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Korean Opposition Delays Approval of KORUS FTA

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Kuros

Joined: 27 Apr 2004

Posted: Thu May 22, 2008 6:39 pm Post subject:

Gopher wrote:

Would this agreement allow American auto and consumer-electronics manufacturers and exporters into the South Korean market?

Here's a short paper by the Korean Economic Institute.

Quote:

Tariffs are 8 percent in Korea and 2.5 percent in the United
States for passenger cars and parts and accessories; tariffs
are 10 percent in Korea and 25 percent in the United
States for trucks. Most of the tariff barriers in Korea will
be eliminated on the date the KORUS FTA enters into force.
The tariff barriers in the United States will be eliminated on
the date the KORUS FTA enters into force, with some exceptions:
For passenger cars with spark ignition internal
combustion engines with cylinder capacity greater than
3,000 cc or with a compression ignition internal combustion
engine, the tariffs in the United States will be removed
in three equal annual stages beginning on the date the KORUS
FTA enters into force.

Therefore, this will give the US an 8% edge on Japanese and other European manufacturers within the Korean market. In exchange, the US merely has to eliminate its 2.5% tariffs with Korea. The biggest change will be in reducing our tariffs on trucks.

Quote:

Because of tariff elimination for automobiles and parts between
Korea and the United States (SIM I), exports and
imports in the sector are calculated as increasing in the
two FTA signatory countries. From the base simulation
(SIM I), exports from Korea to the United States are calculated
to increase by 12.8 percent and from the United
States to Korea by 40.1 percent, reflecting the difference
in tariffs between the two countries (Table 20a). By applying
these rates of change to base-year (2001) bilateral
trade data (from Korea to the United States $6,969.4 million,
and from the United States to Korea $323.8 million; see Table 20b), we calculate an increase in value terms of
bilateral exports of automobiles and parts from Korea to
the United States of $892.1 million and from the United
States to Korea of $129.8 million. Thus, the changes in the
bilateral trade balance in the automobile sector will be a
$762.3 million increase in the surplus for Korea and an
equivalent increase in the deficit for the United States.

Here are some of the arguments given:

Quote:

Second, we cannot overemphasize the importance of observing
our economies on the whole. That is, even though
the automobile sector is important for both Korea and the
United States, we cannot totally separate the sector from
those economies to arrive at a fair and balanced evaluation
of economic effects from, for example, the KORUS FTA.
Various industries and economic sectors are closely linked
and complement each other.
Third, to gain benefits from trade liberalization or even from
the improvement of consumer perceptions against imports,
comparative advantage needs to be accompanied by other
measures. In other words, trade liberalization is not a sufficient
condition, but it is a necessary condition to achieve
gains from trade expansion.
Fourth, we need to learn from competition and from our
successful competitors. Successful competitors not only
are the leaders of market trends but also are very responsive
to the market. Every market wants variety but each
has its own specific demands.
Fifth, both competition and cooperation are important. Korea
and the United States are and can be complementary, especially
in the future automobile market. They can cooperate
further in designing, manufacturing, distributing, and servicing
and maintaining automobiles as well as carry out
research and development for next-generation automobiles
such as environmentally friendly and energy-efficient automobiles,
hybrid or fuel-cell cars.
Sixth, the world automobile market is changing. Japan and
Germany are not the only competitors. The emerging Chinese
and Indian markets will be not only an opportunity
but also a threat. Cooperation based on complementarity
between Korea and the United States will maximize the
opportunity and minimize the threat.
Seventh, Korea�s market for automobile imports is growing
as consumers are demanding upgrades for domestic
automobiles, seeking price reductions because of parallel
imports, and experiencing improvements in their perceptions
of imports. Demand for imports has been diversifying
from only luxury automobiles to ordinary automobiles.
Japanese automakers have been active in responding to
these market demands. U.S. automakers might want to
use this opportunity because U.S. automobiles have a comparative
advantage in the ordinary automobile market rather
than in the luxury market in Korea. U.S. automakers need
to be responsive to Korean consumers because Korean
automobile buyers are very selective.

