U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

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Box 3.4 Automotive-related FTA Provisions—Continued Technical Barriers to Trade (Chapter 9) and Confirmation Letter (Specific Autos Regulatory Issues) • K-ULEV: With respect to Korea’s Ultra Low Emission Vehicle standard, Korea has agreed that it would apply emissions standards no more stringent than those applicable in California. Korea has also agreed to use a low-volume (
vehicles that receive a tax break in the agreement are those over 2,000 cc, as the new rate to be applied at implementation does not change for vehicles with engines between 1,601 and 2,000 cc. (The small percentage of vehicles between 801 and 1,000 cc also receive a tax cut, but there are no imports in this category.) The FTA does not reduce or restructure the subway bond, which is also based on engine size. The effect on U.S. exports of passenger vehicles of Korea’s commitments on TBTs is also expected to be positive but likely minimal. These commitments are also applied on an MFN basis. The FTA addresses the Korean standards that were identified by U.S. automakers as priority issues (ultralow emission vehicle standards, onboard diagnostic standards, and selfcertification), and Ford conceded that “there is some convergence to the U.S. standards.” 455 The overall Korean system, however, remains unique and continues to combine U.S. and European safety and emission standards. 456 On the priority issues, U.S. industry believes that the trade-distorting effect of the K-ULEV regulation is removed in the FTA. 457 The FTA did not eliminate the Korean OBD II regulation, but instead offers a short-term exemption from meeting the standard for low-volume importers. Additionally, as it stands, the OBD II regulation, although consistent with California regulations, may require U.S. automakers to incur significant additional costs in terms of vehicle prototypes, documentation, and other demonstration requirements. 458 Finally, on self-certification, 459 U.S. officials assert that, for U.S. manufacturers exporting no more than 6,500 vehicles, U.S. safety-certified vehicles would be accepted as meeting all Korean safety regulations. 460 As elaborated on in the Views of Interested Parties section, because of the highly technical nature of the TBTs, U.S. industry believes that the FTA text still requires clarification. Further, the low-volume seller exemptions established for two TBTs in the FTA may act as a disincentive for U.S. automakers to pursue vehicle sales above these levels. 461 According to an official with Ford, to build a vehicle to a uniquely Korean emission standard would require sales in the tens of thousands to make sense from a business perspective. 462 If automakers manufacturing in the United States did reach and limit their exports to the lowest low-volume seller exemption threshold, which is the exemption from K-ULEV for importers selling up to 4,500 vehicles in Korea, it could represent a significant increase in the volume of U.S. exports to Korea; the agreement, however, does not specify how a “manufacturer” is defined; e.g., whether foreign affiliates are included in a parent company’s total. Nonetheless, U.S. exports would still likely account for a very small portion of total Korean sales. Additionally, the FTA states that Korea would not adopt new technical regulations that “create unnecessary barriers to trade” and to work with the United States on harmonizing standards. As noted earlier, however, the introduction of each new model of vehicle can create a situation in which subjective decisions are made that can result in loss of market 455 Biegun, testimony before the USITC, June 20, 2007, 239. 456 ITAC (2) on Automotive Equipment and Capital Goods, Advisory Committee Report, April 27, 2007. 457 Ibid. 458 Ibid. 459 Self-certification is the way by which the manufacturer certifies that each product put on the market conforms to given regulations; the competent administrative authorities may verify by random sampling on the market that the self-certified products comply with the requirements of given regulations. 460 ITAC (2) on Automotive Equipment and Capital Goods, Advisory Committee Report, April 27, 2007. 461 Congressman Levin, “Testimony as Prepared for Delivery,” written submission to the USITC, June 20, 2007; and Biegun, “United States International Trade Commission's Hearing” written submission to the USITC, June 20, 2007. 462 Biegun, testimony before the USITC, June 20, 2007, 241. 3-81
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U.S. International Trade Commission
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This report was prepared principall
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CONTENTS-Continued Chapter 3. Secto
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CONTENTS—Continued Chapter 5. Imp
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CONTENTS-Continued Chapter 7. Liter
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CONTENTS-Continued Tables—Continu
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Abbreviations and Acronyms 3G third
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Abbreviations and Acronyms—Contin
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Abbreviations and Acronyms—Contin
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vehicles) would likely be diverted
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Sector-specific Assessments The U.S
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total increased fish imports from K
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Korea would likely limit the impact
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Intellectual property rights (IPR):
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sector barriers. 5 These merchandis
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Table 1.1 U.S.-Korea FTA: Location
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Table 1.2 Korean tariff rates on im
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Table 1.4 U.S.-Korea FTA: Summary o
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observed GDP for model regions). Th
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Box 2.1 Interpreting the model resu
