🚨 KORUS FTA, U.S. Service Trade Surplus 19.4 Trillion Won... Trade Pressure Continues
Today Korean Economic News | 2025.03.19
📌 KORUS FTA, U.S. Service Trade Surplus 19.4 Trillion Won... Trade Pressure Continues
💬 The United States has recorded a service trade surplus of $13.4 billion (approximately 19.4 trillion won) through its Free Trade Agreement (FTA) with South Korea. While voices emphasizing the economic value of the KORUS FTA are growing within the U.S., America continues to raise issues with Korea's non-tariff barriers. Additionally, as Korea's participation in the Alaska LNG development project emerges as a major trade cooperation agenda, discussions about future economic burdens and risks are expected.
1️⃣ Easy to Understand
Although the U.S. is benefiting greatly from service trade under the KORUS FTA, it continues to exert trade pressure on Korea. I'll explain what this situation means for us in simple terms.
A Free Trade Agreement (FTA) is an agreement that promotes trade in goods and services between countries by lowering tariffs and trade barriers. Korea and the U.S. have been implementing the KORUS FTA since 2012, and recent data shows that the U.S. is gaining significant benefits from this agreement in service trade.
Service trade refers to buying and selling intangible services, including finance, insurance, patents, tourism, and transportation. For example, when a Korean student goes to study at a U.S. university, it's importing an educational service, and when a Korean film is screened in the U.S., it's exporting a cultural service.
The fact that the U.S. has recorded a $13.4 billion (approximately 19.4 trillion won) surplus in service trade means that the amount the U.S. sold services to Korea exceeded the amount it bought from Korea by that much. This is like two people trading items, but one person selling 19.4 trillion won more than the other.
What's interesting is that despite gaining such large benefits, the U.S. continues to exert trade pressure on Korea. The U.S. is raising issues with Korea's 'non-tariff barriers,' which refer to various regulations and standards that limit the entry of foreign goods or services through methods other than tariffs. These include complex certification procedures, regulations requiring specific standards, and so on.
Additionally, the U.S. is requesting Korea's participation in the Alaska LNG (Liquefied Natural Gas) development project. This goes beyond simple economic cooperation and is connected to the U.S. energy security strategy. The Trump administration has made expanding U.S. LNG exports an important policy goal and wants participation from major energy-consuming countries like Korea.
This situation shows that trade relations are not simply a matter of economic benefits but involve complex strategic interests between countries. Despite having a large surplus in service trade, the U.S. demands more market opening and cooperation because it's connected to America's strategic goal of maintaining global economic hegemony. Korea needs a balanced response to maximize national interests amid these pressures.
2️⃣ Economic Terms
📕 FTA (Free Trade Agreement)
FTA (Free Trade Agreement) is an agreement that promotes trade by lowering tariffs and trade barriers between countries.
- It includes trade rules in various fields such as goods, services, investment, and intellectual property rights.
- The KORUS FTA, which took effect in March 2012, has greatly expanded trade in goods and services between the two countries.
📕 Service Trade
Service trade refers to the trading of intangible services such as finance, insurance, and telecommunications between countries.
- It is divided into four modes: cross-border supply, consumption abroad, commercial presence, and movement of natural persons.
- The proportion and importance of service trade in the global economy continues to increase.
📕 Trade Surplus/Deficit
Trade surplus is a state where exports exceed imports, positively affecting international balance of payments.
- Conversely, a trade deficit is a state where imports exceed exports, generally putting pressure on currency depreciation.
- The U.S. records a deficit in goods trade with Korea but a surplus in service trade.
📕 Non-tariff Barriers
Non-tariff barriers are measures that restrict imports through methods other than tariffs, including regulations, certifications, and standards.
- They are invisible trade barriers that are being gradually eased through the WTO and FTAs.
- The U.S. claims that Korea's non-tariff barriers make it difficult for American companies to access the Korean market.
3️⃣ Principles and Economic Outlook
💡 Changes and Impact of Trade Structure through the KORUS FTA
Since the KORUS FTA took effect, there have been distinct changes in the trade structure between Korea and the U.S., which have had various impacts on both economies.
First, the imbalance between goods trade and service trade is deepening. Korea shows strength mainly in goods exports centered on manufacturing and records a surplus in goods trade with the U.S. In contrast, the U.S. has competitiveness in services such as finance, insurance, intellectual property rights, and education, recording a large surplus in service trade. The recently announced service trade surplus of $13.4 billion (approximately 19.4 trillion won) clearly demonstrates this structural characteristic. This imbalance reflects the differences in industrial structure and competitiveness between the two countries and has a structural characteristic that is difficult to resolve in the short term.
Second, the KORUS FTA is acting as a 'double-edged sword' for both economies. From Korea's perspective, improved access to the U.S., the world's largest consumer market, has helped expand the market for its main export items such as automobiles and electronic products. However, it has also had to bear the burden of competitive pressure and domestic industrial restructuring due to the opening of service markets such as finance, legal, and medical services. From the U.S. perspective, it has gained advantages such as expanded service exports and improved access to agricultural markets, but has also faced increased political burden due to an expanded goods trade deficit. This duality shows that the effects of FTAs cannot be evaluated solely in terms of trade balance.
