Trump hits South Korea on auto sales barriers

Keith Laing
Detroit News Washington Bureau

Washington — President Donald Trump criticized South Korean auto companies for selling cars in the U.S. while American carmakers are struggling to gain a foothold in South Korea.

Speaking at a Friday joint news conference at the White House with newly elected South Korean President Moon Jae-in, Trump said, “South Korean companies sell cars in America. American companies should have that same exact privilege on a reciprocal basis, and I’m sure we will be able to work that out.”

The comments came as Trump and Moon were discussing a trade deal between the two countries that was enacted during former President Barack Obama’s administration. Trump has derided that agreement as a bad deal for U.S. workers.

“From when the U.S.-Korea trade deal was signed in 2011 to 2016, you know who signed it, you know who wanted it, our trade deficit has increased by more than $11 billion,” Trump said. “Not exactly a good deal.”

Moon said through a translator that he had a “candid and lengthy” discussion with Trump during his visit to Washington. He did not mention Trump’s comments about his country’s automakers, Kia and Hyundai.

Under the 2012 U.S.-Korea Free Trade Agreement known as KORUS, South Korea reduced its tariffs on U.S. autos from 8 percent to 4 percent and the country was to eliminate them entirely in 2016. Obama administration officials said the trade agreement resulted in a 24 percent increase in sales of exports from the Detroit automakers in Korea by 2014.

U.S. Commerce Secretary Wilbur Ross painted a starkly different picture of trade relations between the two companies on Friday.

“The trade balance of South Korea has doubled since the KORUS treaty was put into effect. And the largest single component of that is automotive trade,” he said. “There are a lot of non-tariff trade barriers to U.S. exports.

“Only 25,000 cars per Big Three manufacturer are allowed in based on U.S. standards. Anything above that needs to be on Korean standards,” Ross continued. “So that kind of rule-making affects quite a few industries and really restricts the access that U.S. companies have to the Korean market.”

U.S. automakers have pointed out the imbalance and they have accused the Korean government of manipulating its currency to ensure higher values for its companies.

American Automotive Policy Council President Matt Blunt said Friday, “Clearly, KORUS has had mixed results for America’s automakers and it has failed to live up to expectations. There is no question the Korean marketplace is one of the most difficult for any automaker to export into in the world. We appreciate the administration’s attention to the very real challenges we have seen in implementing this agreement.”

The AAPC lobbies for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles in Washington.

South Korean companies Hyundai and Kia have manufacturing plants and other facilities in the U.S.

Hyundai’s website says that over half of the cars it sells in the U.S. are manufactured at its plant in Montgomery, Alabama. Kia similarly says that 40 percent of its vehicles are made at its plant in West Point, Georgia.

Neither company responded immediately to a request for comment.

General Motors Korea, formerly known as Daewoo, sold 180,275 cars in South Korea in 2016, according to data compiled by IHS Automotive. GM Korea is currently the third-largest automaker in South Korea. Imports overall accounted for only 10 percent of the 1.8 million cars that were sold in South Korea last year, according to the group.

Hyundai reported sales of 775,005 vehicles in the U.S. in 2016, which the company said was a 1.75 percent increase over 2015. Kia reported sales 647,598 vehicles in the U.S. in 2016, which the company said was up 3.5 percent over 2015.

Karl Brauer, senior analyst for Kelley Blue Book, said Trump may have a point about barriers to entry for U.S. automakers that are trying to enter the South Korean market. However, he said leveling the playing field would not guarantee parity between Detroit and Korean automakers.

“If we still can’t sell cars in Japan and Korea even when the barriers go away,” he said, “then the market has spoken.”

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Twitter: @Keith_Laing