GYEONGJU, South Korea (Reuters) -Following are some of the details released by South Korea’s chief policy advisor Kim Yong-beom, shortly after U.S. President Donald Trump said the two nations had reached a trade deal. Washington has not confirmed the details of the agreement.
TRADE
Washington and Seoul agreed to set tariffs on U.S. imports of Korean auto and auto parts at 15%, down from current 25%, to put them on par with their Japanese competitors who also pay 15% after Tokyo reached a deal with the U.S.
South Korean manufacturers of wood products and pharmaceuticals will face the lowest tariffs among countries, while aircraft parts and generic drugs will face zero tariffs.
South Korean chipmakers will “not be put in a disadvantage compared to their Taiwanese competitors,” Kim added.
Seoul was also able to successfully defend additional market openings for agricultural products, including rice and beef.
INVESTMENT
The two countries agreed to split a promised $350 billion investment fund into $200 billion in cash to be paid in phased installment and capped them at $20 billion per year.
The phased installments would allow the dollar-won onshore market to remain stable despite the outflow, as the Bank of Korea recently said that $20 billion a year would probably be the maximum Seoul can afford to provide without affecting the forex market.
The remaining $150 billion would be for shipbuilding cooperation, and would include guarantees as well as investments by South Korean companies, and ship financing. This would reduce burdens on the South Korean foreign exchange market as well as increase chances of South Korean companies winning orders, Seoul said.
The deal’s structure is similar to the one that Japan and the U.S. struck in September, but South Korea managed to secure more safeguards to cushion any potential shock to the domestic foreign currency market, for example the $20 billion annual limit, Kim said.
RAISING FUNDS
South Korea’s Kim said the two sides agreed to split profits 50/50 before the initial investments are recouped, and to only pursue commercially viable projects.
Kim said South Korea will use operating income from the country’s foreign assets including interests accrued and dividends.
South Korea will not need to raise government-backed bonds in the local market but is likely to raise funds from offshore markets, as policy banks such as The Export and Import Bank of Korea often does.
U.S. Commerce Secretary Howard Lutnick would head an investment committee to assess potential projects.
(Reporting by Cynthia Kim, Joyce Lee, Jack Kim in Seoul, Jihoon Lee and Ju-min Park in GyeongjuEditing by Frances Kerry)
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