Third, the effects in terms of investment and technology transfer are also important. Direct investment between the two countries has expanded since the KORUS FTA, indicating a deepening of economic integration beyond simple trade. U.S. companies' investments in Korea are mainly concentrated in services and advanced technology fields, and the resulting technology transfer and sharing of management know-how contribute to the qualitative growth of the Korean economy. Meanwhile, Korean companies' investments in the U.S. focus on bypassing trade barriers and strengthening competitiveness within the U.S. market through local production. These investment flows are factors that further strengthen economic interdependence between the two countries.
Fourth, the economic effects of the FTA are appearing differentially by sector and company size. Large corporations and export-oriented companies have received relatively large benefits from tariff elimination and improved market access, while small and medium-sized enterprises and domestic market-oriented companies may bear a greater burden due to intensified competition. Additionally, while consumers enjoy benefits such as lower prices of imported goods and increased variety of choices, workers in some industries may experience restructuring and increased employment instability. These differential effects suggest that the benefits of FTAs are not equally distributed throughout the economy.
Overall, the KORUS FTA has brought changes in trade patterns reflecting the economic structure and competitiveness of both countries, and this has complex economic impacts beyond simple trade balance. Trade relations between the two countries are expected to continue evolving according to changes in industrial structure, technological innovation, and reorganization of global value chains in the future.
💡 Background and Strategic Intentions of Continued U.S. Trade Pressure
There are several strategic intentions behind the U.S. continuing to exert trade pressure on Korea despite recording a substantial surplus in service trade through the KORUS FTA.
First, it is being used as leverage to resolve the goods trade deficit. The U.S. continues to record a deficit in goods trade with Korea, which is a politically sensitive issue directly related to manufacturing jobs in the U.S. In particular, the Trump administration has put forth resolving trade deficits as a core economic policy, and this stance continues in the second term. Demands for easing non-tariff barriers can be seen as an intention to expand goods exports and resolve trade imbalances. The U.S. claims that complex certification procedures and regulations in areas such as automobiles, pharmaceuticals, and agricultural products in Korea limit market access for U.S. companies.
Second, there is a strategic goal to maintain global economic hegemony. The U.S. is pursuing a strategy to strengthen its own central trade order in response to China's economic rise and expanding global influence. Trade pressure on allies like Korea is being used as a means to solidify the U.S.-centered economic network and check China's influence. In particular, it is pressuring Korea to reduce dependence on China through cooperation in strategic industries such as semiconductors, batteries, and advanced materials, and through supply chain reorganization. In this context, demands for easing non-tariff barriers can be seen as part of a broader strategic goal beyond simply improving market access.
Third, pursuing economic benefits linked to energy security is also an important factor. Requesting Korea's participation in the Alaska LNG development project is directly linked to the U.S. strategy to expand energy exports. Since the shale revolution, the U.S. has emerged as the world's largest energy producer and wants to use this as economic and geopolitical leverage. As a major LNG importer, Korea is interested in expanding imports of U.S. LNG in terms of diversifying energy import sources. However, the Alaska LNG project involves enormous investment costs and uncertainties regarding environmental issues and economic feasibility, requiring a cautious approach from Korea's perspective. The U.S. is taking a strategy of linking such energy cooperation to major agenda items in trade negotiations.
Fourth, domestic political dynamics in the U.S. also influence trade pressure. U.S. trade policy is greatly influenced by domestic political factors. In particular, various stakeholders including the U.S. Congress, industry lobbies, and labor organizations pressure the administration for their own interests. In the case of the Trump administration, it emphasizes protectionist policies that appeal to voters in traditional manufacturing regions (Rust Belt). These domestic political dynamics sometimes serve as a background for continued trade pressure regardless of actual economic benefits. Demanding more market opening despite a surplus in service trade can be seen as influenced by these political factors.
Considering these complex strategic intentions, U.S. trade pressure can be seen as a result of various factors working together beyond simple pursuit of economic benefits, including global economic hegemony competition, energy security, and domestic politics. Korea needs a more comprehensive and strategic approach that understands these multi-layered intentions rather than responding solely from a trade balance perspective.
💡 Korea's Response Strategies and Policy Implications
What response strategies and policy directions should Korea explore in the face of continued U.S. trade pressure?
First, a fundamental understanding and approach to trade structure imbalances is needed. The trade imbalance between Korea and the U.S. is largely a structural characteristic stemming from differences in industrial structure and competitiveness between the two countries, rather than simply a policy issue. With Korea having strengths in goods exports centered on manufacturing and the U.S. having competitiveness in service exports, it is not realistic to demand balanced trade. Rather, it is important to acknowledge the complementary trade structure between the two countries and approach it in the context of overall economic cooperation. There is a need to emphasize 'balanced reciprocity' that comprehensively considers the U.S. surplus in service trade and Korea's surplus in goods trade.
