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(Washington D.C.)- Ways and Means Committee Chairman Sander M. Levin (D-MI) issued the following statement today in response to the announcement of an agreement on critical changes to the pending trade agreement between the U.S. and South Korea:
“The changes announced to the U.S. – Korea Free Trade Agreement (FTA) today are a dramatic step toward changing from a one-way street to a two-way street for trade between the U.S. and South Korea. These changes represent an important opportunity to break open the Korean market for U.S. businesses and workers and boost American manufacturing jobs, particularly in the automotive sector.
“For decades South Korea has employed a unique and ever changing regulatory regime to discriminate against auto imports while the U.S. market has been totally open to their goods. As a result, U.S. automakers exported less than 6,000 cars to South Korea in 2009 while South Korea has used its historically closed market to finance an aggressive push into the U.S. market, exporting 476,000 cars to the U.S. in 2009. The imbalance is so severe that automotive trade accounts for a full three-quarters of the $10.6 billion U.S. trade deficit with South Korea.
“Today’s agreement delays the elimination of the U.S. tariff on South Korean auto exports for five years, unlike the 2007 FTA, which would have eliminated duties on Korean car exports immediately. This development provides leverage to assure that Korea opens its market and provides time for our industry to root itself in the Korean marketplace. Today’s changes will also tear down South Korea’s wall of non-tariff barriers (NTBs), including their improper use of tax rules and discriminatory safety and emissions standards that have shut U.S. automakers out of their market. The changes also include, for the first time ever, an auto-specific safeguard that will protect U.S. manufacturers from a harmful surge of South Korean imports in the future. Most importantly, today’s changes are fully enforceable.
“The FTA also includes robust labor and environmental commitments that are fully enforceable that were agreed to in May 2007. Going forward, the Trans-Pacific Partnership negotiations provide an opportunity to continue working on other provisions within the framework of trade agreements.
“The changes announced today resulted from the Administration, domestic automotive industry, the United Auto Workers and a key, bipartisan Congressional group standing up for American manufacturing. This was the only way to reverse the historic, lopsided pattern of one-way trade with South Korea. I support today’s agreement. It is important for American manufacturing and American jobs. It is also an important step toward a global rules-based trade system.”
IMPORTANT CHANGES TO THE KOREA FREE TRADE AGREEMENT (FTA)
TARIFFS
- Under the 2007 agreement, almost 90% of Korea’s auto exports to the United States would have received duty free access on the first day the FTA entered into force.
- Duty elimination for Korea’s auto exports is now delayed until Year 5, giving U.S. automakers the opportunity to reverse decades of South Korean protectionism, providing important time to establish a brand and distribution presence and leverage to evaluate Korea’s compliance.
- Cuts in the U.S. 25% truck tariff are substantially delayed. Under the 2007 agreement, truck tariffs began to be cut on the first day the FTA entered into force. Cuts are now delayed until Year 8.
AUTO-SPECIFIC SAFEGUARD
- The agreement includes a first-ever auto-specific safeguard designed to protect against potential surges of Korean cars and trucks, once the applicable tariffs are eliminated.
- The remedy is the snapback of the tariff. The safeguard now can be used more than once. No compensation is required for the first two years the safeguard is in place. And now, the safeguard is available for 10 years after the elimination of the applicable tariff.
SAFETY STANDARDS
- The agreement will level the playing field and prevent Korea from relying on discriminatory, rotating safety regulations – as it has in the past – to shut out U.S. auto imports and give U.S. automakers the chance to make real inroads into Korea’s auto market.
- It requires Korea to recognize 25,000 vehicles built to meet U.S. safety standards per automaker per year as meeting its safety standards, an increase from 6,500 in the 2007 agreement.
ENVIRONMENTAL STANDARDS
- The agreement prevents Korea from using its new CO2 regulations to shut out U.S. imports.
- The agreement gives automakers the opportunity and time as needed to sell a diverse fleet mix and to secure a real commercial presence in Korea.
TAXES
- The agreement provides transparency based protections to ensure that Korea does not use its taxes in a discriminatory manner.
ACCOUNTABILITY
- The agreement mandates that Korea establish post-implementation reviews to deter the use of discriminatory standards.
- In order to prevent Korea from using new rules to disrupt imports, the agreement gives U.S. automakers 12 months to comply with any new Korean standards.
ENFORCEMENT
- The agreement is fully enforceable.
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