US-Korea Fund Stuck on Key Points Ahead of Trump Visit, Lee Says

Lee Jae Myung Photographer: Tina Hsu/Bloomberg Photo by Tina Hsu /Bloomberg

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(Bloomberg) — The US and South Korea remain stuck on “all” the major details of a $350 billion investment pledge, President Lee Jae Myung said in an interview Friday, signaling that they may fail to finalize a trade deal in time for a summit meeting with Donald Trump. 

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“The method of investment, the amount of investment, the timeline and how we will share the losses and divide the dividends — all of these remain sticking points,” Lee said in an exclusive interview with Bloomberg News at his office that also touched on his China policy and defense issues. “The US will of course try to maximize its interests but it mustn’t be to the extent that causes catastrophic consequences for South Korea.” 

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The two leaders are due to hold talks on Wednesday on the sidelines of the Asia-Pacific Economic Cooperation summit in Gyeongju, South Korea. The investment pledge is a key pillar for cementing a trade deal between the two nations first sketched out in July, a delay that has left Korean automakers at a competitive disadvantage. 

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While Lee and other senior officials in Seoul have pointed out that important differences remain between the two sides, Trump told reporters that the US was “pretty close” to finalizing the deal with South Korea as he headed from Washington to Asia.  

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The talks come as Lee hosts an APEC multilateral summit set to be overshadowed by the bilateral meetings taking place on the sidelines. Those talks include a crunch meeting between Trump and Chinese President Xi Jinping that has implications both for South Korea’s economy and global trade as a whole.

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On the investment fund, US and South Korean officials have been engaged in intense last-minute negotiations to reach agreement. Prime Minister Kim Min-seok told Bloomberg last month that the size of the investment pledge would shock the Korean economy without a currency swap. Finance Minister Koo Yun Cheol said last week that the focus of talks was still on the structure of the deal, rather than a swap arrangement.

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“The discussion is ongoing and there are some differences of opinion but the delay does not necessarily mean that this is a failure,” Lee said. “So, I would appreciate your patience.”  

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As Lee asks for time, South Korea’s automakers face a 25% US tariff while their Japanese rivals have the benefit of a 15% levy after Tokyo signed a memorandum of understanding with Washington last month. Still, Lee played down comparisons with the Japan deal, saying Seoul can also learn from how the EU negotiated with Trump.

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“South Korea is an ally and friend of the US, so we believe that we will be able to reach a rational result that is acceptable to all sides and this is what has to be done,” Lee said.

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The South Korean president’s reluctance to accept an investment pledge that might be viewed unfavorably likely strengthened after a US immigration raid on a Hyundai Motor Co.-LG Energy Solution Ltd. battery plant under construction in Georgia in September. 

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More than 300 Korean workers were arrested over alleged violations of visa regulations, with images of shackled staff shocking a nation that has spent billions of dollars investing in the US and pledged even more.