Monday, April 2, 2007

US-South Korea Free Trade Agreement

. Monday, April 2, 2007

I am kind of surprised by the lack of chatter about the US-South Korea Free Trade Agreement. Without question this is the most important FTA the U.S. has signed since NAFTA. As the International Herald Tribune summarizes, "The United States has reached its biggest free trade agreement since NAFTA, clinching a last-minute deal with close security ally South Korea that it hopes will bolster bilateral ties and provide added spark to global trade talks.

"The free trade a historic accomplishment," Deputy U.S. Trade Representative Karan Bhatia told reporters on Monday after eight days of talks. "It is an agreement for the 21st century."

Prominent American legislators are already criticizing the agreement; Max Baucus, D-Mont. is unhappy about Korea's treatment of American beef (do you think Montana is a large beef producer?) while Sander Levin, D-Mich. is unhappy about Korea's apparent reluctance to buy American cars (do they still produce cars in Michigan?). The big auto companies are none too pleased either.

"Levin, who chairs the House Ways and Means Trade Subcommittee, said the deal faces certain defeat in Congress. "The U.S. did not get what was needed - an agreement that assures that the U.S. automotive industry will no longer face the barriers to their products, that trade will be truly a two-way street," Levin said, noting that South Korean companies export 700,000 vehicles to the U.S. annually while the U.S. sells less than 5,000 in South Korea. Earlier this month, Levin had proposed that USTR offer South Korea a tariff-rate quota that would grant a zero tariff for a number of autos that would grow only as U.S. auto exports to South Korea increased in the future. "

Seeing how a lot of Americans prefer Hyundais to Hummers these days, I am not sure why our ability to buy small, reliable, and fuel-efficient cars should be dependent upon Koreans' willingness to buy gas guzzling SUVs. But that's just me--I drive an import.

The agreement seems to go a long way toward accommodating American auto producers' concerns. According to the USTR, the agreement "will eliminate discrimination in engine displacement-based taxes, long a significant impediment to market access in Korea. The agreement contains strong commitments to addresses the specific standards-related concerns raised by U.S. auto manufacturers and to create a working group to review auto-related regulations being developed as an early warning mechanism to prevent new problems from arising and to promote good regulatory practice in Korea. The agreement also contains a special enhanced dispute settlement mechanism for auto-related measures, with strong remedies to deter actions on autos that are inconsistent with the agreement."

The vote should give an early indication of the prospects for getting a WTO agreement through Congress. Initial signs are not encouraging...


US-South Korea Free Trade Agreement
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