Senate Floor Statement on the U.S.-Korea Free Trade Agreement

Mr. President, as our economy struggles to recover from the worst recession since the Great Depression, we must look at all ways to create jobs here at home. One obvious way to create jobs is to sell more products to overseas markets. That’s why President Obama has announced the goal of doubling U.S. exports by the year 2015. That is an admirable goal and one that I support.

To achieve that goal we have to examine our trade policies and change them when they are not working. That’s surely what we need to do when it comes to the so-called U.S. Korea Free Trade Agreement and automotive trade.

This agreement, still being negotiated, would perpetuate an unlevel playing field that unfairly disadvantages U.S. automotive exports. One of the reasons the agreement has not been brought before the U.S. Congress for approval is because the agreement is skewed in favor of Korean automakers.

The Bush Administration made a major error in how it approached the growing field of electric vehicles during treaty negotiations. The agreement would allow for a 10 year phase-out of the 8 percent Korean tariff on hybrid electric passenger vehicles and the 2.5 percent U.S. tariff. This is not a fair deal for U.S. electric car exports. It’s bad enough that the current Korean electric car tariff is more than 3 times the U.S. tariff. This agreement would lock in place for 10 years Korea’s electric car tariff advantage as it is phased out. Why in the world would we agree to that?

It’s as if you beat me up 8 times a day and I beat you up two times a day and you expect me to be happy when you reduce that beating to 7 times per day -- that’s still not much of a deal for me.

It’s a stubborn thing this image some people have of free trade. It’s like a blind faith belief that any trade agreement is automatically good for the United States. This seems to hold true no matter how many American jobs may have been lost as a result of unfair trading practices by our trading partners and no matter how bad a deal a specific free trade agreement might be for certain sectors in the United States. The response always seems to be the same for those that criticize an unbalanced free trade agreement: they call the critics protectionists.

The protectionism enmeshed in the U.S. Korea trade relationship is protectionism by Korea. Until 1989 Korea did not even allow imported autos into its market. Once it did officially allow imported vehicles into its market, Korea found other, less visible ways of keeping them out, including maintaining tariff and nontariff barriers, such as discriminatory taxes based on engine size, unique standards, inadequate regulatory transparency, and inadequate ability of stakeholders to provide input at an early stage into the development of regulations and standards.

When it comes to automotive trade with Korea, the numbers tell the story. Korea has free unfettered access to the U.S. market and we have extremely limited access into Korea’s market.

Last year Korea shipped 476,833 autos to the United States. And while Korea relies on exports to support its domestic auto makers, Korea remains one of the most closed auto market in the world. In a market of almost1.5 million annual vehicle sales, the U.S. exported just 5,878 autos to Korea last year. And it’s not just American autos that are being kept out. Vehicles made in Korea account for 94% of the Korean market -- only 6% of vehicles sold in Korea are imports. That is lower than every other developed country except Japan. In the U.S., over 41% of our auto market is made up of imports. In Germany that number is 55%, in Mexico it is 57%, and in Spain, Canada and Italy it is over 70% or higher.

Korea’s protected automotive market provides a huge source of profit and jobs for Korea and, in contrast, it is a huge source of trade deficits and job loss for the United States. About 74 percent of the $10.6 billion U.S. trade deficit with South Korea is in automotive trade.

So to those who say we are protectionist when we complain about this, I respond that we are not the protectionists and we have not protected our automotive market. The nearly 500,000 Korean-made vehicles that come into the U.S. market each year validate this point, as does our 2.5 % auto tariff compared to Koreas 8% auto tariff and numerous non-tariff barriers that keep our vehicles out of Korea.

Despite efforts by the U.S. government for over a decade to open the Korean auto market, Korea has successfully kept its market closed. Auto-specific agreements negotiated in 1995 and 1998 failed to make any progress in opening Korea’s automotive market. Although the previous agreements were intended to sweep away some of the most overt non-tariff barriers, Korea quickly replaced them. For instance, the year after the 1998 auto-specific agreement was signed committing Korea to, "Not take any new measures that directly or indirectly adversely affect market access for foreign passenger vehicles," Korea introduced three new and unique auto safety standards: front tow hook, headlamp, and remote keyless entry. In the three years after that, Korea introduced seven more auto safety and emissions regulations. And in the four years after that, Korea introduce another seven, and the list continues. Our protests were for naught.

Any trade agreement with South Korea should level the playing field for U.S. auto exports. Unfortunately, the pending agreement, reached more than three years ago but now being renegotiated, leaves South Korea with the effective ability to use rules and regulations to continue limiting automotive imports into the Korean marketplace. Korea has used such rules and regulations before to discriminate against imported vehicles and they’ll be used again unless we have a strong mechanism to remove them. This agreement does not include such a mechanism to deal with any new non-tariff barriers, such as auto safety standards or emissions regulations that Korea could introduce once the current draft agreement is entered into and approved by the Congress.

The agreement is strongly opposed by Ford and Chrysler because the agreement does not ensure that South Korea will not take measures to impede access of imported U.S. made cars. GM is neutral on the agreement because it gained access to the Korea market by buying Daewoo, not by exporting cars to Korea from the United States.

Ensuring fair access to the Korean market would have an important impact on our auto industry’s drive to regain its competitive strength and health. We need to fight for American jobs, not let them go overseas as a result of poorly negotiated trade agreements. We need to find a way to gain meaningful access to Korea’s auto market and so far this trade agreement has not achieved that goal.