It will not be easy to export weapons systems and conclude the RDP-A due to the America-first policy.
Trump tells President Yonhap, “We need to cooperate closely with Korea in the MRO field”
Observations are being raised that the ‘America First’ policy of President-elect Donald Trump, who won the US presidential election, may cast a dark cloud over Korea-US defense industry cooperation. However, it is predicted that the U.S. Navy ship maintenance and repair (MRO) project, with which President-elect Trump expects cooperation, will gain momentum.
Our defense companies are working hard to enter the defense industry market in the United States, which boasts the world’s strongest defense power.
The United States is planning a project to introduce 280 Air Force tactical introductory aircraft and 220 Navy tactical introductory and advanced trainer aircraft, and Korea Aerospace Industries (KAI)’s FA-50 light attack aircraft series is planning to challenge this project.
In addition, LIG Nex1’s 2.75-inch (70 mm) guided rocket ‘Bigung’ (English name: Poniard), which recorded a hit rate of 100 out of 100 in the final test evaluation of the U.S. Foreign Comparative Test (FCT) last July, is also looking for opportunities to be mounted on U.S. coastal patrol boats. there is.
However, it is expected to be a difficult challenge for the Trump administration, which will prioritize the introduction of domestic weapons systems.
Shim Soon-hyung, an associate researcher at the Korea Institute for Industrial Economics and Trade, said, “President Joe Biden places importance on cooperation with allies, and President-elect Trump will pursue the recovery of the country’s defense supply chain.” He added, “If defense spending increases under the Trump administration, the U.S. market for our defense companies will increase.” “There is speculation that there is a possibility of entry, but I think the profits will go to American defense companies,” he said.
Competition in defense industry exports to countries that are seeking to strengthen their defense capabilities, such as in the Middle East, is expected to intensify. The Biden administration classified Saudi Arabia and the United Arab Emirates as human rights violators and controlled the export of American weapons, which benefited K-Defense, but the Trump administration will pursue the exact opposite export strategy.
Associate Research Fellow Shim said, “During Trump’s first term, we exported well to the Middle East despite various controversies. “It is a style that does not worry about the external repercussions of its own weapons exports,” he said. “If American defense companies enter the Middle East, competition with Korean defense companies may intensify.”
The signing of the Korea-U.S. Mutual Procurement Agreement (RDP-A), which the government had been pushing to enable more active entry into the global defense industry market led by the U.S., has also become difficult.
RDP-A is an intergovernmental agreement signed by the U.S. Department of Defense with the Department of Defense of allied and friendly countries that addresses legal rights and obligations regarding the opening of each country’s defense industry market.
Countries that have signed an RDP-A with the United States can be exempted from the price penalty imposed under the ‘American Preferential Purchase Act’ when participating in the US Department of Defense procurement project, and are exempt from the obligation to purchase chemical warfare protection equipment and special metal-related products from the United States. Companies will be able to participate in bidding, and will benefit from exemption from taxes such as tariffs on products and components in defense procurement.
However, the Trump administration recognizes this as a ‘tariff removal’ system that could have a negative impact on the domestic defense industry market, so not only will the negotiations become sluggish, but the possibility that the project itself may be aborted cannot be ruled out.
However, the U.S. Navy ship MRO project is expected to gain momentum.
In a phone call with President Yoon Seok-yeol that day, President-elect Trump said, “The U.S. shipbuilding industry needs Korea’s help and cooperation,” and added, “I am well aware of Korea’s ability to build world-class warships and ships, and I am well aware of Korea’s ability to build not only our ship exports but also repairs and cooperation.” “There is a need to closely cooperate with Korea in the field of repair and maintenance,” he said.
Last July, HD Hyundai Heavy Industries signed a ship maintenance agreement with the US Naval Supply Systems Command and entered the US ship MRO market for the first time in Korea. This is limited to MRO business rights for some ships belonging to the US 7th Fleet, which oversees the Asia-Pacific region, but in light of President-elect Trump’s remarks, there are expectations that the targets and volume of MRO business may increase in the future.
Some believe that in line with President-elect Trump’s preferred ‘local production’ strategy to create jobs for the American people, Korean defense companies will actively pursue MRO business strategies such as building or acquiring shipyards in the United States.
