Korea-U.S. FTA

What happens when U.S. and Korean auto tariffs are eliminated?

Dr.Sang-yirl Nam estimates that the auto tariff provisions of the Korea-U.S. trade agreement - examined independently of the rest of the provisions of the agreement - would provide Korea a $178 million welfare gain, but cost the U.S. about $20 million.

UAW Leader Says South Korea Steals U.S. Jobs

The United Auto Workers (UAW) President Ron Gettelfinger spoke to about 1,000 union activists on Feb 3: South Korea called threat (Justin Hyde, Detroit Free Press, Feb 4). 

The speech touched on other issues including the upcoming election,the stimulus package, and a recent agreement with the auto companies, but he got in a dig at Korea:

Foreign Auto Makers in U.S. Like KORUS FTA

The Association of International Automobile Manufacturers endorses the Korea-U.S. FTA: AIAM Affirms Its Support For the Korea Free Trade Agreement (press release, October 1).

The association membership includes Korean firms, like KIA, but firms from other countries as well, including many Japanese firms.

Here's the press release:

Ford Pushes, South Korea Pushes Back

Doug Palmer (Ford and South Korea dig in heels over trade deal, Reuters, Sept 26) reports that Stephen Biegun, Ford's Vice President for International Governmental Affairs, has

...warned of a fight in the U.S. Congress that could damage the entire free trade agenda unless the pact is renegotiated to address an "ever-changing pattern" of South Korean barriers to keep out auto imports.

Palmer says that "Ford has emerged as the biggest industry opponent of the free trade agreement."

Seok-young Choi, economic affairs minister at the South Korean embassy responded that, South Korea has no intention to renegotiate.

Choi called Biegun's concern "totally unreasonable" and said the U.S. auto industry was blaming South Korea for its own chronic problems. "The U.S. auto industry has little interest in penetrating the Korean market," as shown by its disregard for Korean consumer preferences, he said.

"The U.S. government should do something for the U.S. auto industry, but why should Korea?" Choi said.

Schott on the Auto Provisions

Detroit's opposition to the auto provisions of the Korea-U.S. FTA has become one of the key issues for opponents of the agreement.  Both Ford and Chrysler, and the UAW, have come out against the agreement.  Many Democrats have echoed their concerns.

In 2006, while Korea exported about 700,000 cars to the U.S., the U.S. only was able to export about 4,500 to Korea.  Even setting aside the differences in population and per capita income, this seems like a large difference.  There are certainly tariff barriers to U.S. exports to Korea, but the industry has also pointed to other, persistent, non-tariff barriers, as a big concern: Korea's NTBs on foreign autos (Ben Muse, July 8, 2007).

Jeffrey Schott, a senior fellow at the Peterson Institute, reviewed key provisions of the Korea-U.S. FTA in a recent Institute Policy Brief (The Korea-US Free Trade Agreement: A Summary Assessment, August 2007), and doesn't think the auto provisions should be a stumbling block:

KFTA Assessment from Jeffrey Schott

The Peterson Institute has released an assessment of the FTA by Jeffrey Schott: The Korea-US Free Trade Agreement: A Summary Assessment (Policy Brief 07-7, August 2007).

Schott is a supporter.  This survey is tightly focused on a few issues.  Separate sections deal with autos, agriculture, services, the Kaesong industrial complex, implications for trade relations in the Asia-Pacific, and the prospects for ratification in the U.S.  Schott doesn't draw on, or add to, the general equilbrium modeling.  The abstract:

Korea's NTBs on foreign autos

Stephen Collins, President of the U.S. Automotive Trade Policy Council, described Korean non-tariff barriers (NTBs) on car and truck imports (testimony before the House Ways& Means Subcommittee on Trade, March 20, 2007) - for example tax audits or threats of audits for people who buy foreign models:

"Michigan Phenomenon"

The DongA-Ilbo with a (not-dispassionate) discussion of the politics of auto industry opposition to the FTA in the U.S.: Obstacle to the KORUS FTA: “Michigan Phenomenon" (July 3). 

Why Ford doesn't like the Korea-U.S. FTA

The U.S. International Trade Commission held a hearing on the FTA today (Witness list), in connection with its preparation of a mandated report on the agreement.  Stephen Biegun, Ford's Vice President for International Governmental Affairs, explained why Ford doesn't support they agreement: Remarks prepared for the hearing.

Korea ranks at the bottom of large automotive markets, for import penetration.  Ford's problems don't relate to their product quality, and not to price (Korean tariffs and taxes alone can't explain the low import levels).

Here's the problem: