04.06.2020 Author: Konstantin Asmolov

US-South Korea Dispute over Defense Costs Still Hitting a Dead End

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Our last piece on the US-South Korea military cost-sharing agreement known as the Special Measures Agreement (SMA) was published two months ago, yet no progress has since been made.

To briefly provide some background information, South Korea has been partially covering the cost of hosting American troops since 1991, and Korean contributions have been going towards paying the salaries of some 8,600 Korean employees of the United States Forces Korea (USFK), along with covering the cost of construction projects and logistics. Under the old SMA that expired in December 2019, Seoul was required to pay $870 million.

Negotiations broke down after the first round of talks in September 2019, when the US called for a fivefold increase in South Korea’s payment to around $5 billion, while the South Korean government offered to raise its contributions by about 10%.

The most recent and seventh round of talks on how to split the cost of having 28,500 US troops stationed on the Korean Peninsula was held on March 17-19, 2020, but Seoul’s chief negotiator Jeong Eun-bo and his US counterpart James DeHart were unable to put their differences aside and failed to reach an agreement. A diplomatic source in Seoul who wished to remain anonymous said that the US had insisted South Korea pay $4 billion a year to maintain the US military presence. The figure they had initially been asking for was reduced by $1 billion after Washington received criticism for being more concerned with its own financial interests than the strategic interests of ensuring regional stability.

A serious problem arose around the same time with South Korean employees of the USFK, as the American money that their wages were being paid with had run out, and they were going to have to be furloughed from April 1. Although Seoul proposed creating a separate deal to resolve this issue, Washington opposed the idea, as resolving this secondary issue, albeit an important one, would give South Korea a reason to delay their decision on the main cost-sharing deal.

On April 21, Donald Trump reiterated that South Korea should pay more towards keeping American troops stationed on Korean territory. Trump said that the reason why he rejected Seoul’s offer to increase its share of defense contributions by 13% was based on the principle of fairness and on the grounds that his country is doing South Korea a “tremendous service”, so America has to be treated “equitably and fairly”.  Donald Trump also dismissed rumors that the US is negotiating a reduction of US troops on the Korean Peninsula, as they are unable to resolve the funding issue. “It’s not a question of reduction, it’s a question of, will they contribute toward the defense of their own nation?”

In an interview on April 30, Donald Trump told Reuters, “They’ve agreed to pay a lot of money. They’re paying a lot more money than they did when I got here.” Yet South Korea’s presidential office declined to comment, saying, “the negotiation is still ongoing,” and Foreign Minister Kang Kyung-wha said that the amount Trump had rejected was “the highest possible level” South Korea would stretch to. “Korea and the US are still in negotiations over the defense cost-sharing deal and nothing has been officially decided yet,” the foreign ministry said.

On May 1, South Korea’s National Assembly unanimously passed a special law to provide financial support for furloughed South Korean employees of the USFK, which should strengthen the position of South Korean negotiators in defense cost-sharing talks with the United States.  Each furloughed employee will receive a monthly payout of between 1.8 million won (1,476.6 USD) and 1.98 million won, which is around 60-70 percent of their average monthly wages. This will require a monthly budget of 7.5 billion won to be allocated. The government plans to pay the money first and then deduct the amount from its due payment to the US under the SMA framework to be agreed at a later date.

On May 8, another South Korean diplomatic source stated: “We have already done our best within our capacity”, and said that there is no room left for more flexibility from South Korea. With these statements, it has become quite clear that the current bargaining stage looks something like this: South Korea says that 13% is as high as it is willing to go, taking the fivefold increase in the South Korean share the US demanded down to about one and a half — $1.3 billion a year — and that is South Korea’s final and reasonable offer!

Assistant Secretary of State for Political-Military Affairs René Clark Cooper responded on the same day, May 8, repeating that the United States is sill looking to secure a defense cost-sharing deal with South Korea, as neither side wants to see their alliance eroded. The South Korean press noted that his comment contradicts President Donald Trump’s claim that South Korea “has agreed to pay substantial money to us” to keep American troops stationed there.

On May 15, 2020, R. Clark Cooper reiterated that Washington has been flexible in the negotiations with Seoul on splitting defense costs, the negotiations themselves are ongoing, and both sides have never stopped communicating to come to an agreement that both governments and presidents Donald Trump and Moon Jae-in would find perfectly acceptable.

In response, center-left daily Hankyoreh Shinmun stressed that Seoul stands firm on its position, and a 13% increase is the highest it can offer. “The government’s position remains unchanged. The amount that the US has mentioned is unreachable.”

Amid concerns that a delayed conclusion to the negotiations could erode the allies’ cooperation in other areas, Deputy Assistant Secretary for Korea and Japan Bureau of East Asian and Pacific Affairs Marc Knapper said on May 20, 2020 that he was “very confident” the United States and South Korea would find a way forward, as both sides are working very hard to break the deadlock. Knapper praised South Korea as a “model and exemplar for the world” for its response to the COVID-19 pandemic, and noted that the US has benefited from cooperation with Korea in handling the virus outbreaks.  But he pointed out that the two countries’ cooperation in the fight against the coronavirus was thanks to “years and decades of people-to-people exchanges and educational exchanges between our two countries.”

Knapper reiterated Trump’s stance that America wants “to figure out a way to have a fair share of the burden among allies, not just South Korea but others whether in Northeast Asia or Europe, to lessen the burden on American taxpayers.”

It has already been six months since a new SMA for this year should have replaced the one that expired. Trump is driving a hard bargain, after all, let’s not forget, Trump is a savvy businessman, and any expert could clearly see from the outset that it was not going to be easy to bring down a fivefold increase as the starting price. President Moon is not cracking under the pressure just yet, because his proud and independent policy would not have Seoul following all the orders it has received from America immediately after securing a resounding victory in the legislative elections. Although just like other past examples, Seoul is likely to break sooner or later, but the South Korean media will portray this as a major victory for diplomacy: “Look at the bargain we have negotiated compared to Washington’s starting price!”

 Konstantin Asmolov, PhD in History, Leading Research Fellow at the Center for Korean Studies of the Institute of Far Eastern Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.


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