Washington — Members of Congress and Ford Motor Co. said this week the two-year-old Korea free trade agreement hasn’t done enough to open the Asian economy to U.S. exports and cite the treaty as a reason for caution in negotiating a new trade deal with Japan and other countries.
Sen. Debbie Stabenow, D-Lansing, chaired her first Senate Finance Committee subcommittee on international trade this week on the deal that the Obama administration heralded in 2012.
In an interview, Stabenow said the Trans-Pacific Partnership — the 12-nation trade deal being negotiated — has no chance of being completed and ratified this year. There are outstanding disputes on agriculture and autos among other “very sticky issues” involving Japan and other nations in the talks, Stabenow said.
“We’re continuing to push and the reason for this hearing was to talk about Korea but also to send a message about Japan and what comes next,” Stabenow said.
The Korea Free trade deal hasn’t led to a big jump in U.S. exports to Korea. Stabenow said the deal “has fallen short of our hopes.” The U.S. trade deficit with Korea has expanded; in terms of the deficit in goods — the things the U.S. makes — “it has increased by nearly 50 percent,” Stabenow said. “The agreement aimed to open Korea’s markets to American automakers. But agreeing to phase-out tariffs on U.S.-made automobiles hasn’t been enough. Due to non-tariff barriers, Korea remains one of the most closed auto markets in the world.”
Steve Biegun, Ford vice president for international government relations, told the Senate trade panel, that Ford will sell just 7,000 cars in Korea this year — after working for two decades to boost sales. “Access to the Korean auto market has still fallen well short of the openness promised, and we are deeply disappointed by the results to date,” Biegun said, saying Korean regulatory issues are still a big hurdle.
Biegun said the company is “deeply concerned” about Japan in the trade deal and questions if any safeguards can be reached in negotiations to open Japan’s market to U.S. autos. Biegun, Ford CEO Mark Fields and Ford executive chairman Bill Ford Jr. all say the deal must increase measures to keep Japan from intervening in the value of its currency.
President Barack Obama even brought South Korean President Lee Myung-bak to a General Motors assembly plant in Orion Township in October 2011 to herald the deal. “If Americans can buy Kias and Hyundais from Korea, then I know Koreans should be able to buy some Fords and Chryslers and Chevys that are made right here in the United States of America,” Obama said then.
U.S. Trade Ambassador Michael Froman’s office noted that through May, sales of Big Three Detroit autos to Korea are up by more than 20 percent and key agriculture products like dairy have seen a more than 40 percent increase in exports.
“These are real results that benefit farmers, workers, and small business owners across the U.S. We also fully expect that as further tariff elimination takes place and Korea’s economy improves, we will reap greater benefits from KORUS,” Froman’s office said.
General Motors Co. owns GM Daewoo — one of Korea’s largest automakers.
Since the Korea agreement took effect, tariffs have been reduced on U.S. autos by 50 percent and the value of U.S. auto exports to Korea have increased by 80 percent.
The Association of Global Automakers, the association representing major foreign automakers including Korean automakers Hyundai Motor Co. and Kia Motors, noted that after the deal foreign automakers have started “exporting thousands of U.S.-made vehicles to Korea” that are “supporting thousands of American jobs.”
Five years ago, 23 import brands together held just 6 percent of Korea’s automotive market, the group noted. Last year, the number of imported cars sold in Korea had risen 250 percent to 156,497 units, accounting for 12.1 percent of vehicles sold. The group noted Toyota Motor Corp., Honda Motor Co, Volkswagen and Nissan Motor Co. exported to Korea a total of 14,637 vehicles in 2013 built by U.S. workers in the United States. The group acknowledged that implementation “has not been seamless, and it is unrealistic to expect that an agreement of this magnitude and complexity could be implemented without encountering some challenges.”
Rep. Sander Levin, D-Royal Oak, agreed. “But negotiations are going on and it’s important there be structured involvement of the U.S. Congress,” Levin said. He also said Korea “continues to throw up barriers to U.S. automakers and we are determined that they be knocked down. We worked to hard to structure (the Korea Free Trade agreement) correctly and now it has to be enforced.”
It comes as manufacturing groups are pushing the administration to take a tougher line on currency. The Alliance for American Manufacturing said a new poll showed that Americans by a more than 2-1 ratio believe Congress should oppose a trade deal that doesn’t prohibit currency manipulation.