Korea agrees to import more US cars

Gov't defends steel, agriculture, auto parts in return

By Nam Hyun-woo

Korea consented to a number of U.S. demands on automobiles during negotiations for a revision to the Korea-U.S. free trade agreement (KORUS FTA), while protecting its agriculture and steel sectors. Trade Minister Kim Hyun-jong said Monday both countries have agreed in principle on revisions to the KORUS FTA. Also, the two agreed to exclude Korea from the U.S. list of countries subject to hefty steel tariffs

“With the negotiations, Korea has removed the two biggest trade uncertainties of U.S. steel tariffs and revisions to the KORUS FTA,” Kim said during a press briefing at the Government Complex in Seoul.

“There will be no additional opening of domestic agriculture markets, no mandatory use of U.S. auto parts and no rollback on tariffs which have already been lifted,” Kim stressed. “In terms of the steel tariff issue, Korea became the first country to have concluded negotiations to exclude itself from the U.S. move.”

Along with the FTA renegotiations, 30 negotiators engaged in talks to remove Korea from the U.S. plan to impose a 25 percent tariff on imported steel and a 10 percent duty on imported aluminum, which took effect last Friday.

Key revisions revealed by the Ministry of Trade, Industry and Energy include new rules on automobiles.

The two countries agreed to lift the duty on Korean pickup trucks by 2041, 20 years after 2021 stated in the current deal. Also, they agreed to increase the 25,000-vehicle per U.S. automaker threshold for U.S. car shipments to Korea to 50,000.

Currently, the pact regards up to 25,000 vehicles per U.S. automaker as having met Korea's safety standards, if the automaker keeps the U.S. safety standards. The U.S. had been claiming the cap has been virtually operating as a non-tariff barrier for its carmakers.

The U.S. has been exerting a tough pressure on automobiles as Korea's car and auto parts manufacturers posted a $17.75 billion trade surplus, which accounted for most of Seoul's trade surplus with Washington last year.

Describing the negotiations, Kim said, “there was nothing that should make us flinch,” stressing automakers here are yet to export pickup trucks to the U.S., while no U.S. carmaker sells more than 10,000 vehicles a year in Korea.

Regarding the steel tariff, Kim said Korea was excluded from the U.S. move, while setting up a 2.68 million ton export quota to the U.S., which is 70 percent of the average steel export volume from 2015 to 2017.

“This bears extra significance because Korea clinched the outcome under harsh conditions. Korea was on the list of 12 countries that could be slapped with a 53 percent duty as the U.S. said Korea was harming its industry through transshipping Chinese steel,” Kim noted.

The negotiations were widely interpreted as Korea giving up its “leverage” on automobiles in return for being excluded from the steel tariffs.

“I don't agree to the leverage interpretation,” Kim said, adding trade issues can be linked to each other.

To Korea's demand for revisions on investor-state dispute settlement (ISDS) he said the two countries have agreed to prevent investors from exploiting it, while reflecting the governments' legitimate authority.

ISDS allows investors to sue countries for alleged discriminatory practices via international arbitration bodies, but many have expressed concerns that multinational firms could exploit it, thus infringing on Korea's judicial sovereignty.