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U.S., S. Korea reach pact on free trade


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U.S., S. Korea reach pact on free trade

Biggest agreement since NAFTA could boost Big 3 auto exports

David Shepardson / Detroit News Washington Bureau

Washington — The White House and South Korea reached a landmark deal Friday that should clear the way for a long-stalled free trade agreement to win approval and open the Korean market to more U.S. auto exports.

The deal also will protect the U.S. market from too big a surge in Korean vehicle imports.

The South Korean government has agreed to steps sought by the White House to open its market to more U.S. auto exports, a main sticking point of the talks that have gone on for months but intensified in the last four days.

The deal is the biggest trade agreement since the North American Free Trade Agreement in 1994 between the United States, Canada and Mexico. It may set a pattern for more free trade agreements, opening markets to U.S. automakers.

The White House said the deal will boost U.S. exports by $11 billion. President Barack Obama hailed the agreement as a "landmark trade deal" that would support at least 70,000 U.S. jobs.

The deal is a clear win for U.S. automakers. Ford Motor Co. aggressively lobbied for changes; General Motors Co., which owns South Korea's fourth-largest automaker, GM Daewoo, stayed on the sidelines.

Under the agreement, 25,000 cars per U.S. automaker — or almost four times the number allowed in the 2007 agreement — can be imported into South Korea as long as they meet U.S. federal safety standards, among the most stringent in the world.

Last year, about 7,600 U.S.-built vehicles were sold in South Korea. In contrast, more than 411,000 Korean vehicles were exported to the United States. South Korean automaker Hyundai Motor Co. has grown quickly in the United States and holds 5.3 percent of market share, while Ford and Chrysler Group LLC virtually sell no vehicles in Korea.

"This gives the U.S. automakers breathing space," a senior Obama administration official said.

Under the agreement, the United States will keep tariffs of 2.5 percent on Korean car imports for five years; Ford had proposed extending them for 10 years.

By contrast, the 2007 agreement — signed by the Bush administration but never submitted to Congress for ratification — would have immediately eliminated U.S. tariffs on 90 percent of South Korea's auto exports, with remaining tariffs phased out by the third year.

Ford CEO Alan Mulally praised the deal to "open the Korean auto market."

"President Barack Obama and U.S. trade representative Ron Kirk vigorously advocated the important principle of two-way trade, and the resulting agreement provides greater clarity and transparency by affirmatively addressing the issues surrounding non-tariff and tariff barriers," Mulally said.

Benefits touted

Negotiations this week included Mulally, and Ford had run ads in major newspapers urging changes to the agreement.

The South Korean government sent its ambassador to cities across the United States — including Detroit — during the last six months to win support and tout the fact that so many U.S. industries, including Michigan agriculture, would also benefit.

Under the deal, South Korea will immediately cut its tariff on U.S. auto imports in half (from 8 percent to 4 percent), and eliminate that tariff in the fifth year.

The 2007 agreement would have required the U.S. to reduce its 25 percent tariff on Korean trucks immediately and phase it out by the agreement's 10th year.

The 2010 supplemental agreement allows the United States to maintain its 25 percent truck tariff until the eighth year and then phase it out by the 10th year, but it holds South Korea to a commitment to eliminate its 10 percent tariff on U.S. trucks immediately.

United Auto Workers President Bob King had signaled the union would support a free trade deal if it did more to open the market to autos.

The Obama administration was eager to win the support of the auto industry.

Automakers had the support of some key members of Congress, including Rep. Dave Camp, R-Midland, who is set to become the next chairman of the House Ways and Means Committee, the panel that oversees consideration of free trade agreements.

"This is a big win for American employers and workers," said Camp, who praised the White House "for working closely with me to reduce the barriers our domestic auto industry faces today and get the best deal possible. The agreement concluded today will give meaningful market access to U.S. auto companies and support good-paying jobs in the United States."

The White House said the South Korean government had agreed to eliminate non-tariff barriers "that severely restricted American automakers' access to the Korean market and raised the cost of producing vehicles for sale in that market."

