In Response to U.S. Demands, President Lee Reiterates 'Commercial Rationality' in Meeting with Treasury Secretary
President Lee: "Korea's Economic Scale and FX Market Are Different from Japan... Currency Swap Also Discussed"
Secretary Besant: "There May Be Temporary Difficulties, But They Are Surmountable"
Policy Chief Kim Yongbeom: "Meeting with U.S. Treasury Secretary Is a Critical Turning Point for Future Tariff Negotiations"
Kim: "There Was Very Different Content in the U.S. Memorandum of Understanding"
The Government's 'Currency Swap' Request Is Only a Necessary Condition
On the U.S. 'Equity' Investment Demand, Korea Says: "Loans, Guarantees, Investments, etc."
President Lee Jaemyung, who is currently visiting New York, United States, to attend the United Nations General Assembly, met with U.S. Treasury Secretary Scott Besant at the Permanent Mission of the Republic of Korea to the United Nations on the 24th (local time) to discuss the stalled Korea-U.S. tariff negotiations. At the meeting, President Lee reiterated that the 350 billion dollar investment fund for the United States must be based on "commercial rationality." Secretary Besant responded that while there may be short-term difficulties, he believes they can be sufficiently overcome. However, it has been confirmed that since the results of the Korea-U.S. tariff negotiations, which were concluded on July 31, the two sides have had significantly divergent interpretations, leading to difficulties in the follow-up negotiations that have continued until recently.
According to a briefing by Kim Yongbeom, Policy Chief of the Presidential Office, President Lee met with Secretary Besant for about 30 minutes and stated, "The Korea-U.S. relationship is very important as an alliance, and close economic cooperation between the two countries is just as vital as security cooperation for maintaining and developing the alliance. While cooperation on security is progressing well, it is also necessary to achieve good consultations in the trade sector." This meeting marked the first time in about a month that President Lee and Secretary Besant had met since their encounter during the Korea-U.S. summit in Washington, D.C. in August. The meeting was also attended by Deputy Prime Minister and Minister of Economy and Finance Koo Yoonchul, National Security Advisor Wi Sungrak, and Policy Chief Kim.
President Lee once again emphasized "commercial rationality" regarding the 350 billion dollar investment fund for the United States. He said, "I hope discussions will progress in a direction that serves the interests of both countries, based on commercial rationality," and added, "Although there was a recent agreement between the United States and Japan on a U.S.-bound investment package, Korea is significantly different from Japan in terms of economic scale and foreign exchange market infrastructure." President Lee further requested, "I hope negotiations will proceed well, taking these aspects into consideration."
In response, Secretary Besant stated that although there may be temporary difficulties, they can be sufficiently overcome. He said, "The Korea-U.S. alliance is strong, and while there may be short-term and temporary challenges, they are surmountable. In the shipbuilding sector, which the United States considers a core industry, Korea's cooperation is extremely important, and we appreciate your active support." Secretary Besant also commented, "I understand there has been progress in the trade sector regarding Korea-U.S. trade negotiations. I have listened carefully to President Lee's comments on U.S.-bound investment, and we will discuss them internally."
The meeting also included discussions on foreign exchange market issues, including Korea-U.S. currency swap arrangements. The Korean government maintains that, since operating the 350 billion dollar U.S.-bound investment fund as requested by the United States could destabilize the foreign exchange market, it is necessary to establish safeguards such as an unlimited currency swap agreement. Kim explained, "We explained this issue to Secretary Besant, who is the relevant minister for the foreign exchange market. Last week, Bank of Korea Governor Lee Changyong also met with Secretary Besant at the International Monetary Fund headquarters and conveyed his views on currency swaps during a special lecture."
Kim further stated that even if the United States accepts the idea of a currency swap, it does not mean negotiations will proceed automatically. "An unlimited currency swap is a necessary condition for adjusting the U.S.-bound investment fund," he said. "Even if the currency swap issue is resolved, it does not mean that Korea will automatically be able to invest 350 billion dollars in the form of equity, as the United States demands." This suggests that the currency swap is considered a minimum safeguard. Kim added, "Any arrangement must be within the scope permitted by current Korean law. If necessary, we may need to amend the Export-Import Bank Act or seek National Assembly approval if there are significant burdens." He also stated that ensuring "commercial rationality," as emphasized by President Lee, is another essential condition.
Additionally, Kim assessed that the meeting between President Lee and Secretary Besant would be a critical turning point for future tariff negotiations. He said, "The foreign exchange market issue has been raised as a very important matter in bilateral discussions, and the fact that President Lee explained the issue in detail to Secretary Besant will be a significant milestone in subsequent negotiations."
The Background of the Government's 'Currency Swap' Request: "There Was a Very Different Content in the U.S. Memorandum of Understanding"
Kim explained that the background for the Korean government's request for a currency swap with the United States was that the memorandum of understanding (MOU) sent by the United States after the July 31 tariff agreement contained content that was fundamentally different. The Korean government had understood the previously agreed 350 billion dollar investment to be used in the form of loans and guarantees, and had recorded this in a "memorandum," but the U.S. understanding was the opposite. Kim stated, "The United States used the term 'cash flow,' which was very close to an equity-based claim. We recognized the potential impact on the foreign exchange market and pointed this out to the United States."
Regarding the course of negotiations so far, Kim said that the United States has not responded to Korea's requests. "We have tried to define and separate cash flow into loans, guarantees, and investments in our own way, but the United States has not agreed. We are negotiating to ensure that cash flow has characteristics as close as possible to loans," he said. Kim also mentioned that the Korean government proposed dividing profits generated after the execution of the U.S.-bound investment fund in a 9 to 1 ratio between Korea and the United States.
Kim emphasized, "We are negotiating based on the principle that the outcome must be commercially rational, bearable for us, and mutually beneficial for the national interest. We will not sacrifice our principles due to time constraints." He added, "We have made it clear that rice and beef are off the table for discussion, and that non-tariff issues are not included at all. We are conducting substantive discussions in the remaining areas." Regarding the outlook for future negotiations, he said, "The upcoming Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju will be an important milestone, and we are negotiating with this in mind."
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Meanwhile, the meeting took place because Secretary Besant, who was scheduled to attend the "Korea Investment Summit" at the New York Stock Exchange (NYSE) on the 25th, was unable to attend due to commitments with President Donald Trump. Kim explained, "We initially invited Secretary Besant to the Korea Economic Briefing on the 25th, but as he increasingly had to accompany President Trump, he ultimately could not attend. Secretary Besant's office apologized and requested this meeting instead."
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