(Washington D.C.)- As the United States and South Korea complete the 8th round of negotiations, U.S. Rep. Sander Levin (D-MI), Chairman of the Ways and Means Subcommittee on Trade, today made the following opening statement at the Trade Subcommittee Hearing on the U.S. - Korea Free Trade Agreement:

Honorable Sander Levin, Chairman
Ways and Means Trade Subcommittee

Subcommittee Hearing on the
U.S.-Korea Free Trade Agreement
March 20, 2007

Opening Statement as Prepared for Delivery

"The negotiation of the U.S. - Korea FTA is indeed significant.  Korea is the United States' seventh largest trading partner and the world's eleventh largest economy.  The U.S.-Korea Free Trade Agreement would be the largest and most commercially significant bilateral FTA negotiated by the Bush Administration.

"As the Administration completes its 8th round of negotiations, several outstanding issues remain, including services, telecommunications, intellectual property and agricultural, including beef and rice.  Most challenging is Korea's massive non-tariff barriers (NTBs) to American industrial products in general and automotive products in particular.  Since the outset, Korea has had an economic iron curtain against these products, using a combination of tariffs, taxes, and regulations.

"The U.S. - Korea Free Trade Agreement is a key test of the approach we take to trade policy.  It is a test of whether we need to shape the terms of expanded trade or assume, no matter how unbalanced, that leaving it alone to work out on its own is the best approach.  It is a test, specifically, of whether we will be active, or passive in the face of long-standing, harmful practices of the Korean government to discriminate against our products in their domestic market.  It is a test of our willingness to stand up for our domestic industry.

"Today, we will hear compelling testimony on the history of our trading relationship with Korea in the automotive sector.  The facts tell a real-life story.  Korea is the fifth largest producer, and the ninth largest consumer automotive market in the world.  We now have an $11 billion deficit in auto trade which is 82% of the total deficit between our two countries.  Last year, Korea sold 700,000 vehicles in the U.S.; the U.S. sold only 4,000 in Korea.

"The significance of Korean non-tariff barriers goes beyond this important FTA.  If USTR fails to deal with it decisively it will reinforce the lack of active consideration of NTBs in the WTO Doha Round negotiations which have to date made no progress on outstanding NTB issues in the entire global trading system.

"We know through experience - two previous Korean commitments in 'Memorandums of Understanding' (MOUs) were not worth the paper they were written on - what will not work to end these non-tariff barriers to U.S. exports.

"We need a very new approach.  At the beginning of March, a broad, bi-partisan group of legislators transmitted to the President a specific negotiating position that moves beyond previous negotiating strategies and embarks on such a new approach that conditions Korea obtaining additional access to the U.S. market on reciprocal opening of the Korean automotive market.  There are two key components to the bi-partisan Congressional proposal.  The first part addresses the phase-out of the 2.5 percent U.S. passenger vehicle tariff and creates a positive incentive for Korea to open its market to U.S. autos.  The second part addresses Korea's current non-tariff barriers and creates a mechanism - available to all industries - for the United States to take action against future non-tariff barriers.

"So far, there has been no meaningful movement by the Korean Government.  It clings to its persistent denial that there has ever been a government policy to shelter its market, a denial that flies in the face of the facts on the ground over the decades.  The response by USTR has included another form of denial ? a denial that Korea cares very much about the 2.5 percent tariff, thereby undercutting U.S. leverage and a denial that the one-way street will continue to be harmful because it is believed Korea will be shifting far more production to the U.S.

"Since the Korean government has made it clear that early elimination of the U. S. 2.5 percent passenger vehicle tariff is a top priority, I have no idea why we would be conceding any leverage.

"As I have communicated to USTR, a focus on future Korean increases in U.S.-based production is speculative and in any event misses the point.  Increased domestic production will not necessarily result in fewer exported autos from Korea.  Just look at the Japanese model. Over the last ten years, as Japanese production in the U.S. has increased, Japanese car exports to the U.S. have doubled from 1.2 million to 2.4 million. From 2005 to 2006, Japan exported an additional half a million cars to the United States - eighty percent of those were Toyota's. Finally, nearly half of all Toyota's sold in the U.S. last year, 2006, were exported to the United States. 

"It also misses the point that a large portion of the content of Korean cars assembled in the U.S. comes from Korea. 

"It also misses the point that the FTA must be structured to assure that the Korean market becomes fully open to U.S. automotive and other industrial goods.

"Congress cannot do the negotiating to end one-way streets in trade with Korea. But we can make it clear the type of Agreement that we can support.  My hope is that message is becoming clear to USTR.  We need a shift in negotiating strategy - to an active, results-oriented approach that demands and measures commitments by the Korean government.  To do less would be to do more of the same, and that should not and cannot result in an FTA acceptable to this Congress and the American people."

 

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