inauguration of the Biden administration, before US policies in trade, industry, and resources are concretized, we expect to convey our position and discuss various cooperation measures and issues."

This content was produced with the assistance of AI translation services.