As the Washington Post reported last week, U.S. President Donald Trump is contemplating withdrawing the United States from the Korea-U.S. Free Trade Agreement (KORUS). As the Office of the United States Trade Representative (USTR) details on its website, KORUS entered into force on March 15, 2012, with an aim of expanding access to trade and investment between South Korea and the United States.
Read More: International Bar Association (IBA) now offering Executive LLM on global legal issues
Legal Market Liberalization a part of KORUS
Legal services market liberalization was a part of the agreement, and as a result, a number of U.S. law firms have deepened their presence in South Korea’s legal market since 2012. The opening of the South Korean legal market has not always been a smooth one for U.S. law firms, however. The agreement involved three steps of increasingly more expansive market access for U.S. law firms. The final step, which US-Korea Connect details on their website, permits U.S. law firms to directly compete with South Korean firms for domestic legal work.
U.S. law firms saw KORUS as a significant opportunity
Timothy Hester, a Partner with U.S. law firm Covington & Burling LLP, Chair of the firm’s’ Management Committee when KORUS came into force, told U.S.-Korea Connect at the time: “We expect the free trade agreement will increase the flow of business between Korea and the U.S., spur additional Korean investment in the United States and benefit both countries. Where we see the most opportunity is being a legal adviser to Korean companies as they look outbound from Korea to international markets.”
Legal Market Liberalization: Some Speed Bumps
The third phase of the liberalization of South Korea’s legal market was subject to some disagreements in the timing and nature of its roll-out (including a protest by the then U.S. Ambassador to South Korea). Overall, however, the agreement has seen a large number of U.S. law firms expand in the market as liberalization progressed through each phase. (Joon Hwan Kim of Columbia Law School provides more detail about the third phase of the agreement in the Columbia Journal of Transnational Law — and Ranajit Dam, Editor of Asian Legal Business (ALB) provides insight into the competitive legal services climate created by the agreement).
KORUS and the Trump Administration’s objections
As the U.S. Department of State details on its website, South Korea is “the United States’ sixth-largest goods trading partner with a trillion-dollar economy…Under KORUS, 95 percent of all goods are duty free. In 2015, the two-way trade in goods amounted to $113.8 billion, and $33.4 billion in services. The agreement has boosted exports by billions of dollars annually for both sides and created new export-related jobs in both [South Korea] and the United States.”
The U.S Trade Representative’s Offices breaks down the figures on South Korea-U.S. trade, highlighting notably the U.S. deficit in goods trade with South Korea which, as CNBC reports forms the basis of the Trump Administration objection to KORUS, despite a U.S. surplus in services trade:
- “U.S. goods and services trade with Korea totaled an estimated $144.6 billion in 2016. Exports were $63.8 billion; imports were $80.8 billion. The U.S. goods and services trade deficit with Korea was $17.0 billion in 2016.
- Trade in services with Korea totaled an estimated $32.4 billion in 2016. Services exports totaled $21.6 billion; services imports totaled $10.9 billion. The U.S. services trade surplus with Korea was $10.7 billion in 2016.”
North Korea standoff and the (current) U.S. pause in focusing on KORUS
The recent standoff between the U.S. and its allies South Korea and Japan – against North Korean dictator Kim Jong-un over the North’s nuclear program and recent missile tests has, as The New York Times details in its continuing coverage of the crisis, precipitated a pause in the U.S, push to withdraw or radically re-negotiate KORUS. The New York Times cites U.S. geopolitical concerns over a rupture of U.S.-South Korean economic relations at a critical time as the reason some Trump advisors successfully advocated for the current pause in discussion of KORUS withdrawal.
U.S withdrawal from KORUS may reverse legal market liberalization progress
As Jasper Kim (Senior Fellow at Melbourne Law School, Lecturer in Law at Berkeley Law, former visiting scholar at Stanford University and Harvard University, Director at the Center for Global Conflict Management, Professor at the Graduate School of International Studies at Ewha University and Chief Executive of Asia-Pacific Global Research) told me in an email interview for this article: “The US withdrawal from KORUS may reverse the progress towards legal market liberalization in South Korea. Prior to KORUS, US law firms had little to no onshore presence in South Korea. But due to KORUS, an increasing array of US-based law firms, legal services, and legal professionals have added to, and complemented, South Korea’s legal marketplace. This was largely a win-win. But a pullout of KORUS, would potentially represent a reverse course of this legal trend towards liberalization.”
Time will tell as to what the Trump Administration will do in relation to KORUS. However, positive figures for U.S services exports to South Korea (of which legal services is a part) — and the significant strategic and financial investments U.S. law firms have made there — remain at risk as the Trump Administration continues to consider withdrawal from the agreement.