According to the Central Daily News of South Korea, the U.S. investment plan of 35 billion dollars agreed on October 29 is similar to that of Japan and the European Union (EU), which are export competitors, but there are differences in details.
On the same day, Kim Young-bum, head of the policy office of the South Korean presidential office, disclosed the details of the results of the South Korea-U.S. tariff negotiation agreement, saying, "This is similar to the 55 billion dollar financial scheme that Japan reached with the United States, but unlike Japan, South Korea set an annual investment limit of 20 billion dollars. The South Korean government believes that the impact on the foreign exchange market will be reduced because the term can be extended for at least 10 years and the investment can be made according to the level of business progress. If we look at the proportion of cash investment alone, it is about 36% of Japan's."
The distribution of investment returns is also similar to Japan. Until the repayment of principal and interest, the U.S. has maintained a 5:5 principle. After that, when profits start to come in, it becomes 9:1, with the U.S. taking more. However, Kim said, "We have prepared a clause that allows us to readjust the profit distribution ratio if the recovery speed is slow."
The EU pledged to invest 60 billion dollars in the U.S., but unlike Japan, which mainly used public funds, the EU signed a tariff agreement with the U.S. and would provide financial support if private enterprises and individual member states invested. The South Korean government will also prevent the additional opening of farmland, including rice and beef, as an achievement. Many people are worried that Japan's decision to expand imports of rice from the U.S. will increase pressure on the South Korean government to open its agricultural market.
However, its failure to implement the current 50% reduction in steel tariffs is considered a limitation. With the Trump administration entering the re-election phase, the possibility of increasing pressure under the pretext of investment performance is also rising. Professor Seo Byung-hun from the Department of Economics at Ewha Womans University said, "The 5:5 profit distribution is actually a structure that accepts the U.S. requirements."
Since the first agreement was reached in mid-July, the South Korea-U.S. tariff negotiations have taken 90 days and finally reached an agreement through direct negotiations between the leaders of the two countries on the 29th. On the 29th, President Moon Jae-in of South Korea and President Donald Trump of the United States reached an agreement during a summit meeting held at the Gyeongju National Museum, where South Korea committed to providing a "35 billion dollar (about 53 trillion yen) financial investment plan" to the U.S., including 20 billion dollars in cash investment and 15 billion dollars in shipbuilding cooperation.
At a press conference after the meeting, Kim Young-bum, head of the policy office, explained, "The 20 billion dollars of investment is not completed at once, and the annual investment limit is set at 2 billion dollars. It seems that this is the result of a compromise between the U.S. position and the South Korean position on the issue of large-scale direct cash investment, which was most strongly opposed by the South Korean side. Therefore, the tariffs on automobiles and parts will be reduced from the current 25% to 15% as early as November."
Until the day before the meeting, the general view inside and outside the Blue House was that it would be difficult to reach a dramatic conclusion on the tariff negotiations, but the situation began to change when the closed-door talks lasted 87 minutes, exceeding the scheduled one hour. It is said that the "top-down approach" preferred by President Trump worked. President Trump attended a special dinner held before the presidential inauguration and announced first, "We have reached a trade agreement."
Regarding profit distribution, this is another issue, and the two sides decided to distribute the profits in a 5:5 ratio until South Korea recovers the principal and interest. However, the profit distribution rate after the recovery of the principal and interest was not clearly defined. "We both agreed that if we expect to be unable to fully recover the principal and interest within 20 years, we have already agreed that the profit distribution ratio can also be adjusted," "Unfortunately, we could not include the numbers we wanted in our agreement."
In this 35 billion dollars, 15 billion dollars will be used for shipbuilding cooperation. South Korean companies will invest in the U.S. in the form of foreign direct investment (FDI). "The (domestic company's) investment will be guaranteed by loans from domestic and foreign commercial banks, and the actual burden on the foreign exchange market, especially on ship financing, is extremely limited," Kim explained. For this, both sides agreed to establish a "shipbuilding cooperation consultation group" between the National Security Council (NSC) and the diplomatic authorities.
Kim explained that South Korea will also obtain Most Favored Nation (MFN) treatment in pharmaceuticals and wood products, including a 15% tariff on automobiles.
◇ "Rutnik Chairman" establishes the South Korea-U.S. Investment Committee to discuss specific projects
It is said that the tariff level on semiconductors will not put South Korea at a disadvantage compared to its competitor Taiwan. The two countries decided to establish an investment committee (with the U.S. Secretary of Commerce as chairman) and a consultation committee (with the Minister of Industry, Trade, and Energy of the Republic of Korea, Kim Jong-kwan, as chairman) to discuss specific investment projects. The two countries decided to specifically define the term "commercial reasonableness" in the memorandum of understanding. Kim explained that this is a "safety device" to prevent South Korea from losing money.
A new consensus was formed in the security field. On the same day, President Moon told President Trump, "I hope you make a decision so that we can get the fuel for nuclear-powered submarines," officially announcing the introduction of nuclear-powered submarines. This is the first time that President Moon has publicly expressed his intention to introduce a submarine.
President Moon said, "This is not a submarine equipped with nuclear weapons," and explained, "If we are allowed to supply (nuclear) fuel, we can use our technology to build multiple submarines and carry out maritime defense activities in the Korean Peninsula (Korean Peninsula), the East Sea (Sea of Japan and Japan Sea), and the West Sea (Xihai, Yellow Sea), which will greatly reduce the burden on the U.S. military. He also said, "I hope you instruct me to make progress in the substantive discussions on spent nuclear fuel management and uranium enrichment." In response, President Trump also said, "We sympathize with South Korea's need for nuclear-powered submarine capabilities due to environmental changes such as North Korea building nuclear submarines, and we will conduct follow-up discussions," according to the presidential office. However, the current South Korea-U.S. nuclear agreement prohibits the use of nuclear materials for military purposes and needs to be revised. Park Sung-rok, Director of the National Security Office of the Presidential Office, said at a press conference, "We need to adjust the existing agreement."
Original: https://www.toutiao.com/article/7566766906431128079/
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