Kuros

Joined: 27 Apr 2004

Posted: Thu May 22, 2008 6:56 pm Post subject:

Gopher, as you can see, American auto-makers will have to stay competitive to make serious in-roads into Korea which justify the competitiveness Korean auto-makers will enjoy in a much larger consumer market. In whatever case, the American consumer wins by having access to cheaper Korean automobiles. 2.5% of a $20,000 car is $500.

However, the overall benefits of the FTA are mutual.

Quote:

Goods Market Access

Tariff commitments: Thirty-eight percent of U.S. tariff lines and 13 percent of Korean tariff lines currently have free rates of duty. Upon implementation of the FTA, more than 82 percent of U.S. tariff lines and more than 80 percent of Korean tariff lines would have free rates of duty for their FTA partner. Approximately 99 percent of U.S. tariff lines and 98
percent of Korean tariff lines would have free rates of duty by year 10.

Impact of Tariff- and Tariff-rate Quota-related Provisions on the
U.S. Economy

The Commission's simulation of the economy-wide impact of tariff and TRQ elimination under the FTA estimates that upon full implementation U.S. GDP would likely increase by $10.1�11.9 billion (approximately 0.1 percent). This increase reflects higher U.S. export
prices as the removal of relatively large Korean tariffs and TRQs, primarily in the agriculture sector, increases demand for U.S. exports. Without a full quantitative analysis of services trade and international investment patterns, however, these simulation results should not be
interpreted as changes in total imports and exports, or as implying meaningful information about the balance of trade impact of the entire U.S.-Korea FTA.

U.S. exports to Korea:

Based on the results of the economy-wide model simulation, U.S.
exports to Korea are estimated to be $9.7�10.9 billion higher once the FTA is fully implemented. The largest estimated increases in U.S. exports, by percent, would likely be in dairy products, other meat products (primarily pork and poultry), wearing apparel, and bovine meat products (beef). The largest estimated increases in U.S. exports, by value, would
likely be in various machinery and equipment; chemical, rubber, and plastic products; bovine meat products; other meat products; and certain other food products.

U.S. imports from Korea:

Based on the results of the economy-wide model simulation, U.S. imports from Korea are estimated to be $6.4�6.9 billion higher once the FTA is fully implemented. The largest estimated increases in U.S. imports, by percent, are in dairy products, wearing apparel, and footwear and leather products. The largest estimated
increases in imports, by value, are in textiles, motor vehicles and parts, and wearing apparel.

U.S. industries:

The FTA would likely result in a small to negligible impact on output or
employment for most sectors of the U.S. economy, as expected losses in output and employment in contracting sectors are expected to be offset by gains in expanding sectors. The bovine meat products sector; the upstream cattle, sheep, goats, and horses sector; and the other meat products sector are estimated to experience the largest percentage increases (up to 2.0 percent) in output and employment. Textiles, wheat, wearing apparel, and electronic equipment are anticipated to experience the greatest declines, although generally less than 1 percent. The modest declines in some industries, such as wheat, are primarily driven by the reallocation of resources to higher value products.

Lastly, the over-arching goal of the KORUS FTA is a push to open Japan. South Korea and America are two of Japan's three biggest foreign markets. With South Korea and America enjoying higher competitiveness with each other, the hope is that Japan will simply have to sign FTAs with both.

caniff

Joined: 03 Feb 2004
Location: All over the map

Posted: Thu May 22, 2008 7:52 pm Post subject:

Kuros wrote:

Will Americans opt to start driving around in Hyundai Bongo fruit trucks?

"Air-con...Computah...Telebeee...Samnida......"

I'm guessing no.

bookemdanno

Joined: 30 Apr 2008

Posted: Fri May 23, 2008 3:53 pm Post subject:

caniff cajoled:

Quote:

Will Americans opt to start driving around in Hyundai Bongo fruit trucks?

"Air-con...Computah...Telebeee...Samnida......"

I'm guessing no.

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