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Table 2.1 U.S.-Korea FTA: Simulated
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2-8 This page has been updated to r
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Figure 2.2 U.S-Korea FTA: Simulated
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As shown in figure 2.2, the largest
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2-14 This page has been updated to
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Economy-wide Impact of Implementing
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Grain (Wheat, Corn, and Other Feed
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Korea imported 3.8 million mt of wh
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U.S. oilseed product exports to Kor
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Table 3.2 U.S. oilseed product expo
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Table 3.3 Animal feed exports to Ko
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consumed domestically by the U.S. l
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ates. For corn starch, the United S
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quota rates have been effectively e
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Noncitrus Fruit 87 Views of Interes
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3-20 Table 3.9 U.S.-Korea trade and
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Korean grapes are much more costly
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Potato Products 122 Assessment The
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ate is 304 percent ad valorem. 141
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Other Vegetables 162 Assessment The
Page 84 and 85: U.S. exports of other fresh and pro
Page 86 and 87: tariff concessions that could accru
Page 88 and 89: Dairy Products 215 Similarly, the p
Page 90 and 91: TRQ for food whey, 223 based on cur
Page 92 and 93: potential changes in trade based so
Page 94 and 95: Figure Figure 3.1 Korea: Beef and v
Page 96 and 97: Views of Interested Parties The inc
Page 98 and 99: are subject to the same food safety
Page 100 and 101: enefit under the provisions of this
Page 102 and 103: Box 3.2 Potential price and quantit
Page 104 and 105: 50 percent, while the vegetable jui
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Page 110 and 111: U.S. Exports The impact of the FTA
Page 112 and 113: passage. NCTO indicated that, even
Page 114 and 115: In its report, the ITAC on Distribu
Page 116 and 117: of the U.S. footwear market, with C
Page 118 and 119: of these producers. 362 RPFMA noted
Page 120 and 121: prohibit improper inducements by ph
Page 122 and 123: Machinery, Electronics, and Transpo
Page 124 and 125: U.S. exports of auto parts would be
Page 126 and 127: imports from and exports to Korea.
Page 128 and 129: Passenger Vehicles 433 Assessment U
Page 130 and 131: Table 3.16 Korean passenger vehicle
Page 132 and 133: import activities have continued
Page 136 and 137: access. The FTA affirms the parties
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Page 140 and 141: keep the products out.” 492 Mr. B
Page 142 and 143: these vehicles to Korea. The commit
Page 144 and 145: Brown expressed concern about the r
Page 146 and 147: goods; and high-technology medical,
Page 148 and 149: device pricing, reimbursement, and
Page 151 and 152: CHAPTER 4 Impact of Market Access P
Page 153 and 154: elative to GDP than do China, Japan
Page 155 and 156: services as a substantial improveme
Page 157 and 158: Box 4.2 Financial services: Competi
Page 159 and 160: Summary of Provisions Chapter 13 of
Page 161 and 162: national treatment, full establishm
Page 163 and 164: Box 4.4 Competitive conditions in t
Page 165 and 166: and cross-connect links 70 are more
Page 167 and 168: Box 4.5 U.S. legal services trade w
Page 169 and 170: establish offices in Korea to provi
Page 171 and 172: Box 4.6 Competitive conditions in t
Page 173 and 174: equirements and foreign ownership r
Page 175 and 176: CHAPTER 5 Impact of Trade Facilitat
Page 177 and 178: publication and administration of t
Page 179 and 180: Views of Interested Parties In its
Page 181 and 182: Summary of Provisions This chapter
Page 183 and 184: use of TBTs to protect Korea’s au
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conformity assessment procedures el
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FTA Chapter 15-Electronic Commerce
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Views of Interested Parties The U.S
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quantities as to be a substantial c
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that such transshipment could imped
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Box 6.1 Foreign investment in Korea
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in the FTA. The awards made by any
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Table 6.1 U.S.-Korea FTA: Industry
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(ITAC 5) report cited as particular
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Section C of Chapter 11 and the lac
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practices, and violations of consum
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FTA Chapter 17—Government Procure
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Both the United States and Korea ar
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8) 87 also expressed support for th
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Box 6.2 Recent conditions of IPR pr
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protection to life of the author pl
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Views of Interested Parties A numbe
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GPHA stated in testimony before the
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Box 6.3 Labor market conditions in
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FTA Chapter 20—Environment 131 As
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trade measures are the least disrup
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FTA Chapter 22-Institutional Provis
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Views of Interested Parties The Ind
