South Korea’s ruling Democratic Party introduced a bill on Wednesday to establish a special fund to finance $350 billion of investment in the U.S. committed under a deal with Washington to cut U.S. tariffs on its exports, the Industry Ministry said.
The bill, which was written in consultation with the government, fulfils the condition for the U.S. to lower tariffs on South Korean autos and automobile parts retroactively to November 1, the ministry said in a statement.
Special Bill
Yonhap News Agency reported that the envisioned corporation, tentatively named Korea-U.S. Strategic Investment Corp., will be created for a maximum 20-year operation under a special bill.
The two countries this month unveiled details of the agreement reached by their presidents, capping more than three months of intense negotiations on how to structure the massive investment in a way that would not sharply weaken and destabilise the South Korean won currency.
Under a special act to be legislated, South Korea will establish a fund financed by income from the country’s foreign assets and government-backed bonds issued in offshore markets, according to the bill.
South Korea has pledged $250 billion to be invested in strategic U.S. industries and $150 billion in projects to modernise the American shipbuilding industry. In return for this investment, the U.S. administration agreed to reduce the 25 per cent tariffs on Korean automobiles to 15 per cent, with the reduction to be applied retroactively from the start of the month the bill is submitted, reports Yonhap News agency.
South Korea’s Industry Ministry has sent a letter to U.S. Commerce Secretary Howard Lutnick informing him about the introduction of the bill on Wednesday and requesting the implementation of the tariff cuts on autos and automobile parts, the statement said.
Implementation
The Yonhap report suggests that the fund’s resources will be raised through earnings from foreign exchange reserves entrusted by the Korean government and the Bank of Korea, and through overseas issuance of government-guaranteed bonds.
The Korean government said the special bill stipulates that related authorities must comply with safeguard measures specified in the memorandum of understanding (MOU) on the investment pledge signed by the two countries.
The safeguard measures include the $20 billion annual cap on investments, adjustments to the amount and timing of the investment when it is feared to cause instability in Korea’s foreign exchange market, selection of “commercially reasonable” projects and others.
(with inputs from Reuters)
