WASHINGTON (Thomson Financial) - The largest US bilateral trade deal since the North American Free Trade Agreement is facing significant hurdles to being approved by Congress, in particular a hostile US auto industry that is warning the deal will do nothing to increase US auto exports to South Korea.
House Democratic leaders on Friday took up those complaints on behalf of the industry by calling the US-Korea free trade deal a "missed opportunity" on autos.
"The agreement does not address in an effective manner the persistent problem of non-tariff barriers, particularly those blocking access of U.S. manufactured products in South Koreas market," Democrats said.
"As a consequence, we cannot support the KFTA as currently negotiated."
Democrats also noted that, while South Korea exported more than 700,000 cars to the US last year, the US only exported 5,000 cars to Korea, a "one-sided" situation that would need to be remedied in the deal before winning the support of Congress.
In contrast, US Trade Representative Susan Schwab warned during Saturday's signing of the US-Korea trade deal that renegotiating the agreement is not an option.
"We know there are some who believe this agreement must be altered," Schwab said on June 30. "But I want to affirm that this agreement, once signed, will stand on its own, without amendment."
Industry observers said two of the "big three" US auto companies -- Ford and Chrysler -- are actively opposing the deal as negotiated because it does not commit Korea to taking more US cars, but at the same time requires the US to immediately eliminate a small tariff on Korean imports.
The third company, General Motors, is neutral on the agreement, based on the fact that it has an auto production plant in Korea.
Industry sources noted that even with production in Korea, GM is not actively supporting the agreement, which they said shows how bad the deal is for US auto makers overall.
Ford Motor Co vice president Steve Biegun said Ford is "deeply disappointed" in the Korea agreement, and said it gives no US auto producer any reason to expect increased sales there. "We'll be trying to improve the deal, and if it can't get better, we don't think the Congress should support it," he said.
The Korea free trade deal was signed on June 30, just before the expiry of the Bush administration's trade promotion authority. This means the deal must be considered in Congress without amendments, although Congress can reject the deal if it wants.
Biegun said he believes both Democrats and Republicans in Congress are worried about the lack of any real access to Korea's long-closed auto market.
pete.kasperowicz@thomson.com
pik/wash/cmr
