Amid U.S. Demands on Investment Fund, President Lee Reiterates Need for "Commercial Rationality"
President Lee Meets U.S. Treasury Secretary in New York
"Says Korean Economy and Foreign Exchange Market Are Different from Japan"
Currency Swap Also Discussed
Secretary Besant: "There May Be Temporary Difficulties, But They Are Fully Surmountable"
Policy Chief Kim Yongbeom: "Meeting with U.S. Treasury Secretary Is a Critical Turning Point for Future Tariff Negotiations"
Kim: "U.S. Memorandum Contained Drastically Different Terms"
Government's Currency Swap Request Is Only a Necessary Condition
President Lee Jaemyung, who is visiting New York, United States, to attend the United Nations (UN) General Assembly, met with U.S. Treasury Secretary Scott Besant at the Korean UN Mission on the 24th (local time) to discuss the stalled Korea-U.S. tariff negotiations. At the meeting, President Lee reiterated that the $350 billion investment fund for the United States must be based on "commercial rationality," while Secretary Besant acknowledged there may be short-term difficulties but expressed confidence that they can be overcome. However, it has been confirmed that the follow-up negotiations have faced difficulties, as the two sides have had significant differences of understanding regarding the results of the Korea-U.S. tariff negotiations concluded on July 31.
According to a briefing by Kim Yongbeom, Policy Chief at the Presidential Office, President Lee met with Secretary Besant for about 30 minutes, stating, "The Korea-U.S. relationship is extremely important as an alliance, and close cooperation between the two countries is crucial not only for security but also for economic development." He added, "While cooperation on the security front is progressing well, it is also necessary to achieve positive consultations in the trade sector." This meeting between President Lee and Secretary Besant took place about a month after their last encounter during the Korea-U.S. summit in Washington, D.C. in August. Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol, National Security Advisor Wi Seongrak, and Policy Chief Kim were also present at the meeting.
President Lee again emphasized "commercial rationality" regarding the $350 billion U.S. investment fund. He said, "I hope discussions will progress in a way that benefits both countries, based on commercial rationality," and pointed out, "While there was a recent agreement on a U.S. investment package between the United States and Japan, the Korean economy and foreign exchange market infrastructure are significantly different from those of Japan." He further requested, "I hope these factors will be taken into account to ensure successful negotiations."
In response, Secretary Besant stated that while there may be temporary difficulties, they are fully surmountable. He said, "The Korea-U.S. alliance is strong, and although there may be temporary and short-term challenges, they can be overcome." He also emphasized, "Korean cooperation is extremely important in the shipbuilding sector, which the United States considers a key industry, and we are grateful for Korea's active support." Secretary Besant added, "I understand there has been progress in trade negotiations between Korea and the United States," and said, "I have listened carefully to President Lee's comments regarding U.S. investment and will discuss them internally."
The meeting also included discussions on foreign exchange market issues, such as a potential Korea-U.S. currency swap. The Korean government maintains that if the $350 billion U.S. investment fund is operated as the United States desires, it could destabilize the foreign exchange market, so safety measures such as an unlimited currency swap agreement are necessary. Kim explained, "I outlined this issue to Secretary Besant, who is the minister in charge of foreign exchange markets." He added, "Last week, Bank of Korea Governor Lee Changyong also met with Secretary Besant at the International Monetary Fund (IMF) headquarters, where he conveyed his views on currency swaps."
Kim further explained that even if the United States accepts the idea of a currency swap, negotiations will not proceed automatically. "An unlimited currency swap is a necessary condition for adjusting the U.S. investment fund," he said, "but even if the swap is agreed upon, it does not automatically mean that Korea can invest $350 billion in the form of equity, as the United States demands." He clarified that the currency swap is considered a minimum safety measure. Kim also stated, "Any measures must be within the scope permitted by current Korean law; if necessary, we may need to amend the Export-Import Bank Act or, if it involves a significant burden, obtain parliamentary approval." He added that ensuring "commercial rationality," as emphasized by President Lee, is also a sufficient condition.
Kim also assessed that the meeting between President Lee and Secretary Besant could become a critical turning point in future tariff negotiations. He said, "The foreign exchange market issue has been raised as a very important matter in bilateral discussions," and added, "President Lee's detailed explanation of the foreign exchange market issue to Secretary Besant will likely prove to be a major turning point in subsequent negotiations."
The Reason Behind the Government's Currency Swap Request: "The U.S. Memorandum of Understanding Contained Drastically Different Terms"
Kim explained that the reason the Korean government requested a currency swap from the United States was that the memorandum of understanding (MOU) sent by the United States after the July 31 tariff agreement contained terms that were drastically different from what had been agreed. The Korean government had understood and recorded in a "memorandum" that the previously agreed $350 billion investment would be used in the form of loans and guarantees, but the U.S. understanding was the opposite. Kim said, "The United States used the term 'cash flow,' which was very close to an equity-based argument," and added, "We saw the potential shock to the foreign exchange market and pointed this out to the United States."
Regarding the course of negotiations so far, Kim noted that the United States has not accepted Korea's requests. He said, "We have tried to define and distinguish cash flow as loans, guarantees, and investments in our own way, but the United States has not agreed." He added, "We are negotiating to ensure that cash flow has attributes as close to loans as possible." Kim also introduced the Korean government's proposal that profits generated from the U.S. investment fund be split in a 9-to-1 ratio between Korea and the United States, respectively.
Kim emphasized, "We are negotiating based on the principle that the outcome must be commercially rational, bearable for Korea, and mutually beneficial for both countries. We will not sacrifice principles due to deadlines." He further clarified, "We have made it clear that rice and beef are not negotiable, and that non-tariff issues are entirely excluded from the discussions." He added, "We are focusing on substantive discussions in the remaining areas." Regarding the outlook for future negotiations, he stated, "The 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, this meeting was arranged 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 participate due to commitments with President Trump. Kim explained, "We originally invited Secretary Besant to the Korea Economic Briefing on the 25th, but as he had increasing commitments with President Trump, he ultimately could not attend." He added, "Secretary Besant's office requested this meeting and expressed their apologies."
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