Leaders aim to resolve $350 billion investment disputes ahead of APEC meeting

As the South Korea-U.S. summit approaches in three days, attention is focused on whether the South Korea-U.S. tariff negotiations can reach a final agreement.

Both governments recognize the APEC, the Asia-Pacific Economic Cooperation summit as a "decisive opportunity to conclude the South Korea-U.S. tariff negotiations," but they still show significant differences in positions on some agenda items.

However, as both sides have already sufficiently confirmed each other's positions, there are also observations that it is difficult to hastily predict the outcome, as there remains a possibility of a dramatic agreement between the highest-level officials during the summit.

According to trade authorities on the 26th, South Korea and the U.S. are currently continuing last-minute negotiations over the direct investment ratio, investment period, profit-sharing structure, and other details related to a $350 billion South Korean investment fund in the U.S.

Earlier, on July 30, the two countries agreed that in exchange for South Korea's $350 billion investment in the U.S., the U.S. would reduce the reciprocal tariffs it had announced for South Korea from 25% to 15%. However, disagreements over the details of the investment fund have since emerged, delaying the signing of the 'investment memorandum of understanding (MOU)'.

Originally, South Korea planned to directly invest only up to 5% of the $350 billion, with the remainder to be provided in the form of loans and guarantees. However, negotiations have faced difficulties as the U.S. has demanded a Japanese-style investment approach.

Japan agreed on the 4th of last month to invest $550 billion (approximately 782 trillion Korean won) in the U.S. and signed an MOU. Once the U.S. establishes an investment plan, Japan will deposit funds in U.S. dollars. The final decision on investment destinations lies with President Donald Trump, and after the principal is recovered, the U.S. will receive 90% of the profits.

However, South Korea's annual direct investment capacity is limited to a maximum of $15 billion to $20 billion. The government is known to have proposed a long-term phased investment approach to the U.S. side, citing fiscal burdens and concerns over foreign exchange market instability.

Minister of Trade, Industry and Energy Kim Jung-kwan responded to a question during a National Assembly audit on the 24th asking whether a plan to invest $25 billion annually over eight years had been discussed, stating, "There were similar discussions," but added, "I cannot confirm the specific figures."

However, the possibility of prolonged negotiations cannot be ruled out. Both trade authorities and the government have stated that it is difficult to predict whether the leaders of the two countries will be able to sign the investment MOU during this summit.

Kim Yong-beom, Presidential Chief of Staff for Policy, and Minister of Trade, Industry and Energy Kim Jung-kwan, among others, have visited the U.S. for two consecutive weeks recently to continue negotiations with U.S. Secretary of Commerce Howard Lutnick. However, they stated that differences on key issues remain.

On his return on the 24th, Kim Yong-beom stated, "While some progress has been made, the positions of the two countries remain deadlocked on key issues," and added, "There is still a long way to go to expect a resolution through the APEC summit." President Lee Jae-myung also mentioned in a CNN interview that "significant time and effort are needed to adjust and correct the positions of the two countries," indicating a willingness to moderate the pace of negotiations.

In contrast, President Donald Trump stated, "The South Korea-U.S. tariff and trade negotiations are very close to the final stage," and added, "If South Korea is ready, so am I."

Meanwhile, if the tariff negotiations are concluded during this summit, there is also a possibility that the agreements discussed during the Washington summit will be announced together. During his previous visit to the U.S., Kim Yong-beom stated, "The government is not considering signing an MOU based solely on a partial agreement while leaving key issues unresolved," but added, "If an MOU is announced this time, the outcomes of the first summit could also be disclosed."

South Korea-U.S. Tariff Talks Face Decisive Summit