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

Sander Levin, Member of the U.S. House of Representatives from
Michigan 19
Congressman Sander Levin, who represents Michigan’s twelfth Congressional District,
focused principally on the impact of the FTA on the U.S. auto industry in his written
testimony to the Commission. He stated that Korea maintains an “economic iron curtain
against all imported autos, using a powerful and extremely effective combination of tariffs,
prohibitive and discriminatory taxes, and regulations designed specifically for the purpose
of keeping imports out.” He also said that “the FTA as currently negotiated will simply lock
in a structure of one-way trade . . . and allow the Korean auto industry to continue an export
driven strategy using the profits from their protected home market to fund R&D and broader
incursions into the US and other major markets.”
Congressman Levin also addressed several provisions in the FTA and their impact on the
U.S. automotive industry. With respect to discriminatory taxes, he stated that the FTA
merely reduced two of them and left the third intact. On existing nontariff barriers, he noted
that four such barriers were identified by U.S. industry during the negotiations, and
characterized the outcome as follows: “delay of one onerous discriminatory regulation, delay
of another with an exemption dependent on a low volume of sales, an artificial resolution of
the third and no handling of the fourth.” With respect to the low-volume sales exemption,
he noted that this was is a self-defeating concession. With respect to the FTA’s special
dispute settlement provisions pertaining to autos, Congressman Levin added that “the only
thing ‘innovative’ about it might be that the expedited structure assures failure sooner,” and
that it will be even more difficult for a U.S. automaker to win a case under the FTA
provisions than to win a case under WTO dispute settlement rules. Congressman Levin also
noted that the automotive working group created under the FTA is not mandated to meet. He
estimated that tariff reductions would amount to a savings of $217 million for Korean
automakers exporting to the United States, but only $12 million for U.S. automakers
exporting to Korea.
The Government of the U.S. Virgin Islands 20
John P. de Jongh, Jr., the Governor of the U.S. Virgin Islands, stated that duty-free entry of
watches from Korea into the U.S. market under the FTA has the potential to cause serious
harm to the watch industry in the Virgin Islands in his written submission to the
Commission. He remarked that watch production is the largest light manufacturing industry
in the Virgin Islands and that the watch sector is essential to the economic stability of the
Virgin Islands. He noted that the FTA would permit duty-free entry from Korea for several
classifications of watches for which eligibility under the Generalized System of Preferences
(GSP) has been denied because of potential material injury to the watch industry in the
United States and the Virgin Islands. 21 The governor noted the 2004 Miscellaneous Trade
and Technical Corrections Act included a “hold harmless” mechanism that provides watch
producers in the Virgin Islands with additional wage-based benefits under the Production
Incentive Certificate (PIC) program to offset the loss in comparative advantage from duty-
19 Congressman Sander Levin, testimony before the U.S. International Trade Commission, June 20, 2007
and written submission, June 20, 2007.
20 Governor John P. de Jongh, Jr., U.S. Virgin Islands, written submission, June 28, 2007.
21 Korea is not eligible for GSP treatment.
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