Obama to Korea: Free Trade Agreement Isn't That Free
By Michelle Krebs March 16, 2009The Obama administration is reviewing a Bush-negotiated trade agreement with South Korea, objecting to provisions that too heavily favor Korean automakers. Additional concessions from Korea may be required for Congress to approve the 2007 proposal.
This agreement "just simply isn't fair," said Ron Kirk, designee for U.S. Trade Representative, last week at his confirmation hearing before the Senate Finance Committee. Expanding trade in South Korea is "one of the biggest opportunities we have," he added, also cautioning that the administration "will step away from that if we don't get it right."
U.S. lawmakers want to modify the current accord to phase out existing tariffs on vehicles over 15 years, with an accelerated schedule if exports to Korea achieve minimum volumes. The current deal would immediately lift a 2.5 percent duty on vehicle imports with engines 3.0 liters or less, while a 25 percent truck tariff would be phased out over 10 years.
South Korea has "a long history of erecting a series of non-tariff barriers to severely limit U.S. exports of automobiles and other key industrial goods," said Rep. Sander Levin, D-Mich. and chairman of the House of Representatives Ways and Means trade subcommittee, last week.
American exports of passenger vehicles to South Korea totaled less than 1 percent of sales in South Korea for 2008, while Korean imports claimed 5 percent of U.S. market share. Better trade rules can help U.S. automakers access the South Korean marketplace, but ultimately consumers there will decide if American vehicles are an attractive alternative to a market 71 percent dominated by Hyundai and Kia.
The trade agreement encourages commerce and investment in several other sectors, including agriculture, industrial goods, telecommunications, and e-commerce. Provisions also will enforce intellectual property rights. It is the largest trade deal in nearly 20 years, since the North American Free Trade Agreement (NAFTA) was ratified.
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