Korea, US agree on delay on car tariffs

Trade Minister Kim Jong-hoon holds a copy of the new supplemental agreement to the Korea-U.S. free trade deal during a press conference at the Ministry of Foreign Affairs and Trade, downtown Seoul, Sunday.

/ Korea Times photo by Bae Woo-han

Government accused of giving too many concessions

By Cathy Rose A. Garcia

Korea and the United States have finally reached an agreement on thorny automobile and agriculture issues, paving the way for the ratification of the long-delayed Korea U.S. free trade agreement (KORUS FTA).

President Lee Myung-bak and U.S. President Barack Obama hailed the KORUS FTA as a “win-win” deal that will create more jobs and spur economic growth for both countries.

However, there is criticism that Korea gave too many concessions to the U.S., particularly for its automobile industry, while getting too little in return.

Trade Minister Kim Jong-hoon, who participated in the final negotiations with U.S. Trade Representative Ron Kirk in Columbia, Md., last week, bristled at these criticisms. “I cannot agree with some views that (the agreement was the result) of our unilateral concession. The outcome is a win-win for both sides,” Kim said in a press conference Sunday.

The KORUS FTA was signed in 2007 under the Bush administration, but both sides have remained in a deadlock over U.S. demands for wider access to the Korean auto and beef markets.

The new FTA supplemental agreement only focuses on the issue of automobiles, and it appears U.S. automakers will finally be getting more access to Korea. In return, Korea, which has refused to discuss the issue of beef, has received some concessions such as a two-year delay in tariff reductions on American pork.

The U.S. is allowed to continue imposing a 2.5 percent tariff on most of Korean auto exports for four years before they are phased out in the fifth year. This is a major change from the original FTA signed in 2007, which calls for tariffs to be eliminated immediately or within three years.

On the other hand, Korea agreed to cut its tariffs on U.S. car imports by half to 4 percent immediately, and eliminate them in the fifth year.

Korea is also allowing more imports of American vehicles, even if they do not meet Korean safety standards. Each U.S. automaker is allowed to export 25,000 vehicles, almost four times the number allowed in the original FTA, as long as they meet U.S. federal safety standards.

The revised deal also allows the U.S. to maintain a 25 percent import tariff on Korean trucks for seven years, before being eliminated in the following three years. Korea will stick to its commitment to eliminating 10 percent tariffs on U.S. trucks immediately.

Another sticking point was U.S. vehicles’ compliance to strict Korean environmental standards on fuel economy and greenhouse gas emissions. Under the supplemental agreement, Korea will consider all U.S. autos to be compliant with these standards if they achieve 119 percent of the targets.

U.S. automakers have long complained of their limited access to the local market. Korean automakers like Hyundai and Kia have significantly increased exports to the U.S., topping almost 500,000 in 2009, while U.S. exports to Korea are fewer than 10,000 a year.

In exchange for these concessions, Korea will be allowed to extend tariffs on American pork by two years to 2015. Korean workers, who are assigned to U.S. offices, will be allowed to have a five-year visa rather than the current three-year one.

The highly contentious issue of American beef imports was not on the agenda. Kim said the beef issue was not discussed by the two sides during the recent negotiations. The U.S. has continued to press Korea to further open its beef market, but Korea has maintained the issue is not related to the FTA.

Once the FTA enters into force, nearly 95 percent of bilateral trade in consumer and industrial products will become duty free within three years, and remaining tariffs will be eliminated within 10 years.

The U.S. International Trade Commission estimated that the KORUS FTA will increase U.S. GDP by at least $10 billion and increase exports to Korea by $10 billion to $11 billion annually. The Korea Institute for International Economic Policy estimated Korea’s real GDP will increase by an additional 6 percent and exports to the U.S. by $13.3 billion within 10 years of implementation.

한미 FTA 승용차 관세철폐 연장 합의

한국과 미국은 오랜 동안 지연되어온 양국간 자유무역협정 (FTA) 비준을 위해 자동차와 농업부문 관련 난제들에 대해 합의를 이끌어 냈다.

이명박 대통령과 버락 오바마 대통령은 양국에 더 많은 일자리와 경제성장을 촉진할 한미FTA (KORUS FTA)를 반겼다.

그러나 한국에서는 미국에 자동차 부문에서 너무 많은 양보를 하고 너무 적은 것을 얻었다는 비판이 있다.

지난주 미국 컬럼비아에서 미국 무역대표부 대표 론 커크와 최종 협상을 벌였던 김종훈 통상교섭본부장은 5일 이런 비판에 대해 발끈하며 “이번 합의가 우리측의 일방적 양보에 의한 결과물이라는 일부의 주장에 대해 동의할 수 없다. 쌍방의 win-win의 결과” 라고 기자회견에서 말했다.