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

fifth-largest vehicle producer and the third-largest vehicle exporter, but has the lowest level
of import penetration of any major automotive-producing country in the world. The 1995
and 1998 MOUs were ineffective in opening the Korean market to imported vehicles, and
U.S. automotive trade deficit with Korea grew particularly quickly after the 1998 MOU,
even while the U.S. government was engaged in regular consultations with the Korean
government. Mr. Meyer stated that the FTA will result in a surge of imports from Korea, a
large loss of automotive jobs in the United States, and an abandoning of Korean automaker
plans for future manufacturing expansion in the United States. Korea automakers have one
manufacturing plant in the United States and one under construction, and said that these two
plants will not be able to satisfy most of their sales in the U.S. market. With respect to the
FTA provisions, Korea will be able “to continue the discriminatory taxes and other non-tariff
barriers that it has used to keep its market closed. He also said that the special auto dispute
resolution process is structured in a manner that would make it extremely difficult for the
U.S. to prevail in any case against Korean non-tariff barriers.” With respect to the
agreement’s side letter on autos, “Korea agreed to delay the application of selected non-tariff
barriers and to allow limited volume exemptions for others. But the agreement does not
require Korea to eliminate all current non-tariff barriers, nor does it establish effective and
enforceable mechanisms for addressing future non-tariff trade barriers.”
The Automotive Working Group created in the agreement has no enforcement power to
address barriers, and that the dispute resolution procedures would do little more than
“expedite slightly the usual joint committee review and arbitration process.” With respect
to dispute resolution, “the burden should be on the Korean government to prove that its
discriminatory taxes and other non-tariff barriers are not responsible for keeping out our
products.” He also added that the snapback remedy provision, which does not apply to the
25 percent truck tariff, is “toothless,” and that it will do nothing to provide redress to the
automakers and their employees. At the Commission’s hearing, Mr. Meyer stated that the
FTA allows Korea to maintain its own emission standards that are “essentially equivalent”
to U.S. standards in certain instances, calling into question the effectiveness with which a
dispute could be resolved.
National Association of Manufacturers 44
In a written submission to the Commission, the National Association of Manufacturers
(NAM) reported that it is the nation’s largest industry trade association, representing small
and large manufacturers in every industrial sector in every state. NAM said that the FTA is
not perfect, but on an overall basis is strongly beneficial to a majority of manufacturers and
provides significant access to the Korean market. NAM noted concerns that U.S. automakers
have voiced regarding some tariff and nontariff provisions that they believe will continue to
block commercial access to the Korean market and the U.S. steel industry’s concerns
regarding trade rules and other barriers. NAM stated that among the primary reasons for the
U.S. trade deficit with Korea are the tariff and nontariff barriers that U.S. manufacturers face
in the Korean market. Further, NAM noted that it believes that the FTA would provide U.S.
manufacturers with strong market access and substantially reduce barriers that companies
face.
44 International Trade Policy, National Association of Manufacturers, written submission, June 27, 2007.
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