On the last day of the Chuseok holiday, the 9th, the presidential office convened key aides including the chief of staff, chief of policy, and the head of the Office of National Security for a meeting on measures for tariff negotiations. It was the fourth, following meetings on the 5th, 7th, and 8th during the holiday. Ahead of the International Monetary Fund (IMF) and World Bank annual meetings in Washington, D.C., on Oct. 13 (local time), it was a session to discuss responses to the "350 billion dollars U.S.-bound investment funds" in preparation for a possible meeting between the Korean and U.S. finance ministers. It serves as a prelude to the second Korea-U.S. summit, expected to be arranged on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju at the end of this month.
According to the presidential office, Chief of Staff Kang Hoon-sik, Office of National Security head Wi Sung-lac, chief of policy Kim Yong-beom, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, and Minister of Trade, Industry and Energy Kim Jung-kwan discussed response strategies for Korea-U.S. tariff negotiations in a closed-door meeting that day. Earlier, on the 4th, Minister Kim met his negotiating counterpart, U.S. Commerce Secretary Howard Lutnick, in New York, and the following day held a follow-up meeting chaired by the chief of policy; this meeting came four days later.
The agenda was how to narrow differences with the United States regarding the 350 billion dollars U.S.-bound investment funds. If a meeting between Deputy Prime Minister Koo and Minister Bessent is arranged during this month's IMF annual meetings, it could serve as a preliminary meeting for the second Korea-U.S. summit, now about 20 days away. In particular, the meeting that day reviewed a U.S. proposal regarding the 350 billion dollars investment method. The U.S. side sent Seoul a plan that differs somewhat from its previous demands, and these options were put on the table, according to officials.
A senior presidential office official said, "Among the items the U.S. side presented regarding the 350 billion dollars investment funds, there are matters our government finds 'worth discussing,'" noting that these were addressed in meetings over the holiday. The United States has demanded that Korea invest most of the 350 billion dollars in cash directly, that Washington decide the investment destinations, and that the U.S. take 90% of the investment profits. The amount corresponds to 84% of Korea's foreign exchange reserves.
The biggest gap between Seoul and Washington concerns the ratio of direct equity investment (equity). Initially, our government stated multiple times that most of the 350 billion dollars would be composed of loans and guarantees. However, the memorandum of understanding (MOU) the U.S. sent after the agreement in principle specified a mostly dollar direct investment method.
On this, Chief Kim said at a local briefing in New York last month, "In light of international investment practice, we anticipated that most (of the U.S.-bound investment funds) would be loans and guarantees, with some direct investment. We wrote this in our memorandum," adding, "But the MOU document the United States sent us was drastically different." He also said, "We could tell that the 'cash flow' asserted by the United States was, to a considerable extent, close to equity (direct equity investment)."
In response, the presidential office sent several revised proposals back to the U.S. side and received a reply that was 'worth reviewing.' For the Korean government, there is also a political burden to avoid a 'bare-handed negotiation' outcome at the second summit. A presidential office official said, "On the 4th, Minister Kim Jung-kwan and Commerce Secretary Lutnick met to discuss major trade issues, including a U.S.-bound financial package," adding, "We are continuing to consult with relevant ministries on future response measures."