Korean Trade Pact Fails U.S.

May 1, 2008 Issues: Trade

Tom Walsh got it wrong in his April 17 column on the pending U.S.-South Korea Free Trade Agreement ("S. Korean trade deal worth close look; But emotional debate casts doubt on it getting approval in Congress"). It is not an emotional debate, but an economic one, that has derailed the Korea FTA.

Trade agreements are about the terms of economic competition between countries. Our negotiators should be fighting for U.S. businesses and workers by breaking down tariff and non-tariff barriers to U.S. goods and services.

Consider the facts: Korea is the fifth largest producer, and the ninth largest consumer automotive market in the world. We now have an $11-billion deficit in automotive trade, which is 87% of the total trade deficit between our two countries. In 2006, Korea sold 700,000 vehicles in the United States; the United States sold only 4,556 in Korea.

The FTA as negotiated will simply lock in a structure of one-way trade between the two industrialized nations and allow the Korean auto industry to continue an export-driven strategy using the profits from its protected home market to fund R&D and broader incursions into the U.S. and other major markets.

The FTA fails to eliminate the extensive use of discriminatory tax structures and non-tariff barriers used by Korea to keep its auto market closed. We also know through experience -- two previous Korean formal automotive trade agreements that the United States called the 1995 and 1998 "Memorandums of Understanding" -- that it is very difficult to move the Koreans to end these non-tariff barriers.

By giving away the 2.5% auto tariff and negotiating down the 25% pick-up truck tariff without linking it to concrete results in assuring the end of Korea's unfair non-tariff barrier structure, the Bush administration has locked in the status quo and worse. Korean automakers win $217 million in auto tariff reductions from the FTA while tariff reductions for U.S. automakers amount to just $12 million.

We cannot accept a model of trade that fails to stand up for U.S. businesses and workers in the area that now represents 87% of our trade deficit with South Korea.