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CHAPTER 7 Literature Review and Sum
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7-3 Table 7.1 Model, liberalization
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terms. Much of the increase in U.S.
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Liberalization generated small incr
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Sander Levin, Member of the U.S. Ho
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Regarding footwear and travel goods
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Korea’s establishment as a region
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The California Table Grape Commissi
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order activity, and facilitate expa
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At the Commission’s hearing, Mr.
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Information Technology Industry Cou
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With respect to tariff and nontarif
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deterring illegal transshipments. I
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PhRMA identified what it views as t
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the TIA stated that it supports the
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access to the market. The Council a
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United States, Spain, Chile, Brazil
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Bibliography Advanced Medical Techn
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AT&T. “AT&T Reaction to Free Trad
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______. “Korea-U.S. Free Trade Re
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______. “Country Finance: South K
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Global Trade Information Services I
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International Labor Organization (I
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Jones, Laura E. Executive Director.
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Lee, Hyunok, and Daniel A. Sumner.
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Nam, In-Soo. “Helio's Losses To W
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Powers, Mark. Northwest Horticultur
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Smith, Brad. American Council of Li
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U.S.-Korea Business Council (USKBC)
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______. “Korea, Republic of Oilse
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U.S. International Trade Commission
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Ward, David. American Council on Ed
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APPENDIX A Request Letter from USTR
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APPENDIX B Federal Register Notices
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pwalker on PROD1PC71 with NOTICES 2
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APPENDIX C Hearing Participants
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ORGANIZATION AND WITNESS: PANEL 1 (
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APPENDIX D U.S.-Korea FTA: Chapter-
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fees and charges on trade in goods
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determines the tariff classificatio
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The transparency provisions would a
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necessary duties within 1 year of i
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technical regulation or conformity
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procedures), and practices of a par
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aviation, fisheries, or maritime ma
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of standards and criteria and on te
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of the FTA that impose unilateral o
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use of electronic authentication in
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parties’ rights and obligations u
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establishment of Uniform Domain-Nam
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government to take appropriate meas
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environmental laws. 102 In the U.S.
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not limited to, policies on commerc
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Economic indicators 2002 2006 Popul
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Table E.1 Leading U.S. exports to K
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APPENDIX F GTAP Model
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Updating the GTAP Database The curr
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Key Assumptions Agency. 4 The price
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Table F.2 U.S.-Korea FTA benchmark
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Measuring the Impacts of the FTA an
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General Effects of Trade Agreements
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APPENDIX H Tariff Equivalents in Ko
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Previous Literature The method for
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For the purposes of this report, a
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Table H.1 Tariff equivalents in Kor
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APPENDIX I Services Nonconforming M
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Table I.1 U.S.-Korea FTA: Korean se
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APPENDIX J Description of Possible
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are in effect import prices, and th
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APPENDIX K Overview of Agricultural
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Additionally, although current regu
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About This Report The United States
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