Korea Legal has been following the Korea-U.S. (KORUS) Free Trade Agreement since its inception. In this Korea Economic Institute report, Troy Stangarone shares some recent insights. Troy is KEI’s specialist on the U.S.-Korea FTA.
Solving the Auto Riddle May be Key to KORUS FTA
by Troy Stangarone (ts@keia.org)
With an ambitious deadline of the Seoul G-20 Summit to resolve any remaining concerns regarding the KORUS FTA, the key to moving the agreement to a vote in early 2011 may be finding a way to solve the riddle of autos. While many of the concerns of the auto industry and its supporters predate the KORUS FTA, it has been largely unclear what measures would be needed to resolve this concern.
In recent remarks, Steve Biegun, Ford’s vice president for international governmental affairs, was quoted as saying that “We want to see complete elimination of Korean barriers to the market. We want to see a rapid increase in imports. We want to see it done in an enforceable way.” He also emphasized that a quota is not needed and that “It’s really going to be up to the Koreans, if they’re willing to make the steps necessary to open up the market.”
While Biegun’s remarks are designed to lay out expectations, they also raise a series of questions about his argument given the provisions already in the FTA and recent trends in car sales in Korea.
- What are the barriers to the Korean market that are not addressed by the FTA and how can they be fixed in an enforceable manner? Members of Congress and the auto industry have previously expressed concerns that the provisions of the FTA do not go far enough to address the discriminatory nature of Korea’s engine displacement tax and issues related to Korea’s automotive safety and environmental regulations and certifications. However, most discussion of barriers in Korea has focused on a general concern about non-tariff barriers without specifics.
- What would qualify as a “rapid” increase in imports in Korea. Since 2000, the sale of imports in Korea have risen from 4,414 vehicles, or 0.42 percent of the Korean auto market, to a high water mark of 61,648 in 2008 and 6.04 percent of the Korean auto market. Early 2010 date indicates these sales figures will easily be passed this year. Through June, 41,947 imports, representing 6.64 percent of the Korean auto market, have been sold in Korea. Since 2002, sales of BMWs, the leading foreign seller in Korea, have grown from 2,232 to 9,652 in 2009.
The greatest hurdle, however, may be the issue of trust. In the 1990s, the United States and Korea negotiated two memoranda of understanding in the hopes of opening the Korean market to U.S. autos to little success. Shortly before the KORUS FTA negotiations were concluded, members of the auto industry and its supporters in Congress put forward a proposal that would have utilized a non-traditional approach to this issue. It called for Korea to only gain additional access to the U.S. market after U.S. producers had gained meaningful and sustained access to the Korean market and placed the burden of proof on Korea to demonstrate that it does not have barriers to the sale of U.S. autos in its market. The industry and its supporters felt this non-traditional approach was justified because of the U.S. government’s long history of unsuccessful attempts to open Korea’s market to U.S. autos.
Tags: KEI, Korea automotive industry, Korea consultant, Korea Economic Institute, Korealegal.org, KORUS FTA, South Korea FTA, US Korea auto market, US Korea auto trade
This entry was posted
on Saturday, August 7th, 2010 at 5:25 am and is filed under Commentary.
You can follow any responses to this entry through the RSS 2.0 feed.
You can skip to the end and leave a response. Pinging is currently not allowed.
KORUS FTA Auto Hurdles
Korea Legal has been following the Korea-U.S. (KORUS) Free Trade Agreement since its inception. In this Korea Economic Institute report, Troy Stangarone shares some recent insights. Troy is KEI’s specialist on the U.S.-Korea FTA.
Solving the Auto Riddle May be Key to KORUS FTA
by Troy Stangarone (ts@keia.org)
With an ambitious deadline of the Seoul G-20 Summit to resolve any remaining concerns regarding the KORUS FTA, the key to moving the agreement to a vote in early 2011 may be finding a way to solve the riddle of autos. While many of the concerns of the auto industry and its supporters predate the KORUS FTA, it has been largely unclear what measures would be needed to resolve this concern.
In recent remarks, Steve Biegun, Ford’s vice president for international governmental affairs, was quoted as saying that “We want to see complete elimination of Korean barriers to the market. We want to see a rapid increase in imports. We want to see it done in an enforceable way.” He also emphasized that a quota is not needed and that “It’s really going to be up to the Koreans, if they’re willing to make the steps necessary to open up the market.”
While Biegun’s remarks are designed to lay out expectations, they also raise a series of questions about his argument given the provisions already in the FTA and recent trends in car sales in Korea.
The greatest hurdle, however, may be the issue of trust. In the 1990s, the United States and Korea negotiated two memoranda of understanding in the hopes of opening the Korean market to U.S. autos to little success. Shortly before the KORUS FTA negotiations were concluded, members of the auto industry and its supporters in Congress put forward a proposal that would have utilized a non-traditional approach to this issue. It called for Korea to only gain additional access to the U.S. market after U.S. producers had gained meaningful and sustained access to the Korean market and placed the burden of proof on Korea to demonstrate that it does not have barriers to the sale of U.S. autos in its market. The industry and its supporters felt this non-traditional approach was justified because of the U.S. government’s long history of unsuccessful attempts to open Korea’s market to U.S. autos.
Posts Related to KORUS FTA Auto Hurdles
Special Report KORUS FTA–An Auto Sector Update
By Don Southerton, Editor Since 2006, BCW has been following the KORUS FTA discussions. As strong supporters of free trade, globalization, and the Hyundai Kia ...
KORUS FTA Update
By Don Southerton, Editor KoreaLegal.org Following the latest news on KORUS FTA, it looks like treaty might be presented to the U.S. Senate by July ...
South Korea–European Union FTA Talks
By Don Southerton, Korea Expert Witness Editor and Chief Blogger Officially and privately, I have carefully followed and supported the FTA talks between the U.S. ...
KORUS FTA–What’s the delay?
By Don Southerton, KoreaLegal.org Editor This past week we saw the current Korean administration's opposition seeking to "axe" KORUS FTA. In response supporters seek to ...
2012 Trends and Expectations—A Korea-facing Commentary
By Don Southerton Each new year, I share thoughts for the upcoming months in an executive-level commentary. Looking back at 2011, South Korea’s export economy ...
Tags: KEI, Korea automotive industry, Korea consultant, Korea Economic Institute, Korealegal.org, KORUS FTA, South Korea FTA, US Korea auto market, US Korea auto trade
This entry was posted on Saturday, August 7th, 2010 at 5:25 am and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.