Under the FTA only 25,000 cars per U.S. automaker can be imported into Korea, provided they meet U.S. federal safety standards, even though they do not meet Korean standards, which are designed to exclude imports.
The U.S. trade deficit with South Korea reached its highest level in history just ten months into the controversial trade agreement, according to the latest data released by the U.S. International Trade Commission. During January the deficit with South Korea was at -$2.4 billion — the largest monthly deficit with Korea on record.
During nine of the ten first months since the FTA began, U.S. exports to Korea fell below pre-FTA levels when compared to the same months in the prior year. The net effect was an overall -9% decline in exports under the FTA. In six of those ten months, including the most recent month, U.S. imports from Korea exceeded pre-FTA levels, for a 2% increase in imports under the FTA. As a result, the U.S. trade deficit with Korea under the FTA is 30% — or $4 billion — larger than in the same months before the deal took effect.
Korea is the fifth largest producer and fourth largest exporter of motor vehicles in the world, and until last year its car market was closed to outsiders, even as U.S. taxpayers prop up its economy with massive amounts of defense spending more than 50 years after the Korean war or “police action” against insurgents ended.
President Obama said last year that the Korean FTA would not have been possible without the help of Bob King, the head of the UAW, which was alone among all other U.S. organized labor groups to support it. Critics say the FTA is almost certain to result in the loss of more U.S. manufacturing jobs, under the “no jobs” Obama Administration.
The AFL-CIO has repeatedly said, “The Korea agreement is the largest off-shoring deal of its kind since NAFTA,” estimating that it likely will displace 159,000 U.S. jobs, mostly in manufacturing. Worse, according to the AFL-CIO, loopholes will allow unscrupulous businesses to import illegally labeled goods from China and possibly even from sweatshops in North Korea—potentially without any tariffs at all. (See Obama Administration Submits Controversial FTAs to Congress. Largest Loss of Jobs since NAFTA Coming?)
President Obama has continually ignored the critics, using, as always, finely tuned rhetoric to deflect discussion the issue.
“Now, here’s the thing, said the President (who when running for president along with the UAW then vehemently opposed the deal), “We live in a global economy, and that means most of the potential customers for American companies like GM won’t just be here in the United States; they’ll be all around the world. And the more goods and services we sell abroad, the more jobs we create here at home.Now, Korea is one that is critically important, because understand Korea has 50 million people; it’s one of the fastest-growing countries in the world. It’s one of our closest allies and our closest friends.”
The President also claimed last year “our trade is basically balanced between the United States and Korea. They buy as much stuff from us as they sell to us — and that’s how fair and free trade is supposed to be. It’s not a one-sided proposition. That’s how trade is supposed to be. And I know President Lee (of South Korea) doesn’t mind me saying this, even though he’s a Hyundai guy. 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.
Korea ranks at the very bottom — 30 out of 30 among the largest automotive markets — for auto market access, according to Ford Motor, which also supported the FTA while opposing an equivalent Korean FTA in the European community. The average among major developed economies is 40% market penetration by imported automobiles. In Korea, the total of import vehicles from all global manufacturers in all countries entering the Korean market is around 8%. This is about 90,000 vehicles in a market that buys more than one million vehicles annually.
The U.S. Korean FTA – it was claimed – would help redress this imbalance. The revised Korean Free Trade Agreement eliminates tariffs on more than 95% of industrial and consumer goods within five years, according to the White House. However, it also protects the Korean beef and pharmaceutical industries.
Under the FTA only 25,000 cars per U.S. automaker can be imported into Korea, provided they meet U.S. federal safety standards, even though they do not meet Korean standards, which are designed to exclude imports.
GM because of it ownership of Daewoo already has a substantial position in Korea, unlike Ford, which refused to bail out an ailing Kia late in the last century, in what could be one of the greatest blunders in the global automobile business. Chevrolet was introduced in Korea in 2011. GM Daewoo was formed from the extinct Daewoo Group, which went bankrupt in 1999. It has five manufacturing facilities in Korea, as well as an assembly facility in Vietnam. GM Daewoo also provides vehicle kits for assembly at GM facilities in China, Thailand, India, Colombia and Venezuela. GM Daewoo sells in Korea and exports almost two million units annually.
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- Toyota to Export U.S. Built Camry to South Korea
- Hyundai Joins ACEA as European Auto Sales Slump Continues
- Automakers Protest EU Korean FTA Deal is One Sided
- President Obama and South Korean President Lee Defend Korean FTA at a Michigan General Motors Small Car Plant
