By Ian Swanson - 11/29/09 08:40 PM EST
President Barack Obama’s call to complete a trade deal with South Korea
in 2010 is stirring a hornet’s nest among Michigan lawmakers on Capitol
They worry it will harm the U.S. auto sector and warn it will have to be significantly changed to win support.
Obama has said he’ll seek to change auto provisions in the deal, and South Korea’s president agreed to talks about the sector during Obama’s trip to that country last week.
But that hasn’t mollified opponents, who are calling for significant changes that South Korea may find difficult to swallow.
The concessions are aimed at closing the gap between sales of U.S. vehicles in South Korea, and sales of Korean vehicles in the U.S.
The Big Three U.S. automakers sold fewer than 7,000 automobiles in South Korea last year, while Hyundai alone has sold nearly 375,000 cars in the U.S. this year.
Rep. John Dingell (D-Mich.), the dean of Michigan’s delegation, has introduced a resolution that demands that the trade deal be amended to ensure fair access to the Korean automobile market for U.S. manufacturers. He said the agreement as written would allow Korea to continue unfair treatment of U.S. automobiles.
Ford, the U.S. automaker that has been most vocal on the issue, is also demanding changes.
“Ford believes it is absolutely necessary to level the playing field,” Steve Biegun, Ford’s vice president of international government affairs, said in a statement. “We appreciate President Obama's commitment to correct the huge imbalance in U.S.-Korean automotive trade before an FTA is considered.”
Economically, a trade deal with South Korea would be the biggest approved by Congress since the North American Free Trade Agreement (NAFTA) with Mexico and Canada.
The International Trade Commission estimates the deal would add $10 billion to $12 billion to annual U.S. gross domestic product through the reduction of tariffs and quotas alone. The deal would also give U.S. firms greater access to Korean financial services, legal consulting and international delivery markets, among other areas.
Business groups that support the deal have urged the administration to move forward, arguing the U.S. is losing out to Canada and Europe by sitting on the Korea trade deal and a similar agreement with Colombia, a view Commerce Secretary Gary Locke appeared to support in comments last week.
Locke noted that the European Union had signed a tentative agreement with Korea that he said would result in substantial market entry for European companies.
“The longer we wait to pass an agreement, to ratify an agreement with Korea, the more the relationships between Korean entities and European counterparts will have been solidified,” Locke said during a question and answer session at the National Association of Manufacturers.
“And of course, once you have a business relationship, you're not just going to jettison that relationship just because someone else is new knocking on your door,” Lock continued. The longer the U.S. waits, “the harder it is for the American companies to catch up.”
Locke said the deal needed to be finalized as soon as possible so that it could be delivered to Capitol Hill, but acknowledged some outstanding issues must still be worked out.
Lawmakers including Dingell and Rep. Sander Levin (D-Mich.), the chairman of a subcommittee on trade, say a 2007 proposal from Congress must be addressed.
That proposal calls on Korea to eliminate a number of non-tariff barriers to trade. Korea would also have to phase out a 2.5 percent tariff on Korean cars over 15 years, while an 8 percent tariff that Korea imposes on U.S. cars would be eliminated immediately.
Korea would also be given incentives to increase sales of U.S. cars in Korea. It would get to export duty-free to the U.S. a number of vehicles equal to the increase in annual U.S. vehicles sold in Korea.
The proposal also would allow the president to impose tariffs on imports of cars from Korea if there is a surge in imports under the deal.