Further progress was made toward the ratification of the US-Korea free trade agreement last Friday when representatives from both countries met to redraft vehicle tariff proposals included in the deal, with South Korea making significant concessions on a number of points.
At the negotiations, which involved US trade representative Ron Kirk and Korea trade minister Kim Jong Hoon, South Korea said it would halve those tariffs placed on US-made vehicles immediately after ratification while the US maintained its tariff on Korean-made vehicles at 2.5% for the same period. Tariffs would then be removed under the new proposal drawn up.
Meanwhile, the US would continue its 25% tariff on truck imports for eight years and then phase them out over a two-year period. Prior to the most recent revisions the US was bound to begin to phase out truck tariffs immediately.
South Korea has also said it will exempt US carmakers that sell less than 25,000 vehicles in the country from meeting local safety standards provided that they comply with US regulations. This is almost four times the number allowed in the 2007 agreement. It will also lower its CO2 emission standards by 19% for US carmakers that sell less than 4,500 units on the local market.
The American Automotive Policy Council (AAPC), which represents member companies including Chrysler, Ford and GM, said it appreciated the hard work put in by the US administration to reach a deal improving the auto provisions of the pending Korea Free Trade Agreement.
“We value the efforts of President Obama, Ambassador Kirk and the United States Trade Representative negotiating team to revise the text of the agreement and thereby helping improve US access to the Korean auto market,” AAPC acting president Charles Uthus said.
In a separate statement Ford’s Alan Mulally said the company welcomed the revised agreement and stated that “the resulting agreement provides greater clarity and transparency by affirmatively addressing the issues surrounding non-tariff and tariff barriers.”
He added: “These new provisions provide Ford greater confidence that we will be able to better serve our Korean customers. We deeply appreciate the tireless efforts of the Obama Administration and Congress to improve this agreement and open the Korean auto market.”
Meanwhile, the Korea Automobile Manufacturers Association (KAMA) said that the “agreement will greatly contribute in enhancing cooperative development and exchanges between the automobile industries of the two countries."
One of the sticking points in the agreements so far has been the fact that South Korea does not fully acknowledge international test cycles and standards and applies its own unique rules. Regarding CO2 emissions, an approved and tested car from the US or EU cannot be sold in South Korea without costly modifications being made.
Until final ratification is made, something that both countries have been working toward for more than three years now, carmakers in Korea are reserving final judgement.
“We continue to look forward to FTA ratification but all we are saying at this point is that we welcome the agreement,” said a spokesperson for Kia Motors.
Significantly Korea has revised the 2007 paper to add a special safeguard for vehicles to ensure that the American automotive industry does not suffer from any harmful surges in Korean vehicle imports resulting from the agreement. The special auto safeguard, which allows the US to reimpose tariffs, is available for 10 years beyond the full elimination of tariffs for each Korean auto product.