Second, a preemptive and strategic response to easing non-tariff barriers is important. Some of the non-tariff barriers that the U.S. continuously raises as issues may be necessary regulations for Korean consumer protection and industrial development, but others may be unnecessarily complex or outdated regulations. Korea needs to make efforts to reduce unnecessary trade barriers through its own regulatory rationalization and application of international standards. This is partly in response to U.S. pressure, but more importantly, it can be an opportunity to increase the efficiency and global competitiveness of the Korean economy. In particular, a preemptive response to new trade agendas such as digital trade, data transfer, and intellectual property protection is needed.
Third, a comprehensive approach considering economic feasibility and risks is needed regarding energy cooperation. Large-scale energy development projects like the Alaska LNG project can contribute to long-term energy security and diversification of import sources, but they also involve enormous investment costs and uncertainties. Rather than unconditionally meeting U.S. demands, Korea needs decision-making that comprehensively considers the economic benefits and risks for domestic energy companies, national energy mix strategy, and carbon neutrality goals. Additionally, the possibility that such energy cooperation could be linked to other trade issues (e.g., automobile tariffs, semiconductor cooperation) and used as negotiation leverage should also be considered.
Fourth, diversification of trade strategies in response to changing global economic environments is necessary. While trade relations with the U.S. are important, the recent global economic environment demands a more diversified approach. Market diversification through multilateral trade agreements such as RCEP and CPTPP, pioneering emerging markets through New Southern and New Northern policies, and strengthening cooperation with other advanced markets such as the EU and UK should be pursued in parallel. Especially in the process of supply chain reorganization due to intensifying U.S.-China conflicts, Korea needs a balanced approach that maintains 'strategic ambiguity' while maximizing economic benefits. This can reduce trade dependence on specific countries and diversify external economic risks.
Fifth, industrial structure advancement and strengthening service industry competitiveness are long-term solutions. To fundamentally respond to trade imbalances with the U.S. and trade pressure, it is important for Korea to advance its industrial structure and strengthen the competitiveness of its service industry. This is a task that cannot be solved in the short term, but fostering high-value-added service industries such as finance, healthcare, education, content, and software, and promoting innovation through regulatory reform and market opening can be long-term solutions. This is necessary not only for balancing trade with the U.S. but also for sustainable growth and job creation in the Korean economy.
Through these multi-layered response strategies, Korea can effectively respond to U.S. trade pressure while maximizing the potential of economic cooperation between the two countries. The key is to respond to short-term trade issues while simultaneously pursuing long-term industrial competitiveness strengthening and economic structure advancement. This should be approached as part of a comprehensive economic strategy to respond not only to the U.S. but also to changes in the global economic environment.
4️⃣ In Conclusion
The fact that the U.S. has recorded a service trade surplus of $13.4 billion (approximately 19.4 trillion won) through the KORUS FTA shows the complex reality of trade relations between the two countries. This has meaning beyond simple numbers and needs to be understood in the context of both countries' industrial structures, competitiveness, and broader geopolitical context.
Since its implementation in 2012, the KORUS FTA has greatly expanded trade and investment between the two countries. However, its benefits have appeared differentially by sector. Korea shows strength in goods trade centered on manufacturing such as automobiles and electronic products, while the U.S. has competitiveness in service fields such as finance, insurance, and intellectual property rights. These differences in industrial structure have led to trade imbalances, which have structural characteristics that are difficult to resolve in the short term.
There are complex factors behind the U.S. continuing to exert trade pressure on Korea despite recording a substantial surplus in service trade. These include resolving the goods trade deficit, maintaining global economic hegemony, expanding energy exports, and domestic political considerations working together. With the return of the Trump administration, the U.S. protectionist stance is expected to strengthen further, which will act as continued trade pressure on Korea.
The request for Korea's participation in the Alaska LNG development project is a key example of this trade pressure. As it is directly linked to the U.S. strategy to expand energy exports, Korea needs a cautious approach considering energy security, economic feasibility, and risks comprehensively. Given that it's a project requiring large-scale investment, thorough verification of economic viability should precede.
Korea's response strategy should be to simultaneously address short-term trade issues and pursue long-term industrial structure advancement. Key tasks will include rational improvement of non-tariff barriers, emphasizing balanced reciprocity, diversifying trade strategies, and strengthening service industry competitiveness. Especially in the situation of intensifying U.S.-China conflicts, it is important for Korea to maintain 'strategic ambiguity' while taking a balanced approach to maximize economic benefits.
In conclusion, the U.S. surplus in service trade through the KORUS FTA and continued trade pressure is a phenomenon where global economic order reorganization and complex strategic interests between countries work together beyond simple trade issues. Korea needs a strategic and flexible approach to maximize national interests in this complex environment, while simultaneously pursuing fundamental economic structural improvement through long-term industrial competitiveness strengthening.