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U.S. Auto Industry Wants Korea to Open Its Market

Posted June. 22, 2007 03:23,   


The American auto industry and lawmakers representing the auto sector have made “nonnegotiable” complains about the Korea-U.S. Free Trade Agreement (KORUS FTA). They have showed disagreements over a wide range of FTA provisions, indicating a bumpy road ahead to be ratified.

The United States International Trade Commission (ITC) held a hearing presented over by industry leaders regarding the FTA on June 20 in Washington D.C. The ITC is an independent organization that submits an analysis report to the U.S. president and Congress within ninety days after signing of a bilateral trade agreement according to U.S. Congress rules.

The hearing has drawn mixed responses from industries. Potential beneficiaries of the deal, such as banking, insurance, movie and pork industries, and economic organizations like the U.S. Korea Business Council, Business Coalition and American Chamber of Commerce, have shown strong support for the deal.

On the other hand, automobile and beef industries, and environment and labor organizations are among the strong opponents of the KORUS FTA.

Democrat, and House Trade Subcommittee member Sander Levin, a Michigan Democrat, said that the Korea government has imposed an ‘economic iron curtain’ on all imported cars. And he went on to say that the current deal will not get Congressional support and that both sides should renegotiate.

Various statistics were presented, such as: Korea sold the U.S. 700,000 cars last year, but the U.S. only sold 4,556 cars in Korea last year; Among the total U.S. trade deficit to Korea ($11 billion), 87 percent came from automobiles; While 30 OECE member states average a 40 percent imported car rate, Korea ranks among the lowest with 3.6 percent.

Steve Biegun, Ford’s vice president of international governmental affairs, has made many criticisms about the current status of the Korean auto market.

“Ford entered the Korea market 12 years ago but sold only 1,700 cars last year, smaller than a decade ago. I have seriously thought for a decade about why imported cars do not sell in Korea- Do Korean cars have better performance? Are our cars too expensive? Or do Korean consumers have unique needs? My answer was No. That’s because that the Korean market has multiple layers of ever-changing non-tariff barriers. And the market has safety regulations inconsistent with global standards and tax structures. Korean automakers can adapt to regulatory changes as they sell in large numbers. But foreign counterparts can’t maintain a stable supply.”

He went on to say, “Who would be willing to be a Ford dealer in Korea? While Hyundai and KIA motors have 1,300 dealer shops in the U.S, Ford has only one in Korea. The Korean government promised to remove non-tariff barriers in 1995 and 1998. But new barriers have been introduced like “slippery ills.” The Korean auto market should be as open as the U.S. one. Korea should immediately lift its eight percent tariff and all non-tariff barriers. And the U.S.’s elimination of the current two percent tariff should be made only after Korea maintains a meaningful and sustainable market opening.”

The U.S. auto industry wants the same level of market opening from Korea, not a partial revision of Korean system. Moreover, the industry didn’t hide their intention to use the KORUS FTA as an excellent opportunity to get their demands accepted.