Free trade agreements are great, as long as the trade is really free, and as long as people stick to the agreements. In Korea, foreign automakers and distributors say Korean lawmakers and government agencies try to keep them out. There is talk of “import bashing,” says Reuters.
“Korea is a highly protected market. Despite recent agreements to open up its market, the government is not helping … it’s actually doing its best to keep the barriers in place,” Reuters heard from “a senior global automaker executive.”
Imports are selling well in a market that ;previously was nearly entirely home-grown. In January-April, sales of imported passenger cars accounted for 12 percent of the market, up from just 2 percent a decade ago. Hyundai/Kia sales were flat.
- In March, the offices of the Korea Automobile Importers and Distributors Association were raided by investigators of the country’s Fair Trade Commission. The agency alleged that BMW, Mercedes-Benz, Volkswagen and Toyota Motor were involved in price collusion.
- In the same month, South Korean lawmakers proposed a bill to reduce corporate tax breaks on cars priced above 50 million won ($44,000) and bought as company cars – typically those top-of-the-range models from German, Japanese and U.S. automakers. For luxury marques such as Bentley, Porsche and Rolls-Royce, over 70 percent are bought as company cars.”
- This week, local media reported that BMW Korea was being investigated by the tax authorities.
Meanwhile, Autoblog joins the fray, with the harrowing tale that “BMWs are cheaper than Hyundais in Korea,” and that “foreign brands have seen market share jump from 28 percent to 41 percent over the last two years.” Utter nonsense. Reuters correctly reports that imports have a 12 percent share in Korea, 11.83 percent to be exact for the first four months of the year, according to data by the Korea Automobile Importers and Distributors Association (KAIDA).
If you go to the considerable trouble of actually looking at the data, you see that imports to South Korea, which were at homeopathic levels before the turn of the millennium, went on a slow but steady rise in 2001. The trade agreement with the EU (from where most of the imported cars come) came in effect in 2011. The chart says that imports would have gone up anyway, with the FTA, or without it.