A boost to Volt possible

Through August, the U.S. auto sector trade deficit with South Korea was $6.8 billion, up from $4.8 billion over the same period in 2009.

But U.S. auto sector exports there increased to $464 million, more than double the $223 million in the same period in 2009.

Obama and congressional staffers highlighted the fact that the agreement would allow all U.S. autos to be considered in compliance with new South Korean environmental standards.

It also sets new ways to ensure South Korea doesn't adopt new auto regulations that create unnecessary barriers to trade and establishes an early warning system for potential trade barriers.

The deal may also boost the Chevrolet Volt and forthcoming electric Ford Focus.

In the 2007 agreement, the U.S.

and South Korea would have eliminated tariffs on electric cars and plug-in hybrids by the 10th year. Under the deal, South Korea will immediately reduce electric car tariffs from 10 percent to 4 percent. Both countries will phase out tariffs by the fifth year.

The 2007 agreement also created a tough remedy for the United States to reimpose as much as $200 million in U.S. tariffs ("snapping back" to pre-agreement levels) on Korean cars if U.S. auto business in Korea were "materially" hurt by Korean violations of the agreement. The new deal substantially increases South Korea's obligations in areas from safety to environmental standards.

From The Detroit News: http://detnews.com/article/20101204/AUTO01/12040382/U.S.--S.-Korea-reach-pact-on-free-trade#ixzz17LMgPERr

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U.S., South Korea trade agreement gives boost to automakers

December 6, 2010 10:38 CET

SEOUL (Bloomberg) – The U.S. and South Korea have restarted a stalled free-trade agreement between the two countries that includes car imports.

On Friday, the U.S. agreed to end its 2.5 percent tariff on automobiles in five years, instead of immediately or after three years, as was previously agreed.

South Korea will cut its 8 percent tariff on U.S. automobile imports to 4 percent immediately, instead of eliminating it entirely, according to a White House fact sheet.

With almost $68 billion in trade between the nations, a deal would be the U.S.'s largest since the North American Free Trade Agreement in 1994, and would help President Barack Obama meet his goal of doubling American exports in five years.

The trade accord is a “win-win for both our countries,” Obama told reporters in Washington. It will level the playing field for automakers, boost U.S. exports by as much as $11 billion, support job growth and enhance the U.S. partnership with South Korea, Obama said.

The U.S. will maintain a 25 percent tariff on truck imports for eight years instead of beginning to phase it out immediately. In addition, each U.S. automaker will be able to send South Korea 25,000 cars a year that meet U.S. safety standards. They would be exempt from separate South Korean standards.

Deal is 'humiliating'

South Korea's main opposition Democratic Party said the deal is “humiliating” and vowed to block its passage in the National Assembly.

“The unfair revisions would open our domestic market wider while allowing the U.S. to close theirs,” the Democratic Party, said Sunday on its Web site. The ruling Grand National Party, which controls the National Assembly with 171 seats, welcomed the deal, however.

“The free trade deal with the U.S. will bring huge economic benefit to both countries,” South Korean President Lee Myung Bak said in a statement.

Lee said the agreement will also help the alliance between the two countries move a step forward, according to the statement. The Korea Automobile Manufacturers Association estimates South Korean car sales in the U.S. will reach 950,000 this year, including 500,000 shipped from South Korea and 450,000 produced in U.S plants.

“The agreement will remove uncertainty, helping boost sales and competitiveness of South Korean cars in the U.S.,” the industry group said in an e-mailed statement.

U.S. manufacturers lagging behind Europe

U.S. market share in South Korea slid to 10.1 percent of imported car sales last year, from 11.3 percent in 2008, according to the Korea Automobile Importers and Distributors Association. European cars held a 62 percent market share in 2009, with Japanese brands on 28 percent.

“Korean consumers prefer premium sedans from Europe and Japan, or small Korean-made cars to U.S. brands,” Song Won Gun, a senior research fellow at the Korea Economic Research Institute in Seoul, said before the announcement.

Read more: http://www.autonews.com/article/20101206/ANE/101209883/1117#ixzz17LXzoT36

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