USTR Insists the Abolition of Tax on Imported Cars

Trade friction in car is likely to be created this year, as the United States Trade Representative (USTR) insisted the abolishment of taxes in order to improve unfavorable balance of car trade with Korea in the yearly National Trade Estimate (NTE 2001) that USTR submitted to the Congress on the 2nd(local time).

In the section relating Korea in the report, USTR pointed out that market share of imported car in Korea was nothing but 0.7 percent in 2001, and insisted △ abolishment of the tax which is 8 percent now, △ simplification of related taxation like special consumption tax, △ settlement of pending issues related with standards and certification, and △ endeavor to improve the consumers` sentiment against import.

In relation to this, the Ministry of Foreign Affairs and Trade (MOFAT) announced that it understands the abolishment of tax as dropping tax to the level of U.S., as it also levies tax of 2.5 percent on imported cars. NTE forecasted that market share of imported car in Korea would rise to 12 percent in 5 years if the tax rate on imported car is dropped to 2.5 percent.

In addition, the report insisted that foreign medical supplies have difficulties in advancing into Korean market, as hospitals are reluctant to prescribe imported medicines due to the ambiguous standard of insurance payment.

The reported estimated that Korean economy is becoming more open and market oriented economy through the reformation and restructuring of Korean economy and trade barriers, and the connections among government, banks, and conglomerate enterprises became rather loosened, and excessive debts of enterprises are being improved.

MOFAT announced that it would collect the opinions of each Ministry on the report and inform them to USTR, and consult the matters at Korea-U.S conference on pending trade issues in Washing D.C. on 22nd and 23rd.

Ki-Heung Han eligius@donga.com · Ja-Ryong Koo bonhong@donga.com