US-Korea Free Trade Agreement Results Darken Trans-Pacific Partnership
Two years after the Obama administration heralded its free trade deal between the United States and South Korea, the latter’s market remains relatively closed to the former’s exports.
The Detroit News reports U.S. Senator Debbie Stabenow of Michigan, chairing her first Finance Committee subcommittee on international trade, proclaimed the free trade agreement fell short of expectations, noting the increasing deficit between the U.S. and South Korea by 50 percent in favor of the latter party, especially regarding automotive exports:
The agreement aimed to open Korea’s markets to American automakers. But agreeing to phase-out tariffs on U.S.-made automobiles hasn’t been enough. Due to non-tariff barriers, Korea remains one of the most closed auto markets in the world.
Ford vice president for international government relations Steve Biegun, also in attendance, said his employer will sell just 7,000 units in South Korea this year after 20 years of attempts to boost sales. Biegun said access to the Korean auto market remains a challenge, citing regulatory challenges.
This comes on the heels of the Trans-Pacific Partnership, which seeks to do with Japan, the United States and 10 other nations what the U.S. had sought with South Korea. Biegun, CEO Mark Fields and Chairman Bill Ford Jr. warn the deal needs increased measures to hinder Japan’s ability to influence the value of the yen, while Stabenow adds there are “outstanding disputes” on agriculture and automobiles along other “very sticky issues” between all parties involved, especially Japan.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
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I think many Koreans are worried about the cost of parts, service, and insurance when buying foreign cars. The price of upkeep are easily twice or three times the amount of a comparable domestic vehicle. For the majority of the middle class, this is the greatest barrier to buying imports. For the Koreans who can afford that, they prefer German or British brands over American. Most likely due to their cachet and perceived quality. Until American brands create effective marketing to combat such stigmas, they will have tough time selling cars in Korea, free-trade or not.
I have trouble seeing which Michigan built vehicle could be competitive in Korea. Our cars are quite different, bigger, and cruder. Stabenow had earlier expected Koreans to start driving F-series trucks through Seoul, and is now surprised they are not buying?
Shades of Ford Australia and Thailand. Drop the tariffs, but increase the car rego/tax/anything else that is a "local government" issue and not tied to imports directly to achieve the same effect at the same time. Doesn't violate any FTA. Thailand put a huge impost on passenger vehicles with an engine capacity greater that 2.5 litres (I think) Blew the anticipated Ford Territory import scheme right out of the water, but didn't stop the import of Thai Fords to Australia. Looks like Ford got done over, again!
Political advice for South Korea: Eliminate all barriers to imported US cars. It would be painless and completely symbolic; Detroit does not make anything suitable for the Korean market - they might sell a few big SUVs or pick-ups as novelty items. It's also crossed my mind: South Korea is all grown up, a major industrial power, perfectly capable of defending itself from its crazy cousins to the North without the thousands of US troops stationed there.