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U.S. car industry says tariff cuts are not fair, Korea says renegotiation is unlikely
November 20, 2009
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During yesterday’s press conference, President Lee Myung-bak said he was willing to discuss the automotive trade issue to realize the ratification of the free trade agreement. The Blue House quickly downplayed the possibility of a renegotiation. Although both sides agreed on the Korus FTA after numerous rounds of negotiation over a 14-month period, the ratification of the pact has been stalled for over two years due to strong opposition from industry in both countries. Korea agreed to allow in 94 percent of products that will be imported from the U.S. in the course of three years once the free trade agreement has been ratified. Considering that Australia will open up to 81 percent of U.S. products, Singapore to 79 percent and Morocco to 77 percent, the amount of Korea produce exposed will be relatively high. However, the U.S. auto industry has strongly protested to the FTA signed between the two countries, citing that it needs to be renegotiated as the agreement is unfair. Under the agreement the U.S. is to immediately scrap customs taxes on Korean vehicles with engine displacement below 3,000 cc. Seventy-three percent of the total Korean vehicles shipped to the U.S. are under 3,000 cc. The custom tariff on Korean vehicles with over 3,000 cc will gradually be lifted over the course of three years. Every year it will be lowered by 0.83 percent. In Korea, customs taxes on most car parts will be immediately lifted. While special consumption taxes will be exempted for U.S. vehicles with an engine displacement of under 1,000 cc, an 8 percent special consumption tax will be applied on vehicles whose engines exceed 2,000 cc for three years. The U.S. automotive industry insisted that there were various non-tariff barriers in the Korean market including unclear standards and regulations. It urged that the automotive trade agreement on the FTA needs to be revised. The Korean automotive industry remained calm and showed strong faith that the free trade agreement will not be renegotiated. “Even if there is a renegotiation there won’t be a major change,” said an official in the Korean automobile industry, requesting anonymity. By Lee Ho-jeong, Suh Kyung-ho JoongAng daily Hot issue
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