Opening S. Korea Helps U.S. Auto

Nov 30, 2010 Issues: Trade

The discussions between the United States and South Korea at the G-20 meeting about the U.S-South Korea Free Trade Agreement were not a failure.

Contrary to some of the headlines and punditry, they provide an opportunity to carry out the major stated purpose of President Barack Obama’s Asia trip – to open up closed markets to American products. The conversation continues in Washington this week, starting Tuesday.
The unresolved issues were not “technical.” Just the opposite. What’s at stake are U.S. jobs.

Despite two previous agreements with Washington, Seoul has protected and closed their domestic automotive market to imports. Last year, autos and auto parts accounted for full three-quarters of the $10.6 billion U.S. trade deficit with South Korea.

They used a combination of tactics: first an outright ban on imports, then all kinds of discriminatory non-tariff barriers and even anti-import marketing campaigns. So today South Korea ranks 29th out of the 30 largest automotive markets in terms of import market access. Their vehicle producers control 95 percent of their market.

With this protection , South Korean automakers have been able to finance an aggressive push into the United States and other export markets. About 70 percent of South Korean auto production is exported — creating lopsided, one-way trade. With the United States, for example, U.S. auto makers exported less than 6,000 cars to South Korea last year, while South Korea shipped more than 476,000 autos to America.

The proposed FTA, as originally drafted, would not even open the South Korean market to U.S. auto imports. It fails to address South Korea’s unique and ever changing regulatory regime. Instead, U.S. automakers would continue to be relegated to a low-volume market niche, unable to establish a meaningful commercial footprint in South Korea.

Washington is beginning to relearn a lesson from its past, one many of our most prosperous trading partners never forgot: a strong manufacturing base is critical to our economic future. The U.S. automobile industry – from small parts suppliers to large automakers – is a major component of the nation’s manufacturing base, supporting millions of jobs nationwide, investing in research and development and poised for future growth if we open new markets.

The president is correct to insist that South Korea now needs to demonstrate a sustained commitment to open its market to our goods. Any successful agreement must ensure that Seoul allows U.S. automotive companies to secure a real, steady commercial presence. Ford Motor Company, a global producer with profitable operations around the world, now has only one dealership in South Korea, whereas Hyundai has 1,500 dealers in the United States.

U.S. automakers are ready to compete in every country in the world. Washington made an important decision to support General Motors and Chrysler through a difficult bankruptcy and restructuring a little more than a year ago. Now all the companies are back, making profits and investing in the technologies of the future.

It is essential that our government continue to stand up for U.S. manufacturers in these pending negotiations, insisting that trade be a two-way street. By doing so, our negotiators can overcome Seoul’s intransigence and reach an agreement that truly opens the South Korean marketplace.

The current agreement would provide other key U.S. sectors meaningful new access to the South Korean market. These companies should join in pressing South Korea to agree to assured access for the U.S. auto industry — rather than pressing U.S. automotive companies to give way.

As we move into a globalized economy, it is important for South Korea to move, not for the U.S. manufacturing sector to retreat further.

This would make the agreement with South Korea truly a free trade agreement.

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