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Double whammy for local car makers

Posted January. 11, 2001 19:02,   


The domestic automobile industry is suffering from both contracting demand and pressure to open the market. In particular, U.S. demands for the opening of the Korean market have put intense strain on domestic carmakers. According to the Automotive Association on Thursday, the incoming Bush administration is poised to dramatically increase the pressure on Seoul to open the Korean market. The principal figures will be Andrew Card, who had a leading role in the negotiations on opening the Chinese car market in the 1990s, and Don Evans, nominee for the Secretary of Commerce position.

Card, who will be Bush¡¯s chief secretary, previously called for the opening of the car market during negotiations with Japan and Korea during his stint as Secretary of Transportation. When he was chairman of the AAMA in 1994, Card demanded a decrease on tariffs (10% for passenger cars), consolidation of purchase taxes, abrogation of restrictions on car showroom size and location and liberalization of advertising. These issues were agreed upon during negotiations held in 1995. Card ceaselessly demanded and ends to tax hikes on SUVs and for further market liberalization. He even commented on an "over-consumption" movement launched by local civic groups, which called for a boycott on imported cars.

United States Trade Representative (USTR) Barshefsky has strongly criticized the Korean car market, saying automobile trade between the U.S. and Korea is disproportionate. Secretary of Commerce nominee Don Evans said that increased pressure would be made on its trade counterparts to open their markets.

Last year, the Korean car industry, comprised of Hyundai, Kia and Daewoo , exported around 558,000 cars to the U.S. The U.S. exported only 2,400 cars to Korea during the same period and this is expected to become a key issue for the U.S. government. An official from the Korean Automotive Association noted that the possibility is high that the U.S. government will demand changes to the current practice of targeting owners of foreign cars when conducting tax probes on the rich. Considering demand is falling globally, forcing GM, Ford and other carmakers to cut production, the pressure to open the market by the U.S. may drastically contract the local car industry.