Using the APEC summit in Gyeongju as an opportunity, South Korea and the United States reached agreement on tariff negotiations, but the ‘agreement document’ has not yet been issued. Given that large-scale investment in the United States would have a major impact on Korea, the key questions are whether the investment can generate actual returns and whether Korea can recover its capital. Experts say attention should focus on the profit-sharing method to be written into the agreement, the degree of participation in the investment decision process, and item-specific clauses such as semiconductors.

The core of the Korea-U.S. tariff talks is how to establish a $350 billion investment fund targeting the United States. On this, Kim Yang-hee, a professor in the Department of Economics, Finance, and Trade at Daegu University, said in a phone interview on the 29th that it is necessary to assess whether investment in the United States is commercially reasonable to the extent that it can produce real profits.

She stressed the need to see how profit sharing is designed. The earlier U.S.-Japan approach to distributing investment returns reportedly did not split ‘net profit excluding principal’ but instead split principal plus interest income fifty-fifty. In that case, even if profits are divided equally, effectively only half of the invested capital can be recovered. Under those terms, for Korea to recover the invested amount, total project proceeds would have to be twice the investment.

She also said it is necessary to check whether the ‘snapback’ (Snapback) clause, as in Japan, would apply to Korea as is. Snapback is a kind of trade-retaliation measure that restores tariff rates and the like to pre-agreement levels if the commitments are not fulfilled. Japan previously signed language in its agreement with the United States to the effect that if it fails to faithfully fulfill its capital contribution, mutual tariffs and the like will be raised again.

South Korea and the United States set an annual investment cap of $20 billion, and if investment falls short of $20 billion, the U.S. side could question ‘faithful implementation’. Kim said it is also necessary to confirm whether there is a clause covering cases where investment does not reach $20 billion.

Another focal point is how much Korea can be involved in the investment decision process. Han A-Reum, a senior researcher at the Trade Research Department of the Korea International Trade Association, pointed out that it is necessary to examine whether the structure for deciding actual projects would mirror Japan and how much say the Korean government has. Looking at the U.S.-Japan outcome, Japan may ‘consult’ the United States on investment decisions, but the final decision authority lies with President Donald Trump. In the Korea-U.S. talks as well, an Investment Committee chaired by Commerce Secretary Howard Lutnick decides the investment targets, so it is necessary to see whether Korea can actually participate in the committee and how much authority it has.

Lee Tae-ho, a senior adviser at Law Firm Gwangjang and former second vice foreign minister, said it is also necessary to check how specific items such as semiconductors are described in the agreement. The presidential office said, “We secured treatment no less favorable than that of Taiwan, a key competitor,” but since it is awkward for a diplomatic document to name a specific country as a comparator, it is necessary to confirm whether this means most-favored-nation treatment, or is merely a ‘verbal understanding’. For pharmaceuticals and the like, the government explicitly used the term ‘most-favored-nation treatment’.

Meanwhile, Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol said at a comprehensive audit of the National Assembly Strategy and Finance Committee that the U.S. claim that Korea would fully open its market is “not at all the case,” adding that he understands the Commerce Secretary (Lutnick) to be referring to the fact that about 99% was opened under the Korea-U.S. Free Trade Agreement (FTA). In response to a question, ‘Is further negotiation possible later for semiconductors and steel?’, Koo said, “As of now, steel is at 50%,” adding, “That part needs to be further requested of the United States, and as of now it is not possible.”