South Korean Trade Studied: U.S. Carmakers Hear Reassurance

By Justin Hyde, Detroit Free Press

Mar. 21--WASHINGTON -- A federal official said Tuesday that a proposed trade agreement with South Korea would address some concerns of Detroit automakers, but suggested the benefits for Korean automakers would be limited because of their plans to boost U.S. production.

The comments came at a hearing Rep. Sander Levin, D-Mich., called to question Bush administration officials about the trade talks and discuss domestic automakers. The administration must submit any proposed deal by March 30 for it to be considered under fast track rules that force Congress to give up-or-down votes on trade agreements.

Levin and other lawmakers warned the administration that if a South Korean deal does not address automobiles, agricultural products and a number of other goods, it will not get through Congress. If completed, a deal would be the largest U.S. trade pact since the North American Free Trade Agreement in 1993.

A deal "must be structured to assure that the Korean market becomes fully open to U.S. automotive and other goods," Levin said.

Deputy U.S. Trade Representative Karan Bhatia said the administration is planning to submit an agreement by the end of the month, and a deal could increase revenue for the U.S. economy by $17 billion to $43 billion a year.

The U.S. trade deficit with South Korea grew to $14 billion last year, $11.6 billion of which came from autos and auto parts. Detroit automakers have long complained about the closed Korean market. In response to the auto industry's concerns, Bhatia said the deal would address Korean barriers to auto sales, but that his estimates showed Korean automakers raising their U.S.-sourced production from about 20% today to as high as 70% of their sales within a few years.

Bhatia's comment drew a rebuttal from Levin. He said those projections were "pure speculation," and noted that Japanese vehicle imports rose last year even as Japanese automakers built more vehicles in the United States. Levin also said the administration rejected a proposal from several lawmakers that the U.S. take a tougher stance on automotive issues in the trade talks.

While Korean automakers have made gains in the United States, the reverse has not held true. Last year, U.S. automakers and their foreign brands sold 7,165 vehicles in South Korea; Korean automakers sold about 1.2 million vehicles at home and 800,692 cars and trucks in the United States. All foreign automakers in Korea sold just 40,530 vehicles in 2006.

"No manufacturer from any country can make significant sales into the Korean market," said Stephen Biegun, Ford Motor Co.'s vice president of international government affairs. "Not Ford, not General Motors, not Toyota, not Volkswagen -- nobody."

The Korean government has denied using any extraordinary means to block import vehicle sales, but automakers say new rules and tax changes constantly target their businesses there. Stephen Collins, head of the Automotive Trade Policy Council, said those barriers ranged from random changes in license plate sizes to putting foreign vehicles in the highest-risk categories for auto insurance.

Alan Reuther, the UAW's legislative director, said the pact would "exacerbate our auto trade deficit with Korea and jeopardize tens of thousands of auto jobs."

To underline such concerns, Michigan Gov. Jennifer Granholm and Ohio Gov. Ted Strickland sent a letter to Levin on Monday, urging Congress to block any South Korean trade pact that "weakens the competitive position of our domestic automotive manufacturing sector."

Contact JUSTIN HYDE at 202-906-8204 or [email protected].

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Copyright (c) 2007, Detroit Free Press

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