The Proposed U.S.-South Korea Free Trade Agreement (KORUS ...

CRS-16
Total Korean motor vehicle exports to the United States peaked at 860,000 units in
2004, according to U.S. Commerce Department data. It subsequently fell to 730,000
units in 2005, 695,000 units in 2006, and 675,000 units in 2007. 27 Hyundai has
established a major U.S. assembly plant, thus substituting for some imports. Kia also
plans to open a U.S. assembly plant by 2009. 28 Falling imports from Korea probably
were affected by a general softening of the U.S. market. U.S. exporters, including
South Korean and other foreign-owned manufacturers, shipped a total of 12,571
vehicles to South Korea in 2007.
The total value of South Korean automotive exports to the United States,
including parts, was $12.1 billion in 2007, compared to U.S. exports of similar
products to South Korea of $976 million. That meant a U.S. bilateral deficit in autos
of $11.2 billion, growing over the long term from a deficit of $5.5 billion in 2000,
and $1.5 billion in 1990. 29 Sang-yirl Nam, in an academic analysis of the effects of
the proposed FTA, found in simulation models of projected market changes, Korea
would always gain relative to the United States from bilateral liberalization, “because
Korea has a comparative advantage over the United States in the automobile sector;
in other words, Korea has been much more successful in accessing the U.S. market
than the United States has been in accessing the Korean market.” 30
But Tom Walsh, writing in the Detroit Free Press, presents data to show that
while the net U.S. bilateral automotive deficit will probably not decline substantially,
the trends are favorable to the United States since 2004. Data attached to his article
show that while the total value of U.S. imports from Korea rose by less than 1% from
2004 to 2007, the total value of U.S. exports in the other direction nearly doubled (up
87%). 31
South Korean policies that allegedly restrict imports of foreign-made motor
vehicles have been a major target of U.S. trade policy. In 1995 and 1998, the USTR
negotiated memoranda of understanding (MOUs) with South Korea, aimed at
reducing formal and informal South Korean policies that were said to discriminate
against imports of U.S.-made vehicles, and other foreign imports. U.S. policy
primarily focused on motor vehicle taxation policies and South Korean motor vehicle
standards, which supposedly did not conform to international standards, or those
27 U.S. Dept. of Commerce. International Trade Administration. Office of Aerospace and
Automotive Industries (Commerce Dept. OAAI). U.S. International Trade Data for Road
Motor Vehicles series.
28 st Federal Reserve Bank of Atlanta. EconSouth, “West Point Restarts Its Engines” (1 Qtr.
2008), pp. 3, 9.
29 2007 data from Commerce Dept. OAAI. Data for 1990 and 2000 quoted from CRS Report
RL32883, Appendix 5.
30 Sang-yirl Nam, “Implications of Liberalizing Korea-U.S. Trade in the Automobile Sector:
Potential Impact of the Korea-U.S. Free Trade Agreement,” Korea Economic Institute
Academic Paper Series, III:1 (February 2008), p. 10.
31 Tom Walsh, “Time for an Honest Chat About Trade,” Detroit Free Press (April 24,
2008).