Deputy Research Fellow Shim said, “If President-elect Trump applies pressure to increase defense cost sharing, there is a possibility that Korea-US defense industry cooperation itself will retreat, so a mechanism to institutionalize Korea-US defense industry cooperation, such as RDP-A, must be established,” adding, “In the defense industry export market, the US and the US must be established. “Competition will also intensify, so government-wide efforts are needed to provide financial support and fulfill the demands of purchasing countries,” he emphasized.
(Seoul = News 1)
Interview with Shim Soon-hyung, Associate Researcher at the Korea Institute for Industrial Economics and Trade
Time.news Editor: Welcome, Shim Soon-hyung! Thank you for joining us today. With the recent shift in U.S. leadership and Donald Trump’s “America First” policy, many are curious about the implications for Korea-U.S. defense cooperation. What are your initial thoughts on this situation?
Shim Soon-hyung: Thank you for having me. The America First policy definitely poses significant challenges for Korea-U.S. defense industry cooperation. While the Biden administration placed a high value on international alliances, Trump’s approach may prioritize domestic manufacturers, which could limit opportunities for Korean companies looking to break into the U.S. defense market.
Editor: That sounds concerning. Can you elaborate on how Trump’s policy might affect the ongoing projects, particularly the U.S. Navy ship maintenance and repair (MRO) project that has been mentioned?
Shim: Certainly. President-elect Trump has expressed a desire for close cooperation with Korea when it comes to the MRO sector. The U.S. Navy requires support in maintaining and repairing its vessels, and Korea has proven its ability to build world-class warships, which presents an opportunity. However, the broader context of competition for U.S. defense contracts remains tense given the ‘America First’ stance.
Editor: Speaking of competition, how do you think Korea’s defense companies, like Korea Aerospace Industries and LIG Nex1, are positioned amidst these changes?
Shim: They’re facing a double-edged sword. On one hand, there’s a strong inclination to increase exports and challenge projects like the introduction of new Air Force and Navy aircraft. KAI’s FA-50 fighters and LIG Nex1’s guided rocket have shown significant potential. On the other hand, Trump’s administration is likely to prioritize domestic manufacturers, which will complicate matters for our defense firms aiming for entry into that market.
Editor: That’s a solid point. You also mentioned the signing of the Korea-U.S. Mutual Procurement Agreement (RDP-A) as a way for Korean companies to gain a foothold in the U.S. defense sector. How does this agreement’s status stand with the current administration?
Shim: Unfortunately, the RDP-A is under significant threat due to the Trump administration’s views on tariff removals. They perceive agreements like the RDP-A as potentially detrimental to the domestic defense market, which may lead to stalled negotiations or, worse, the abandonment of the project altogether. This would restrict our companies’ access to vital markets.
Editor: It sounds like there is a competitive edge for Korean defense exports, particularly in regions where U.S. policies have been restrictive. Can you explain how that dynamic may shift under Trump’s administration compared to Biden’s?
Shim: Under Biden, we saw a restriction on arms exports to countries like Saudi Arabia and the UAE, which created space for K-Defense to expand its influence. Trump’s administration is likely to reverse this, re-engaging those countries and increasing competition for Korean arms manufacturers. It places Korean firms in a challenging position, as they’ll need to navigate a landscape where both their domestic and international competitors are robustly supported.
Editor: Lastly, with so much uncertainty surrounding defense exports and procurement, what do you foresee as the key areas for Korean firms to focus on in the coming years?
Shim: Korean firms should focus on innovation and developing next-generation technologies to distinguish themselves in a competitive market. Collaborating closely with the U.S. on projects, such as the MRO, can also allow them to showcase capabilities while building trust. Strengthening relationships with other allied nations can diversify their export strategy, mitigating risks that arise from potential U.S. policy shifts.
Editor: Thank you, Shim. Your insights have shed light on the complexities of the current defense landscape and the challenges and opportunities that lie ahead for Korea. We appreciate your time today!
Shim: Thank you for having me. It’s an important moment for the industry, and I’m optimistic about how we can navigate these challenges together.